The following post was published in The Opportune Time for its October 8 issue by Bloggerlytica contributor Ian Chan. We apologize for the lack of publishing due to unforeseen schedule changes.

While the unemployment rate dipped below 8%, the number of jobs created is still insufficient to put those who want work back to work. Photo Courtesy of US Daily Review

The unemployment rate in the United States (U.S.) fell to 7.8% in September, the lowest since January 2009. The economy added 114,000 jobs last month and revised up job gains in July and August. While forecasters expected the number of jobs created, the drop in the unemployment rate came as a surprise. Many expect the drop in the unemployment rate, though mainly symbolic in nature, will provide a boost to President Barack Obama’s re-election campaign.

From a rate of 8.1% in August, the lower rate in September may point to an improving economy as better job prospects and cheap consumer credit boost spending amid a global slowdown. However, many economists believe that the U.S. economy needs to create 150,000 jobs every month to keep up with population growth and bring down unemployment, meaning that the modest number of jobs created in September may not prove to be enough to keep the unemployment rate sustainably low.

As we discussed a few weeks ago (link to fiscal cliff article?), the looming specter of the “fiscal cliff” in the U.S. had prompted many analysts to predict that businesses would lay off more workers to hedge against policy uncertainty. The “fiscal cliff” refers to the $600 billion in automatic spending cuts if Congress fails to act on a number of policy expirations and sequestrations. However, the report on jobless claims offered little sign that companies were laying off workers on a wide scale.

Initial jobless claims climbed 4,000 last week to a seasonally adjusted 367,000, but that followed a drop of 22,000 and a 4-week average held steady at 375,000. The 4-week average offers a better glimpse of the trend in claims than the 1-week data. If employers were hedging against the fiscal cliff they would have laid off more workers until after the election or even until Congress acts in the lame-duck session. However, there seems to be no wide trend to act as such yet. While planned layoffs at U.S. firms rose 4.9% in September, they came in at a 15-year low for the month, according to Challenger, Gray & Christmas.

More encouragingly, in a report by the Labor Department, unemployment rates were lower in August than a year earlier in 325 of the 372 metropolitan areas, higher in 40 areas, and unchanged in 7 areas. Over the year, in 36 out of 37 metropolitan areas with annual average employment levels above 750,000 in 2011, non-farm employment rose.

While the employment numbers were encouraging, the Commerce Department showed new orders for manufactured goods tumbled 5.2 percent – the biggest drop since January 2009 when the economy was in the grip of a recession. Nevertheless, the decline was due to a collapse in demand for aircraft, as orders excluding transportation rose 0.7 percent. ISM national factory activity index released on Monday showed that manufacturing activity expanded in September for the first time in four months. In other words, manufacturing numbers paint a mixed picture of the U.S. economy.

Even though the automobile industry bailout by the Obama administration has been under intense scrutiny and debate for months, the industry appears to be rebounding, according to the latest data from Autodata. Overall industry sales increased 14.5% in the first 9 months of 2012, compared with the same period a year ago. A total of 1.19 automobiles were sold in the U.S. in September, a 13% increase from 2011. This brings the monthly sales rate to just fewer than 15 million vehicles on an annualized basis, and represents the highest seasonally adjusted rate since February 2008. Many believe that continued low interest rates and quantitative easing measures by the Federal Reserve have fueled consumer expenditure as cheap credit flows to households.

In addition to the automobile industry, the housing market seems to have turned a corner as well, with August home prices posting a 4.6% increase from a year earlier nationwide. The gains in August show the biggest year-on-year increase since June 2006 and represent the 6th consecutive month of prices have risen nationwide. Metropolitan areas that were hard hit by foreclosures and the financial crisis have been leading the way, with home prices in Phoenix, Arizona rising by 21.8% in August from a year earlier.

The automobile industry turns a corner. Photo Courtesy of Forbes

With one month to go till the U.S. Presidential Election, a string of economic data points to an economic recovery that, though still weak, is sustainable and on its way, bolstering President Obama’s claim that his policies have saved the U.S. economy from depression and needs more time to bear fruit. While the drop in the unemployment rate is not generally indicative of the overall strength of the labor market, the symbolism behind the rate decreasing to the lowest level since Obama took office will surely be used Democrats to strengthen their case as Election Day approaches. There will be one last jobs report on November 2, just four days before the election, which in the end may determine this election.

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