Unemployment Rate Drops to Lowest Since 2009

9:40 AM, Oct 5, 2012   |    comments
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Washington, DC (written by Paul Davidson/USA Today) -- Employers added 114,000 jobs in September, about what economists expected and the unemployment rate fell to 7.8% from 8..1% as health care and transportation and warehousing led job gains.

Businesses added 104,000 jobs while federal, state and local governments added 10,000 new jobs.

Economists had estimated that employers added 115,000 jobs in September, including 129,000 in the private sector and 14,000 government job losses.

The report is the government's next-to-last reading on employment before the presidential election and could influence undecided voters.

After the economy added a solid 200,000-plus jobs a month early this year, job growth slowed to an average monthly pace of 97,000 from March through August. Economists partly blame a confluence of scheduled tax hikes and spending cuts at year's end that threaten to push the nation back into recession if a divided Congress can't stave them off.

"Until the fiscal cliff issue is resolved, we're not going to get strong job growth," says Joel Naroff of Naroff Economic Advisors. Businesses, he says are hesitant to invest and hire when they could be saddled with large tax increases within months.

Companies are also worried about the lingering European debt crisis and recession, which are damping exports, and rising gasoline prices that are likely to crimp consumer spending. Economic growth, meanwhile, has been running at less than a 2% annual pace this year. IHS Global Insight says it expects 1.5% growth the second half of the year. slightly less than the first half.

Naroff projects average monthly job gains of 125,000 to 150,000 the rest of 2012, barely enough to keep the unemployment rate from rising.

Economic reports this week underscored the halting recovery. First-time jobless benefit claims rose by 4,000 to 367,000. And while surveys showed both manufacturing and service business activity expanding in September, hiring slowed in the service sector -- which makes up 80% of the economy.

On the bright side, vehicle sales remain strong and the long-depressed housing market has started to turn around.

To further spark home sales and the economy, the Federal Reserve last month announced a bold new program to buy $40 billion a month in mortgage-backed securities to further push down interest rates and pump up stocks. The Fed said it would continue the purchases and possibly buy other assets until the job market improves significantly.

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