The U.S. economy added 114,000 jobs in September, with the unemployment rate falling from 8.1% to 7.8%, according to the Bureau of Labor and Statistics.
And here's what made this possible.
Also, employment-to-pop ratio and labor force participation are both up. So drop outs are not why unemployment rate went down.
And here's why this matters.
That said, the unemployment rate is a function of two things: the number of people employed, and the number of people in the labor force. But the proportion of people in the labor force actually went up, suggesting the fall in the unemployment rate reflects a real improvement, rather than people stopping their work search
Unlike some past months, the unemployment rate actually fell because people are going back to work. No really, this is for real. And because job growth this past summer turned out to be stronger than originally expected, the lower unemployment rate finally makes sense.
So what happened? Is QE3 finally raking effect? Perhaps psychologically. However, there may be more to this.
Financial markets have been doing well for some time. But for the past couple years, companies haven't been hiring with their extra cash on hand, so unemployment has lagged behind. So maybe now that the US economy is looking increasingly stable and fears of another "great depression" are finally subsiding, companies are slowly starting to hire again.
Believe it or not, perception can often turn into reality when it comes to economics. Because confidence was so low for so long, it's been a drag on economic recovery. But as QE3 takes hold, markets further stabilize, and more people look at recent jobs numbers, this can turn into a self fulfilling prophecy as people are encourage to spend more... And boost the economy some more.
So really, this is good news. It's now OK to breathe a sigh of relief.