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WRAPUP 2-US jobless rate tumbles to near 4-year low

Friday, 5 Oct 2012 | 8:31 AM ET

* Nonfarm payrolls rose 114,000 in September

* Unemployment rate falls to 7.8 percent, lowest since 2009

* Average hourly earnings gain 7 cents

* Report is second last before Nov. 6 elections

By Lucia Mutikani

WASHINGTON, Oct 5 (Reuters) - The U.S. unemployment rate dropped to a near four-year low of 7.8 percent in September, a potential boost to President Barack Obama's re-election bid.

The Labor Department said on Friday the unemployment rate, a key focus in the race for the White House, dropped by 0.3 percentage point to its lowest point since January 2009.

A survey of households from which the jobless rate is derived showed 873,000 job gains last month, the most since June 1983. The drop in unemployment came even as Americans come back into the labor force to resume the hunt for work. The workforce had shrank in the prior two months.

The household survey is volatile. A survey of business establishments showed employers added 114,000 jobs to their payrolls last month, a touch above economists' expectations for 113,000 jobs. Employment for July and August was revised to show 86,000 more jobs created than previous reported.

It was the second last report before the Nov. 6 election that pits Obama against Republican Mitt Romney.

A Reuters/Ipsos poll released on Thursday after Wednesday's first presidential debate showed Romney gained ground and is now viewed positively by 51 percent of voters. Obama's favorability rating remained unchanged at 56 percent.

Economists blame the so-called fiscal cliff for the slowdown in business hiring, which has left millions of Americans working either part-time or unemployed and too discouraged to look for jobs.

The Congressional Budget Office has warned that a failure by Congress to avoid the automatic tax hikes and government spending cuts that will suck about $600 billion out of the economy next year would knock the economy back into recession.

"Businesses are not hiring people, they want to wait and see how the election evolves and how the political landscape shapes up," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.

"Everyone has kind of battened down the hatches," Sohn said before the release of the report.

Persistently poor labor market conditions led the Federal Reserve in September to announce a plan to buy $40 billion worth of mortgage-backed securities each month until it sees a sustained turnaround in employment.

The central bank, which also pledged to keep overnight lending rates near zero until at least mid-2015, hopes the purchases drive down long-term borrowing costs and spur the recovery.

The Fed's ultra-easy stance has started to free up credit, giving a lift to consumers, economists said. That, in turn, helped lift retail hiring in September.

Temporary help jobs, which are often seen as a harbinger for permanent hiring, fell 2,000 after being almost flat in August.

Manufacturing payrolls fell for a second straight month.

Construction employment rose 5,000, benefiting from the rise in home construction, as demand for housing rises against the backdrop of record low mortgage rates

Government payrolls rose 10,000 after increasing 45,000 in August. Average hourly earnings rose 7 cents last month, which could support spending.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com)(1 202 898 8315)(Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))

Keywords: USA ECONOMY/