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Unemployment falls to lowest level since July 2008

The American workforce expanded by 248,000 last month, driving the unemployment rate to its lowest levels since July 2008.

The U.S. economy added 248,000 jobs in September, and the unemployment rate fell to 5.9%—the lowest level since July 2008.

The job gains were significantly stronger than expected last month, with growth in health care, food services, construction, and professional and business services. 

Just a month away from the midterm elections, Democrats have seized upon the sub-6% unemployment rate as another sign that the economy is on the rebound under their watch.

“Today’s jobs report is just further proof of what we already know – Democrats have led our nation to unprecedented job growth and the lowest unemployment rate in six years, yielding expanded opportunity for American families," Rep. Debbie Wasserman-Schultz, chair of the Democratic National Committee, said in a statement.

"This new jobs report out this morning hopefully is going to provide a lot more opportunities. It's some good news," said Vice-President Joe Biden in a speech on Thursday. Noting the unemployment rate had dropped below 6%, he said: "That's a good thing ... you can clap for that.”

In the 1990s, many economists considered 6% unemployment to be the threshold for full employment. But the consensus has since shifted downward to 5.5% and lower as the real threshold for full employment.

What’s more, the unemployment rate alone isn’t likely to boost Democrats’ prospects come November given stagnating wages, which haven’t seen a significant boost even as the labor market has tightened. 

Last month, average hourly earnings fell by one cent to $24.53 last month, when analysts had expected them to increase by 0.2%.

“One notable downside is that wages grew not at all in the last month. While one shouldn’t read too much into one month, wage growth has been hovering around a sluggish 2% over the last year,” said Elise Gould, senior economist at the Economic Policy Institute. 

Obama acknowledged as much in his speech at Northwestern University yesterday. “Too many families still work too many hours with too little to show for it. Job growth could be so much faster, which would drive up wages,” he said. “So our task now is to harness the momentum we've got and make sure that as the economy grows, and jobs grow, wages grow too.” 

More Americans are also sitting on the sidelines of the labor force, neither working nor looking for work. The labor force participation rate was 65.1% in September -- a slight improvement over recent months, but still in line with a downward trend that began well before the recession. 

While economists believe that part of this is due to discouraged workers facing a relatively weak labor market, the bigger factors driving the trend are the growing pool of aging, retired Baby Boomers and more young people staying longer in school -- both trends unlikely to reverse themselves any time soon.

There were other signs of healing in the labor market this week: Weekly jobless claims fell to the lowest level in eight years, suggesting that companies are making fewer layoffs. August’s disappointing job numbers were also revised upwards from 142,000 to 180,000 jobs gained, and July’s from 212,000 to 243,000 jobs.