Could the September Unemployment Rate Fall to 7.9%?

Despite what was generally seen as a relatively poor August unemployment report, economic confidence is up, Wall Street is up, and the president continues to lead Mitt Romney as the elections approach. Given this context, imagine what might happen to economic and political perceptions if the government's seasonally adjusted unemployment rate falls to 7.9% in September -- nearly matching its lowest level since the president took office. While this seems unlikely based on Gallup's September polling, it remains a distinct possibility.

Gallup and the government showed the same adjusted unemployment rate of 8.1% for August. Gallup's unadjusted rate for August was also 8.1%, while the government reported an 8.2% unadjusted rate.

Gallup's unadjusted unemployment rate fell to 7.9% in mid-September -- down from 8.1% in August and its lowest monthly or mid-monthly average since Gallup began measuring it in January 2010. If the government's data show a similar 0.2-percentage-point decline, the BLS will report an unadjusted September rate of 8.0%. Adding a 0.2-point upward adjustment, based on the government's September 2011 seasonal adjustment, Gallup's seasonally adjusted unemployment rate for September would be 8.1%, while the government's adjusted rate would be 8.2%.

After increasing last month, Gallup's monitoring of the unadjusted workforce participation rate -- the percentage of the workforce that is employed -- shows no change in September. Gallup's last estimates of the participation rate contrast sharply with the 0.6-point decline in the government's unadjusted participation rate in August.

Based on Gallup's monitoring of the unemployment situation, odds seem pretty good that the September seasonally adjusted unemployment rate -- which the government will report on Oct. 5 -- will be 8% or higher. Gallup's results were close to the government's not only in August of this year, but also in September 2011 -- when Gallup's seasonally adjusted rate was 8.9% while the government's rate was 9.0%. Further, it seems unlikely that the government will report another major drop in the size of the workforce after showing an unadjusted decline of 1.27 million and an adjusted decline of 368,000 in the workforce in August.

Regardless, surprise seems to be the norm in the government's unemployment reports this year. So, it cannot be totally discounted that the government's unadjusted decline in the unemployment rate could be larger than Gallup's, that its seasonal adjustment could be smaller for September, and/or that it could show another decline in the size of the workforce. As a result, a 7.9% unemployment rate for September remains possible, if unlikely.