Finally, not so jobless?

The Federal Reserve’s forecasters may now be too pessimistic on US jobs. The world’s largest economy added only 80,000 jobs last month, according to the latest release. But the private sector did better, and readings for previous months were revised up. With labor costs still lower than in 2008, unemployment could decline faster than the central bank thinks. That’s good for the unemployed - and potentially for President Barack Obama’s re-election hopes.

The headline job creation number, of late stubbornly below the 100,000 to 120,000 per month needed just to absorb new entrants into the U.S. labor force, has become somewhat misleading. For several months now, revisions that get less attention have made the picture look somewhat rosier. In August, for example, the original report said no jobs were created. The latest estimate is 105,000.

With that in mind, the details of the October report were mostly encouraging. Despite lost construction jobs, the private sector added 104,000. The government shed 24,000 jobs, mostly in state-level non-education fields. Total government employment is now back to the level of 2006. Since private sector jobs ultimately pay for much of the public sector, this rebalancing is welcome. Even more hopeful was a sharp decline of 366,000 in long-term unemployment. That may be a blip, but it’s a big one and in the right direction.

The unemployment rate has declined by 0.7 percentage point since October 2010. Projecting that forward another year gives an unemployment rate of 8.3 per cent in October 2012, just before the next presidential election. That is already below the Fed’s latest projection this week of 8.5 to 8.7 per cent in the fourth quarter of 2012.

Productivity growth was strong at 3.1 percent in the third quarter, while unit labor costs have fallen 2.6 per cent in nominal terms — and 6.9 per cent adjusted for inflation — from their 2008 peak. If those trends continue, that could help the private sector create jobs faster in the coming year. An unemployment rate close to 8 percent in a year’s time could make Obama’s task just a little less daunting.