October Surprise: Unemployment Drops to 7.8% -- But Skepticism Abounds

• Unemployment drops to 44-month low to 7.8%
• However, many are questioning the numbers due to "contradictory data points" such as the total employment level soaring but the low net number
• Government says 873K people found work -- but reports only 114K new jobs were added
• Former GE CEO alleged fraud, sending a tweet saying "these Chicago guys will do anything"
• Popular finance blog Zero Hedge even called it a "preelection 'massaging' farce"

In what will be one of the most influential jobs reports of the election season, unemployment fell from 8.1% to 7.8% in September, dropping below 8 percent for the first time in nearly four years. The private sector added 114,000 new jobs in September.

While another report will be released three days before the election, Friday's report is the one that will provide the bulk of material on the campaign trail during the election's crucial final month.

The numbers, however, are perplexing to CNBC, which notes that there are some oddities:

The report presented a slew of contradictory data points, with the total employment level soaring despite the low net number.

The falling jobless rate had been a function as much of the continued shrinking in the labor force as it was an increase in new positions.

But the government said the total number of jobs employed surged by 873,000, the highest one-month jump in 29 years. The total of unemployed people tumbled by 456,000.

The labor force participation rate, which reflects those working as well as looking for work, edged higher to 63.6 percent but remained around 30-year lows. The total labor force grew by 418,000, possibly accounting for the relatively modest net level of job growth.

Economists were expecting 113,000 more jobs and the rate to rise to 8.2 percent. Last month saw 142,000 new jobs as the rate dropped from 8.3 percent in July.

Those oddities have not gone unnoticed. Finanical guru Jack Welch sent a tweet alleging the numbers were politically motivated:

Popular finance blog Zero Hedge echoed that sentiment, calling it a "complete preelection 'massaging' farce."

So what's going on?

As Business insider notes, there are actually two jobs surveys released every month: "There's the Establishment Non-Farm Payrolls report, which surveys businesses, and the household survey, which surveys households, the latter of which is always more volatile."

And according to that latter survey, there were 873K people who found jobs, and the unemployment rate fell. However, according to the former survey, Zero Hedge says, only 114,000 new jobs were added. And that's where the discrepancy is in the report: While one survey asking households claims 873K became employed the businesses survey reports only an increase in 114K new ones. Both numbers, you might notice, are used in the final reporting.

So the question remains: Where did all the jobs come from if only 114K new ones were added?

Considering this, MSNBC host Joe Scarborough was baffled, and fellow panelist Willie Geist notes that rate should have been around 8.1%:

Ed Butowsky of Chapwood Capital Investment shared similar concerns on Fox Business Channel:

The report released in September detailing August's numbers showed an unemployment drop, too, from 8.3 percent to 8.1 percent. But while the numbers indicated a decrease, the news wasn't that good. Our own Becket Adams explained at the time:

U.S. employers added only 96,000 jobs last month and the unemployment rate fell to 8.1 percent from 8.3 percent in July, the Bureau of Labor Statistics announced Friday morning.

What’s going on here? Is this a hopeful sign for the economy and the U.S. workforce? Well, not exactly.

First, it needs to be noted that unemployment fell only because more people left the workforce. Actually, a lot of people dropped out.

"However, those numbers were revised higher, with the Labor Department putting July's number at 181,000 from the previously reported 141,000 and August up from an originally reported 96,000," CNBC says. In short: the Labor Department said upon further review, those numbers were even better.

Despite Friday's numbers, however, the Associated Press notes that many of the jobs added last month were part time. The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million.

Mitt Romney was quick to respond, saying "This is not what a real recovery looks like" and that if not for all those who have dropped out of the workforce, "the real unemployment rate would be closer to 11%."

His full statement is below:

“This is not what a real recovery looks like. We created fewer jobs in September than in August, and fewer jobs in August than in July, and we’ve lost over 600,000 manufacturing jobs since President Obama took office. If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11%. The results of President Obama's failed policies are staggering – 23 million Americans struggling for work, nearly one in six living in poverty and 47 million people dependent on food stamps to feed themselves and their families. The choice in this election is clear. Under President Obama, we’ll get another four years like the last four years. If I’m elected, we will have a real recovery with pro-growth policies that will create 12 million new jobs and rising incomes for everyone.”

Jobs and the economy has become a central figure of the election, with Romney trying to rally support by pointing out Barack Obama's poor economic record over the last four years.

Friday's numbers, however, could offer Obama a retort, especially considering the new level matches its level in January 2009 when President Barack Obama took office.

But they are also raising plenty of questions.

UPDATE I:

CNBC confronted Labor Sec. Hilda Solis over the allegations the numbers were "fixed." Get her full reaction here.

Rep. Allen West (R-Fla.) backed Welch's accusation, saying "Chicago style politics is at work here."

UPDATE II:

Columnist Conn Carroll has a good explanation of the numbers. He says it's unlikely the numbers were cooked, but that doesn't mean it isn't fishy:

While it is highly improbable that BLS conspired to cook the books, there is still a huge 756,000 job gap between the number of jobs employers told the Labor Department they created in September (114k), and the number of Americans who told the labor department that they got new jobs (873k). As the chart below shows, these two numbers never match up perfectly, but this month’s gap, particularly the spike in Americans saying they found jobs, is striking:

While you normally hear the Employer survey number in headlines, it actually has nothing to do with the unemployment rate that also gets reported. The Household survey controls that. And the driving reason the unemployment rate fell from 8.1 percent in August to 7.8 percent in September, is because BLS claims almost 1 million Americans found jobs last month.

A million new jobs in a month? Does that sound anything like the economy you and your neighbors are living in?

The Associated Press contributed to this report. This is a breaking story. Updates will be added.