THIS SEEMS LIKE GOOD ECONOMIC NEWS:

The Labor Department released its September jobs report on Friday, and some wags are calling it the “whoops” report. The “whoops” is a reference to the upward revision of 810,000 previously undetected jobs that Labor now says were created in the U.S. economy in the 12 months through March 2006.

So instead of 5.8 million new jobs over the past three years, the U.S. economy has created 6.6 million. That’s a lot more than a rounding error, more than the number of workers in the entire state of New Hampshire. What’s going on here?

Our hypothesis has been that, due to the changing nature of the U.S. economy, the Labor Department’s business establishment survey has been undercounting job creation from small businesses and self-employed entrepreneurs. That job growth has been better captured in Labor’s companion household survey, which reported 271,000 new jobs in September after 250,000 new jobs in August, and a very healthy total of 2.54 million new jobs in the past year.

The household survey is what is used to determine the unemployment rate, which fell in September to 4.6%, the lowest level in five years. The establishment survey, meanwhile, is used to announce the monthly “new jobs” numbers. Every year the Labor Department revises its job estimates from the previous year, in essence reconciling the figures from the two surveys, and the missing 810,000 jobs was the result through March 2006.

Getting out of the statistical weeds, the news here is that the U.S. has a very tight labor market — which is now translating into significant wage gains. Over the past 12 months wages have climbed by 4%, which is the biggest gain since 2001 and which economist Brian Wesbury points out is higher than the 3.3% average annual wage growth of the last 25 years.

Most of the media has ignored all this and instead focused on the disappointing 51,000 “new jobs” number from the establishment survey for September. But even in that survey, the jobs number for August was revised upward by 62,000 and the U.S. jobs machine continues to roll out an average of about 150,000 additional hires each month. Even the loss of residential construction jobs in September, due to the housing market slowdown, was nearly matched by payroll gains in commercial construction.

You’d think that all this good economic news would get more attention, but it seems that “It’s the economy, stupid!” was a 1990s phenomenon. Or something.

UPDATE: Fausta has further thoughts.