How do you count manuscript words?

HERE'S A QUESTION FOR FREELANCE WRITERS, published authors, or anyone who writes and hopes to get published somewhere other than his own blog.  

How do most writers today count their words?

When I first started writing (on an Underwood Five manual desk typewriter), I use to count characters and spaces. Five characters-spaces were considered one word by most editors. Thus, 100 characters-spaces were 20 words and so on. For a large manuscript I would count what was on maybe two or three representative pages and do the math to estimate the number of words in the entire manuscript.

Today, of course, any word processing software will give you an instant count of your words, but those are not five character words—they are actual words of varying length, and the total number offers no consistent basis for copyfitting, spacing, or formatting on a page--hardcopy or web. 
What is the correct method? If an editor today says to you, I want an article of 1500 words, or, your book should be 80,000 words in length, what method is the correct method for determining how many words you've written?

I've been taking the total characters-spaces (also provided by my software), and dividing by five to come up with the old-fashioned measurement for the total words. To me, it seems the result would be a consistent and accurate starting point to determine how much space the copy will occupy on a page, and accordingly, how many printed pages would be required.
 
But then again, I could be wrong. How do you count your words to be published?

Photo: Retail in Key West, FL. Copyfitting on a sign requires a different skill set, and often a variety of typestyles, point sizes, and creative spacing. Professional publishing is much less flexible. Copyright Lloyd Lemons