Storms Seen Cutting U.S. Hiring in Half Before Jobs Rebound
(Bloomberg) -- While the U.S. job market’s solid run in 2017 was probably curbed last month by forces most economists couldn’t predict, any weakness is likely to be short-lived.
The effects of two major hurricanes that inflicted potentially $90 billion in economic losses are expected to show up in September employment figures due Friday. In late August, Harvey knocked almost a quarter of U.S. oil-refining capacity offline and caused widespread flooding throughout the Houston region. Two weeks later, Irma cut power to at least 6.4 million customers and paralyzed tanker traffic. Both storms displaced tens of thousands and disrupted businesses in areas with 11 million workers as of March.
Yet after several months of volatility, the impact on job growth may fade. U.S. employers probably added 80,000 workers last month, according to the median estimate of economists -- which would be about half of August’s gain and a six-month low. Payrolls tend to get a boost later from cleanup and reconstruction efforts following major storms or disasters.
“It’s a month with unusually high uncertainty around it, but this should be the weakest of the numbers and we should see a return to normal by November or December,” said Ward McCarthy, chief financial economist at Jefferies LLC. “The negative effect of the hurricanes will lead to positives due to rebuilding and replacement of lost homes. The U.S. economy is still pretty solid.”
The government’s survey of households, which produces the unemployment rate, reflects the calendar week containing the 12th of the month; the separate survey of businesses and government agencies, which produces the payroll count and wage numbers, is for the pay period containing the 12th. Harvey made landfall on Aug. 25, while Irma struck Sept. 10.
Owing to the difficulty of judging the storms’ effects on the data, analysts’ estimates for payrolls range from a decline of 45,000 to an increase of 153,000. A private-sector report on Wednesday showed businesses added 135,000 workers after net hiring of 228,000 in August.
The counties that FEMA has declared eligible for maximum individual and household assistance account for about 8 percent of non-farm private employment, according to Jed Kolko, chief economist at jobs website Indeed. The industries most concentrated in these affected areas include water transportation, oil and gas extraction and petroleum and coal production, among others.
“It’s still very much going to be a story, underneath these disruptions, of a moderating and maturing labor market,” said Gregory Daco, chief U.S. economist at Oxford Economics.
Compared with payrolls, there’s more agreement among economists that the unemployment rate probably held at 4.4 percent -- just above a 16-year low -- while wage gains remained tepid by historical standards, up 2.5 percent from a year earlier. Even so, average hourly earnings may have accelerated to a 0.3 percent monthly gain in September from 0.1 percent the previous month.
More broadly, monthly job gains averaging 176,000 this year are running just below last year’s pace of 187,000, though analysts had been expecting a steeper slowdown as the labor market tightens.
The hurricanes have already left a mark on filings for unemployment insurance, which soared in the week ended Sept. 2 as tens of thousands of Texans displaced by Hurricane Harvey filed applications to collect benefits. The jump in claims was the biggest since Superstorm Sandy slammed into the Northeast and the volume of filings was the largest since April 2015.
Payrolls for Puerto Rico, which was hit by Hurricane Maria last month, don’t factor into the main monthly U.S. employment report.
While the storms’ effect on data is widely seen as temporary, the distortions could still complicate the Federal Reserve’s deliberations over whether to raise interest rates in December, as investors expect.
“October will show a big rebound,” said Carl Riccadonna, chief U.S. economist for Bloomberg Intelligence in New York. “You’re not really going to have a clean read on the employment trend as you get to the December Fed meeting.”