Why Weather May Skew Wage Signals in the September Jobs Report
(Bloomberg) -- Anyone looking at the September jobs report for a clear signal on U.S. wages may want to wait a few months.
Hurricane Florence, which roared across the Carolinas last month, probably distorted the Labor Department’s employment data due at 8:30 a.m. Friday in Washington.
With the job market running near full speed, economists from the Federal Reserve to Wall Street are scrutinizing wage gains for signs of an inflation breakout that’s been missing in the almost decade-long expansion.
The reason for the fuzzy September numbers? Big storms wreak havoc on a region’s workforce. Some people flee the area and businesses close down days before the wind starts to howl. Others, like utility and construction companies and their employees, work overtime preparing for damage, cleaning up and rebuilding. So the latest wages and hours-worked figures were probably skewed by the weather.
The median forecast in a Bloomberg survey of economist calls for a 2.8 percent gain in average hourly earnings from a year earlier, slightly weaker than the August advance of 2.9 percent -- which was the biggest jump since mid-2009. The hurricane effect, however, may render any actual number on worker pay a short-term blip.
“Hurricane Florence is poised to impact not only the pace of job creation in September" but also to "temporarily distort average hourly earnings and the average length of the workweek, as well," according to Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Tim Mahedy.
Ellen Zentner, chief U.S. economist at Morgan Stanley, sees the weather having a “very limited” impact on the payroll figures. “To be excluded from payrolls in the September employment report, an employee would have to be out of work without pay for the full pay period that includes Sept. 12.”
Florence made landfall on Sept. 14.
Last year, hurricanes Harvey, Irma and Maria led to volatility for several months in employment and other economic figures. Those disruptions even prompted the central bank’s policy-setting Federal Open Market Committee to mention the short-term effects in its September 2017 statement, though they added that “past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.”
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