Hurricanes expected to dim U.S. jobs growth in short termReuters
October 06. 2017 11:55PM
WASHINGTON — U.S. job growth probably slowed further in September as Hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring, the latest indication that the storms undercut economic activity in the third quarter.
According to a Reuters survey of economists, the Labor Department’s closely watched employment report will likely show that nonfarm payrolls increased by 90,000 jobs last month after rising by 156,000 in August.
The projected job gains for September would be the second smallest this year and well below the 175,000 monthly average for the 12 months through August.
Economists estimate that Harvey and Irma, which wreaked havoc in Texas and Florida, cut as many as 125,000 jobs from payrolls in September.
“We are going to get a lot of the jobs back and we are going to see hiring related to the clean-up and rebuilding into early 2018 as well,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pa.
Economists say a weak employment report should not change views the Federal Reserve will raise interest rates in December. Fed Chair Janet Yellen cautioned last month that the hurricanes could “substantially” weigh on September job growth, but expected the effects would “unwind relatively quickly.”
The U.S. central bank said last month it expected “labor market conditions will strengthen somewhat further.”
“Given this, we suspect the financial markets will also take any hurricane-related weakness to the September employment report in stride, maintaining an elevated probability for a December Fed interest rate hike,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, N.C.
According to the Labor Department, the Texas and Florida areas affected by the storms employed 11.2 million people in March 2017, representing 7.7 percent of U.S. employment.
Jobs market still tightening
Excluding the weather impact, economists say the labor market continues to tighten. The employment report would join August consumer spending, industrial production, homebuilding and home sales data in suggesting that the hurricanes will dent economic growth in the third quarter.
Economists estimate that the back-to-back storms, including Hurricane Maria which destroyed infrastructure in Puerto Rico last month, could shave at least six-tenths of a percentage point from third-quarter gross domestic product growth.
Growth estimates for the July-September period are as low as a 1.8 percent annualized rate. The economy grew at a 3.1 percent rate in the second quarter.
Harvey and Irma are not expected to have an impact on the unemployment rate, which is forecast holding steady at 4.4 percent for September. The smaller survey of households from which the jobless rate is derived treats persons as employed regardless of whether they missed work during the reference week and were unpaid as result.
The household survey could reflect the impact of the storms on employment by showing the number of workers who were stranded at home because of bad weather as well as those who were forced to work part-time.
There was probably no impact on the length of the average workweek from the storms.
“There are competing forces at play in September, where hours worked in many sectors will see shutdown-related cuts, while hours worked for clean-up and reconstruction efforts will get extended,” said Ellen Zentner, chief economist at Morgan Stanley in New York.
With the hurricane-driven temporary unemployment concentrated in low-paying industries like retail and leisure and hospitality, average wage growth is forecast picking up.
Average hourly earnings are forecast increasing 0.3 percent in September after rising 0.1 percent in August. Still, the annual increase in wages probably remained stuck at 2.5 percent for a sixth straight month.
Annual wage growth of at least 3.0 percent is need to raise inflation to the Fed’s 2 percent target, analysts say.
Construction payrolls likely fell in September, bearing the brunt of the bad weather. Manufacturing employment is forecast increasing by 10,000 jobs after surging 36,000 in August, which was the most in four years.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)