Real Estate

Jobs plummet further than expected in wake of recent storms

But December rate hike still on the table

Employment plummeted in the wake of hurricanes Harvey and Irma to a level no expert predicted it would fall in September – a loss of 33,000, according to the latest release from the U.S. Bureau of Labor Statistics.

For as long as I have been covering the jobs report, while growth has been low at times, it has never posted a decrease. As it turns out, this is the first time the U.S. economy has shed jobs since 2010.

Before the employment report was released, one expert explained that no matter what the numbers were, a rate hike in December is still on the table as the Federal Reserve and other experts would blame the hurricanes for the loss.

“Whatever the number is will be shrugged off and given a pass because of the effects from the hurricanes, with a possible exception being on the upside if we get a big number despite the storms,” said Brett Ewing, First Franklin Financial Services chief market strategist. “If stocks are up and the dollar is down, they will feel confident enough to deliver a December hike.”

Sure enough, with the release of the report, the bureau issued this statement:

Hurricane Irma made landfall in Florida on September 10, during the reference period for both the establishment and household surveys, causing severe damage in Florida and other parts of the Southeast. Hurricane Harvey made landfall in Texas on August 25, prior to the September reference periods, resulting in severe damage in Texas and other areas of the Gulf Coast.

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate.

And other experts agreed, the Fed is still on track for its final rate hike in December.

“The lousy returns from the September jobs report will make little impression on observers, who essentially gave the labor market a free pass due to the impact of Hurricanes Harvey and Irma,” said Curt Long, National Association of Federally Insured Credit Unions chief economist.

“Both the 33,000 job decline and the rise in wage growth to a level which matches the highest point of the recovery will be downplayed, as many of the lost jobs were likely in low-wage areas,” Long said. “Restaurants accounted for over 100,000 job losses. This outlook likely extends to the Fed as well, as officials seem set on a December rate hike.”

This loss of 33,000 jobs was far below what any expert predicted. Wednesday, ADP and Moody’s Analytics released a report that showed jobs would increase by 135,000. This is down significantly from the last month’s increase of 156,000 jobs.

And due to ADP’s low prediction, Capital Economics announced it feared the jobs report would come in closer to an increase of 100,000 jobs.

“The 33,000 decline in non-farm payrolls in September was worse than the consensus forecast at 90,000 or our own 100,000 estimate but, frankly, all of us were waving a finger in the air and guessing when it came to what impact Hurricanes Harvey and Irma would have on employment,” Capital Economics Chief Economist Paul Ashworth said.

Here are some of the areas which showed major changes in September:

  • Employment in restaurants decreased by 105,000
  • Employment in transportation and warehousing increased by 22,000
  • Employment in financial activities increased 10,000
  • Manufacturing decreased by 1,000
  • Employment in professional and business services increased by 13,000
  • Employment in health care increased by 23,000

Employment in other major industries, including mining, construction, wholesale trade, retail trade, information and government, showed little change over the month.

Due to the concentration in job losses to the restaurant industry, many experts predict employment will soon bounce back from this fall.

“In spite of September's decline, the figures still show there are 1.8 million more jobs than there were a year ago,” chief economist Danielle Hale said. “While this ends the 53-month streak of 2 million or more jobs created per year, the numbers should bounce back in the months ahead as hurricane recovery proceeds.”

The national unemployment rate decrease by 0.2 percentage points to 4.2% in September as the number of unemployed dropped by 331,000 to 6.8 million people.

The average workweek for all employees on nonfarm private payroll remained unchanged at 34.4 hours even as hourly earnings rose by 12 cents to $26.55 in September.

“The key statistic in the September jobs report is the fact that wages grew 2.9%,” said Lawrence Yun, National Association of Realtors chief economist. “The tightening labor market, with unemployment at 4.2% and the number of job openings at high levels, assure more wage gains in the near future.”

“Construction jobs, which did not change much in the latest month, will need to increase rapidly in order to relieve the housing shortage facing the country,” Yun said. “But in the short term, there will be fewer construction workers building new homes, especially since some will be diverted to rebuilding areas impacted by the hurricanes.”

However, another expert disagreed with NAR, saying that while a jump in wages is welcome, it is not the key statistic.

“Though the bump in wages is welcome news, the lack of growth in construction jobs at a time when there is an unprecedented need for resources both to rebuild from hurricane damage and to create long-needed housing supply is concerning,” Redfin Chief Economist Nela Richardson said. “Residential construction employment in September was down 1% from last year and 4% from August.”

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