Hurricanes expected to dim US jobs growth in short term

WASHINGTON: US 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 on Friday 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. They would follow on the heels of August’s disappointing employment growth, which economists blamed on a seasonal quirk.
Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed.
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, Pennsylvania.
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 US central bank said last month it expected “labour 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, North Carolina.
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 per cent of US employment.
JOBS MARKET STILL TIGHTENING: Excluding the weather impact, economists say the labour 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 per cent annualised rate. The economy grew at a 3.1 per cent 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 per cent for September.
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. — Reuters