U.S. Lost 33000 Jobs in September; Unemployment Rate Dips to 4.2%

Staggering from the impact of hurricanes that walloped Texas, Florida and neighbouring states, the economy lost 33000 jobs in September, the first monthly decline in employment in seven years, the government reported on October 6, 2017.

But economists discounted the discouraging report, describing it as a blip in a job market that was fundamentally strong.

Some of the good news released by the Labour Department — a drop in the jobless rate to 4.2 % and a year-over-year gain in wage growth of 2.9 % — may also have been skewed by weather disruptions.

“The numbers were certainly blown around a lot by the storms,” said Carl Tannenbaum, chief economist for Northern Trust. For that reason, he said, the Federal Reserve, which has been scrutinizing the employment report for signs of inflation, will probably look past this report. “As winds calm,” he said, “my guess is employment figures will stabilize.”

That pattern held true for Bruce Gropper, who runs Right at Home, a home-care franchise in Palm Beach, Fla.

“We put our hiring on hold” because of the weather, Mr. Gropper said, adding that many of the 50 to 75 caregivers who work for him and would typically have been in the field were unable or unavailable to work during a two-week period. “Now, things are back to normal.”

It was the same in Texas. “There’s a lot of manufacturing jobs in Beaumont, Corpus Christi, Houston, all of which suffered damage,” noted Ray Perryman, president of the Perryman Group, an economic research and analysis firm based in Waco, Tex. “Some of these plants were shut down for an extended period of time, and that would have gotten into the September survey.”

One upside may be a surge in hiring in subsequent months. Using Hurricane Katrina in August 2005 as a benchmark, Jim O’Sullivan, chief United States economist at High Frequency Economics, said he expected payrolls to bounce back by the end of the year.

“There’s no question there were huge hurricane effects,” he said. Food and drinking establishments alone lost 105000 jobs last month, and the Bureau of Labour Statistics reported that the number of people who said they were not working because of bad weather jumped by 1.5 million.


O’Sullivan and several economists agreed that the labour market was still pushing ahead — no matter how unevenly — in what is now the ninth year of an economic expansion. “The other data we’ve been seeing this week don’t show any signs of a weaker trend,” O’Sullivan said. “If you take out Texas and Florida, there’s been no increase in jobless claims over the past five weeks.”

The stock market’s reaction to the news was mildly negative. The Standard & Poor’s 500-stock index declined slightly from record levels after eight straight days of gains.

President Trump called attention this week to the economy’s successes, writing on Twitter on Thursday, “Stock Market hits an ALL-TIME high! Unemployment lowest in 16 years!” Last week, Mr. Trump said that the Republicans’ proposed tax cuts would provide further “rocket fuel for our economy.”

Many workers have been waiting to see concrete evidence of economic progress in their paychecks. Although the Census Bureau last month reported a jump in annual incomes across a wide spectrum, households with incomes below the median remain worse off than they were in 2000.

The hefty growth in average wages reported on Friday was probably exaggerated, because many low-wage workers were temporarily displaced by the storms, bumping up the overall average.

At least a portion of the 0.5 % average hourly wage growth last month, though, is likely to stick. There is plenty of evidence that broad swaths of the labour market are tightening. Target said last month that it would increase its base hourly pay by USD 1, to USD 11 — higher than or equal to the minimum wage in every state.

Amy Glaser, senior vice president of Adecco Staffing, said that employers she worked with were raising wages and reaching into less-common pools of potential employees like retirees, stay-at-home moms and people with disabilities.

Glaser said she expected wages to rise further, saying some of her clients were thinking about increasing hourly wages as much as 20 to 40 % during the peak holiday season and early next year. Employers are also pushing to retain the workers they have — for example, by offering more bonuses for e-commerce and other seasonal workers who stay through the holidays.

Some businesses are trying to generate and educate their work forces by offering more paid internships and apprenticeships. Others are shortening the interview cycle to improve their chances. “There is a need for speed,” Ms. Glaser said. “Whoever gets to a candidate first is well positioned.”

Radial, the second-largest direct-to-consumer e-commerce company behind Amazon, is hiring 27000 people to work in its 25 warehouses around the country through mid-January. Even as brick-and-mortar retail is suffering significant losses, e-commerce continues to thrive.

“We’re hiring 35 %, or 7000, more people than we did last year,” said Stefan Weitz, Radial’s executive vice president for technology services. “It’s very competitive. A lot of logistics companies have operations in similar areas because of the proximity to air and ground transport.”

At the upper end of the labor market, the competition for highly skilled workers is intense. Bryan Leach, founder of Ibotta, a Denver company offering a mobile shopping app, said he had hired more than 100 people this year, including engineers, product managers and data scientists, mostly at six-figure salaries.

“We are hiring national search firms to shop for talent in the coasts,” in addition to seven in-house recruiters, Mr. Leach said. The company has also helped sponsor billboards in San Francisco promoting the benefits of living in Denver and is offering USD 1000 apiece to employees who refer friends who are hired.

Despite the scramble for workers, the labour market has stubborn weak spots. Many of the jobs available, like the seasonal positions at Radial, are at the lower end of the pay scale and do not offer long-term stability.

For some workers, such jobs have limited appeal. The labour force participation rate peaked its head above 63 % in September, but many workers remain on the side-lines.

Revised hiring figures for July and August showed that a total of 38000 fewer jobs were created in those two months than previously reported, bringing the monthly average gain in 2017 – excluding September – to 170000. August’s figures will be revised one more time, while September’s will be revised twice over the next two months. State-by-state tallies for September are not yet available.

Although Hurricane Maria also devastated Puerto Rico in September, the survey of employers that the Bureau of Labour Statistics uses to calculate monthly payroll gains does not include the island.

The Katrina experience showed that hiring can rebound quickly after a disaster, as damaged communities clean up and rebuild. Employment gains averaged 249,000 in the six months before the storm. After New Orleans found itself underwater, gains averaged 76,000 over the next couple of months before soaring to 341000 in November 2005.

While the recovery from the latest storms takes shape, businesses and workers are still counting their losses. Brian Petranick, Right at Home’s president and chief executive, said Palm Beach was not the only community where franchises were unable to connect workers and clients. He estimated hurricane-related losses to the company would end up at USD 13 million to USD 15 million. “During big storms, we see a loss of hours and services,” he said. “That means caregivers are losing the opportunity to work and make money.”