Hur­ri­cane Harvey set to dis­rupt US jobs data as Texas cleanup es­ca­lates

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

THE US Au­gust em­ploy­ment re­port may have been al­most pre­dictably dis­ap­point­ing, though it wasn’t weak enough to call into ques­tion the un­der­ly­ing strength of the US labour mar­ket. The data marked the sev­enth straight Au­gust that the gov­ern­ment’s ini­tial take on pay­rolls fell short of the me­dian es­ti­mate of econ­o­mists, with 156,000 jobs added com­pared to a pro­jec­tion of 180,000 in a Bloomberg sur­vey.

Yet the big­ger pic­ture shows a still-healthy labour mar­ket in a ma­ture ex­pan­sion. One bright spot in the re­port was a surge in man­u­fac­tur­ing and con­struc­tion em­ploy­ment.

Econ­o­mists were also quick to point out the dif­fi­culty ad­just­ing the Au­gust data be­cause of dif­fer­ing start times of the new school year and swings in sum­mer em­ploy­ment. What’s more, the monthly fig­ures have been re­vised higher in five of the past six years.

“There’s a lot of sta­tis­ti­cal quirks em­bed­ded in here — noth­ing fun­da­men­tal,” said James Smith, a de­vel­oped mar­kets econ­o­mist at ING Bank NV. “It’s a slow-mov­ing ship and we’re still op­ti­mistic that wage growth will pick up in the coming months given the strength in the labour mar­ket.”

Even so, Au­gust’s re­port will prob­a­bly be the most re­li­able pic­ture of un­der­ly­ing em­ploy­ment trends for sev­eral months, as Hur­ri­cane Harvey’s fall­out in the Houston re­gion be­gins to af­fect the data. While the storm may de­press pay­rolls at first, jobs will prob­a­bly get a sub­se­quent boost as con­struc­tion and util­ity work­ers help re­build hous­ing and in­fra­struc­ture.

The Labour Depart­ment said in its re­lease that Harvey “had no dis­cern­able ef­fect” on the Au­gust re­port. Gary Cohn, Pres­i­dent Don­ald Trump’s top eco­nomic ad­viser, said Harvey would af­fect eco­nomic data for sev­eral months and make it much harder for of­fi­cials to get the “big­ger pic­ture” of what’s go­ing on in the econ­omy.

“The eco­nomic data that we’ve just got­ten — this un­em­ploy­ment data — is prob­a­bly the last set of clean un­em­ploy­ment data we’re go­ing to have for many, many months as we go through the re­cov­ery process,” he said in an in­ter­view on Bloomberg Tele­vi­sion.

Other data on Fri­day were more en­cour­ag­ing for the econ­omy. The Univer­sity of Michi­gan’s con­sumer sen­ti­ment sur­vey showed Amer­i­cans in the first eight months of this year have been more up­beat than at any com­pa­ra­ble pe­riod since 2000. House­holds are grow­ing in­creas­ingly op­ti­mistic about em­ploy­ment and the eco­nomic outlook, a pos­i­tive sign for spend­ing.

“De­spite an un­der­whelm­ing jobs re­port, the big­ger pic­ture is that the US labour mar­ket re­mains quite healthy at this late stage of the cy­cle, with lit­tle sign of gen­er­at­ing the kind of wage pres­sures that would risk de­rail­ing the ex­pan­sion,” Sal Gu­atieri, a se­nior econ­o­mist at BMO Cap­i­tal Mar­kets in Toronto, said in a note.

In turn, the steady in­creases in de­mand are pow­er­ing growth in man­u­fac­tur­ing. US fac­to­ries ramped up in Au­gust at the fastest pace in six years, driven by em­ploy­ment gains, fig­ures from the In­sti­tute for Sup­ply Man­age­ment showed. The ISM’S data were cor­rob­o­rated by the Labour Depart­ment’s fig­ures on man­u­fac­tur­ing pay­rolls, which in­creased 36,000 last month, match­ing the largest ad­vance since March 2012.

Yet the tight­en­ing of the labour mar­ket still isn’t lead­ing to a build-up in wages. Av­er­age hourly earn­ings climbed less than fore­cast in Au­gust, ris­ing 0.1pc on a monthly ba­sis. The me­dian pro­jec­tion was for a 0.2pc gain.

The nation’s job­less rate climbed to 4.4pc last month from 4.3pc in July, while the labour-force par­tic­i­pa­tion rate held at 62.9pc.

The jobs num­bers prob­a­bly won’t be enough to change the Fed­eral Re­serve’s outlook for mod­er­ate eco­nomic growth and slowly in­creas­ing in­fla­tion be­cause other data re­main firm.

In­vestors ex­pect this will en­cour­age pol­i­cy­mak­ers to an­nounce the start of the grad­ual process of shrink­ing their $4.5trn bal­ance sheet when they meet later this month, and to keep their op­tions open for an­other in­ter­est-rate in­crease be­fore the end of the year.

“We be­lieve the data re­main more than strong for Fed of­fi­cials to an­nounce the start of the bal­ance sheet nor­mal­i­sa­tion process at this month’s meet­ing,”

High Fre­quency Eco­nomics chief US econ­o­mist Jim O’sul­li­van said in a note. “We still ex­pect a rate hike in De­cem­ber as well, although that will de­pend on the in­fla­tion data show­ing more strength in the next few months than in the last few months.” Bloomberg

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