US payrolls shrink for first time in 7 years
WASHINGTON — Hurricanes Harvey and Irma walloped the labor market last month, causing the nation to lose jobs for the first time in seven years, the Labor Department said Friday.
Total nonfarm employment declined by a net 33,000 jobs in September compared with an upwardly revised gain of 169,000 the previous month. The Labor Department said 1.5 million workers — the most in 20 years — were not at their jobs during the survey week last month because of bad weather.
Restaurants and bars took the biggest hit. Total employment in September declined by 105,000 “as many workers were off payrolls due to the recent hurricanes,” the Labor Department said.
The sector had averaged job growth of 24,000 over the previous 12 months.
“We’ve very confident those jobs are coming back,” Gary Cohn, the top White House economic advisor, told Fox Business Network.
Analysts had expected the major hurricanes that devastated large parts of Texas and Florida would significantly reduce job growth in September, but the decline was much bigger than expected.
“The first thing that comes to mind here is the scene in ‘The Wizard of Oz,’ where we hear the line, ‘Pay no attention to the man behind the curtain,’” said Mark Hamrick, senior economic analyst at financial information website Bankrate.com.
“Because of the impacts from hurricanes and flooding, the decline reported in September payrolls doesn’t carry weight this time around,” he said.
Although much of the report will be discounted because of the temporary weather effects, there were some good signs.
The unemployment rate, which is calculated differently, declined to 4.2 percent in September, from 4.4 percent the previous month. That was the lowest level since 2001.
And average hourly earnings jumped 12 cents in September to $26.55. That was the biggest increase since 2007. For the 12 months that ended Sept. 30, wages were up 2.9 percent, well above the low inflation rate.
“These are really great numbers,” Cohn said of the wage growth. “It just shows President Trump’s economic agenda is really working.”
But the unusually sharp wage growth was probably a temporary boost related to the hurricane, said Gus Faucher, chief economist at PNC Financial Services Group. With so many lower-wage restaurant and bar workers out of the calculation, average earnings got an artificial bump up, he said.
“My guess is that was skewed,” Faucher said.
Economists expect the job market to rebound from the hurricane damage in coming months as workers get back to their jobs and rebuilding begins.
“We should get a boost over the months ahead because you’re going to have reconstruction efforts from insurance payments and federal aid,” Faucher said. “We’re going to make up for it late 2017 and early 2018.”
Federal Reserve Chair Janet Yellen warned on Sept. 20 that “the hurricanes severely disrupted the labor market in the affected areas” and that the nation’s employment levels last month might be “substantially affected.”
Economic growth in the third quarter of the year also would be “held down by the severe disruptions” caused by the hurricanes but likely will bounce back, Yellen said at a news conference.
“Based on past experience, these effects are unlikely to materially alter the course of the national economy beyond the next couple of quarters,” she said.