U.S. sheds jobs for first time in 7 years
Hurricanes lead to 33,000 losses, but wages show growth
The U.S. lost jobs for the first time in seven years last month after hurricanes Irma and Harvey drove down employment. But wages grew, unemployment fell to a 16-year low, and there were other signs that September’s weak showing was a blip.
Employers shed 33,000 jobs in September — the first decline since September 2010, when the economy was still reeling from the recession’s aftereffects. But unemployment dropped from 4.4% to 4.2%, the lowest since February 2001, the Labor Department said Friday. And so economists are likely to write off the drop, as will Federal Reserve officials, who tentatively plan to raise interest rates late this year as the economy improves.
“Despite the decline (in job gains), it’s really clear that the labor market remains in good shape,” Joel Naroff of Naroff Economic Advisors says.
The unemployment rate, which is calculated from a different survey than the headline job totals, edged lower. That’s
because gains in the number of people employed outpaced an increase in the labor force, which includes people working and looking for jobs. In that survey of households, workers are counted as employed even if they were temporarily idled by the storms.
Average hourly wages jumped 12 cents to $26.55, lifting annual gains to 2.9% from 2.5%. With employers struggling to find qualified workers, analysts have been looking for a pickup in pay increases.
But the sharp rise last month may well be deceptive. It can probably be traced to the hurricanes, which kept many lowerpaid part-time and temporary workers at home, boosting average earnings, says Ian Shepherdson, chief economist of Pantheon Macroeconomics.
Yet faster pay increases may come soon. The drop in unemployment likely means it will become even tougher for employers to find job candidates, forcing them to raise pay more substantially and juicing inflation that has been persistently sluggish.
“The soft payroll number will be ignored at the Fed,” Shepherdson says. “Unemployment is what matters, and this report therefore makes a (December) rate hike even more likely.”
Businesses lost 40,000 jobs. Federal, state and local governments added 7,000. The number of workers who stayed home because of weather surged by 1.5 million, the Labor Department said, though economist Jim O’Sullivan of High Frequency Economics said that measure “overstates weather effects on payrolls.”
Job gains for July and August were revised down by 38,000. July was downgraded to 138,000 from 189,000 and August was revised up to 169,000 from 156,000.
Economists had estimated the storms would result in a modest 80,000 employment increase, according to a Bloomberg survey. Hurricane Harvey barreled into the Houston area in late August, and Irma lashed Florida in early September, shutting down many businesses and making it difficult for workers to travel to job sites
The hurricanes’ impact was most evident in payrolls for bars and restaurants, which lost 105,000 jobs after adding an average 24,000 a month over the past year as the storms kept both employees and customers from venturing out. Health care added 23,000 jobs; transportation and warehousing, 22,000; professional and business services, 30,000; and construction, 8,000. Manufacturing cut 1,000 jobs.
Job growth, in turn, was expected to spike in coming months as the idled employees return to work. The volatile tallies, along with other economic data that have been distorted by the storms, will make it difficult for the Federal Reserve to get an untainted view of the economy as it weighs another interest rate hike late this year.
But the Institute for Supply Management’s indexes of manufacturing and service sector activity, which are less affected by weather, both showed the fastest growth in more than a decade last month as their employment measures surged. And initial jobless claims, a gauge of layoffs, have remained near 40-year lows, notwithstanding hurricane-related increases.
There were also other encouraging signs in Friday’s jobs report. A broader measure of unemployment that includes discouraged Americans who have stopped looking for work and part-time employees who prefer full-time jobs fell to 8.3% from 8.6%.
And the share of Americans working or looking for jobs rose from 62.9% to 63.1%, highest since March 2014. That measure generally has trended down as Baby Boomers retire but it has edged higher the past two years as the improving labor market coaxes discouraged workers back into job searches.
Generally, job growth has been solid in 2017, especially in light of a low unemployment rate. Before Friday’s report, payroll gains averaged 176,000 this year, down from 187,000 last year and 226,000 in 2015. After the losses in September, average monthly job growth this year fell to 148,000.