Job market rallies after hurricanes
ADP reports big boost in private sector in October
Economists expect unusually strong job growth when the government reports on October employment Friday, as the effects of Hurricanes Harvey and Irma are reversed.
Any jump in employment would follow a healthy rise reported by payroll processor ADP, which said Wednesday the private sector added 235,000 jobs last month, more than the 196,000 economists had forecast. The Labor Department on Friday is expected to tally 310,000 payroll advances by the public and private sectors.
“The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma,” said Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compile the report. “Looking through the hurricane-created volatility, job growth is robust.”
In September, Labor reported 33,000 job losses, the first since 2010, while ADP announced a tepid 135,000 gains. The Labor survey was more dramatically affected by the storms because it counts people as employed only if they’re paid during the week the survey is conducted. ADP generally includes all employees on the payroll.
As a result, the Labor survey is likely to highlight much stronger increases for October as employees idled by the hurricanes returned to work. Hurricane Harvey hit the Houston area in late August and Irma barreled through Florida in early September.
The better-than-expected ADP tally suggests an improving job market even aside from the storms. It prompted Ian Shepherdson, chief economist of Pantheon Macroeconomics, to revise up his estimate for the Labor tally to 350,000 payroll additions from 300,000.
Even in normal months, ADP tries to forecast the Labor total but often differs from it substantially, though the two re- ports frequently track similar broad trends.
In October, ADP said, small businesses added 79,000 jobs, midsize companies added 66,000 and large ones,
90,000. Professional and business services led the gains with 109,000 new jobs. Construction added 62,000 as rebuilding efforts in Texas and Florida got underway; leisure and hospitality,
45,000; education and healthcare,
39,000; and manufacturing, 22,000. Job growth, based on Labor figures, has slowed this year as the low, 4.2% unemployment rate provides employers fewer qualified workers. If the economy added 310,000 jobs in October, as economists forecast, it would leave average monthly gains at about 164,000 this year, down from 187,000 in 2016. Still, that’s more than enough to continue to lower the unemployment rate.
And the shrinking labor supply should soon push up average pay increases more sharply as businesses compete for fewer candidates, economists say.
That’s leading Federal Reserve officials to forecast a third interest rate hike in 2017 at the Fed’s December meeting as policymakers seek to head off an eventual spike in inflation.