Terrible September Jobs Report 2017 Reports Ugly Headline Numbers
The U.S. Bureau of Labor Statistics (BLS) has released jobs data, and the numbers are less than stellar. The BLS September jobs report shows that payrolls tumbled by 33,000, missing most consensus estimates of a small increase. Although there were obvious extraneous reasons for the miss, the September jobs report for 2017 will be remembered as the month that jobs declined for the first time since 2010.
Obviously, both Hurricane Harvey and, to a lesser degree, Irma factored into the sizable miss. Look no further than the previous two jobs reports, which gained 138,000 jobs (August) and 169,000 jobs (July), respectively. With two hurricanes barreling down on major metropolis centers, employers weren’t focused on expanding their businesses.
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But there was a silver lining, at least for workers that were employed. Average hourly earnings gained 0.5% month-over-month, far above the 0.2% reported in August and the 0.3% that was expected. The participation rate also rebounded from 62.9% to 63.1%.
Also Read: Major U.S. Jobs Cuts Coming in 2017
As a result of this unexpected spike in wages, odds of a rate hike soared to 75% for the December 2017 Federal Open Market Committee meeting. The Federal Reserve has been itching for any reason to raise the federal funds rate (FFR) in recent months. This palpable whiff of inflation—albeit hurricane-aided—could provide the reason to act.
It’s widely believed that the Fed prefers raising rates before the next recession, in order to give itself enough space to cut rates again if required. This business cycle is getting quite long, and the Fed is concerned that it will lack the ammunition to stimulate the economy during the next downturn.
The U.S. jobs report for September 2017 has provided the Fed with the perfect cover in order to proceed.
Hurricane Impact
How much of an impact did the hurricane have on the economy? According to the BLS, 1.5 million workers had a job but were not at work due to bad weather. This was the highest level for this data set in 20 years.
The last natural disaster to wreak such havoc was the great blizzard of 1996, which effectively shut down eastern seaboard commerce for several days. Payrolls fell a whopping 201,000, versus 56,000 jobs added in December 1995. At the time, it was the steepest drop in five years. (Source: “Payrolls Fall by 201,000 Jobs; Blizzard in East Is Cited,” The New York Times, February 3, 1996).
Ultimately, the latest jobs report was heavily skewed by natural events beyond anyone’s control. As such, we shouldn’t look too much into it. Whether the weakness continues on subsequent reports is the bigger concern.
There should be a sizable bounce in payrolls in the next couple of reports to compensate for the post-hurricane recovery. The possibility of the hurricane leading to downside business momentum cannot be totally discounted, though.
