United States labour market hit by hurricanes in September

Jon Howard
October 7, 2017

And despite the loss of jobs in September, the more accurate alternative measure of labor utilization, what the Bureau of Labor Statistics calls its U-6 rate, fell to 8.3 percent, the lowest rate since November 2007.

This is the first negative print for headline payroll gains since September 2010 while the unemployment rate is now at its lowest level since February 2001.

The modest decrease surprised economists, who had expected employment to rise by 90,000 jobs compared to the addition of 156,000 jobs originally reported for the previous month. The unemployment rate was expected to hold steady at 4.4 percent. But economists have long said that the economy needs monthly job growth of over 300,000 to help restore employment to many who suffered during the 2008-2009 downturn.

The job losses were so substantial that it caused the number of jobs across the entire US economy to shrink by 33,000 last month. One tidbit of information was that work no-shows - again, directly related to the hurricanes - reached the highest totals in 20 years. In September, average hourly earnings of private-sector production and nonsupervisory employees increased by 9 cents to $22.23. These had been adding around 24,000 each month over the past year.

The economy lost 33,000 jobs in September, after hurricanes Harvey and Irma damaged crucial economies in Florida and Texas. The monthly jobs report is based in part on a survey of roughly 60,000 American households. That would make Harvey the second-worst US natural disaster, after Hurricane Katrina in 2005. The broadest measure of unemployment is known as the U6 rate, which includes all unemployed, those who are working part time while looking for a full time job, and those who aren't looking now for a job - but still want one, and have worked in the past year.

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If a worker doesn't receive any pay for the survey pay period, which is in the middle of the month, the Labor Department considers that person unemployed.

Hiring could even get a boost from a temporary increase in the number of people employed to help clean up after the recent spate of hurricanes.

But a loss in jobs was far worse than the 80,000 new jobs most USA economists had expected would be created. Still, the government said that figure was artificially inflated by the loss of so many lower-paid workers in hurricane-hit areas. The labor force rose a huge 575,000 and the labor force participation rate by 0.2 percentage points.

The storms' effects are easy to detect in the underlying figures. "Other parts of the report were much stronger than expected", wrote Jim O'Sullivan, chief US economist at High Frequency Economics. That's true even if those employees returned to work after the storm passed or will return. That's equal to about 7.7 percent of the nation's workforce.

Puerto Rico, the U.S. territory also devastated by the hurricanes, is not counted in the jobs report.

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