NFP: U.S. Economy Contracts For 1st Time Since 2010, Likely Due To Hurricanes Harvey, Irma

by Ike Obudulu Posted on October 6th, 2017

The U.S.economy contracted for the first time since 2010, shedding 33,000 jobs in September, according to the latest Bureau of Labor Statistics, Non-Farm Payrolls, NFP, report, while unemployment fell to 4.2 percent. NFP’s -33000 in September is also much worse than the markets expectation of +77000. However, it should be noted that the figure was skewed heavily by the impact of hurricanes Harvey and Irma

It’s the first time in seven years that the monthly jobs report has shown a loss of jobs, instead of at least some growth; the last job decline was in September 2010. But economists caution that the drop is likely representing the short-term consequences of bad weather, not a long-term shift in the job market.

Before this report, the economy had added an average of about 175,000 jobs per month; the unemployment rate has been at 4.3 or 4.4 percent since April.

Job growth in September was expected to be lower than usual because of the effects of several devastating hurricanes. Economists did not generally predict an actual decline, but a not-so-stellar report was widely anticipated.

“Hurricane Irma, in particular, occurred during the period when the Labor Department surveys job growth,” reports NPR’s Jim Zarroli. “So it’s likely to have an especially big impact.”

The Bureau of Labor Statistics agrees that hurricanes Harvey and Irma are the “likely” cause of a “sharp employment decline” in restaurant jobs, as well as low growth in other job fields.

People who have jobs but weren’t paid during the survey period don’t count as “employed” in the BLS statistics. That would include, for instance, a restaurant worker who is paid hourly and could not work for an extended period because of a storm.

The acting commissioner provided more context in a statement issued with the report.

“In September, 1.5 million workers had a job but were not at work for the entire reference week due to bad weather, the highest level for this series over the past 20 years,” William Wiatrowski wrote. “This series is highly sensitive to the timing of weather events.”

Not all the data were similarly affected. For instance, the storms had “no discernible effect” on the unemployment rate, the bureau says.

Stuart Hoffman, a senior economic advisor at PNC Financial Services, told Jim the effects of the storms are likely to be temporary, and the job market should recover by the end of the year.


Photo: Flooded downtown Houston is seen from JP Morgan Chase Tower on Aug 27

The September jobs report also adjusted revised job growth in July and August downward; with those revisions, 38,000 fewer jobs were added this summer than had been previously reported.

Job growth has now averaged 91,000 jobs monthly for the past 3 months, the BLS says.

Dollar spiked higher in early US session even though the headline Non-Farm Payrolls number is a big disappointment. And the markets seem not to be to bothered by it. Unemployment rate dropped to 4.2%, down from 4.4%, lowest since December 2000. Participation rate also increased to 63.1%, up from 62.9%. The most positive surprise is wage growth. Average hourly earnings jumped 0.5% mom. While wage growth could also be inflated by the hurricanes, it beats an also optimistic expectation of 0.3% mom already.

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Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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