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Jobs Numbers Swing Negative Post-Hurricanes; Unemployment 4.2%

Mark Vickery
We expected some hurricane effect in today's non-farm jobs data, but few predicted a swing to the negative: -33K new jobs were created in September.

Friday, October 6, 2017

We knew the devastating hurricanes were going to show up in non-farm employment data from the Bureau of Labor Statistics (BLS) this morning, but few predicted a swing to negative jobs growth: -33K new jobs in the month of September are directly related to Hurricanes Harvey and Irma; the private sector alone accounted for 40,000 fewer jobs in the period. Most of those came from the Food Services/Drinking Establishment segment, which lost 105K jobs last month.

The last time the monthly BLS report delivered a negative employment number was exactly 7 years ago: September 2010. As it happens, this latest survey was taken just as Hurricane Irma was ravaging the Gulf Coast of Florida, meaning these numbers — as well as the Florida peninsula — took a direct hit. One tidbit of information was that work no-shows — again, directly related to the hurricanes — reached the highest totals in 20 years.

Further, we see a further downward revision to the previous two (not-hurricane-related) BLS figures combined, by another 51K. The August tally actually rose to 169K from 156K originally reported, but July fell from the initial 189K all the way down to 138K. This pulls the overall trajectory in 2017 downward from a strong start to the year. This is not to say subsequent months won’t put these jobs back — and possibly more, in terms of construction and infrastructure — but we won’t be counting those chickens just yet.

All that said, there was plenty of good news to take away from this report: the Unemployment Rate fell to 4.2% — the lowest we’ve seen since February 2001. The U-6, or “real unemployment” figure, slipped a few notches to 8.3%, and we haven’t seen this level since June 2007. Healthcare gained another 23K new jobs in September, and Transportation/Warehousing brought in 22K. Average hourly earnings ratcheted up 0.5% to a year-over-year +2.9%, which is not insignificant. The 0.5% bump is the second such gain in the past 3 months.

Of course, what these positive figures mean is that the Fed is more likely to bring another interest rate hike this December. Especially with wage gains at roughly 3% for the year, these are the sorts of metrics Janet Yellen and company have been on the lookout for, literally for years. Rising earnings will be the biggest boost toward the desired 2% inflation that exists within our current economy.

Just When You Thought It Was Safe…

“Just when you thought it was safe to go back in the water…” we now see another tropical storm gaining momentum as it heads up into the Gulf of Mexico. After dumping Central America with torrential downpours as a tropical depression, Tropical Storm Nate is expected to gather hurricane strength as it enters the warm gulf waters. Trajectories currently put the storm on a collision course with New Orleans sometime Saturday night.

Offshore oil-drilling rigs are already shuttering ahead of the coming Tropical Storm Nate, which is estimated to affect a quarter-million barrels of oil per day. With the global supply glut already showing signs of draining from OPEC measures, etc., we might expect oil prices to spike in the near-term, depending on the overall damage this new storm may cause.

Mark Vickery
Senior Editor

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