For the first time in seven years, the U.S. saw a monthly decline in jobs, with a reported loss of 33,000 for September 2017.
It had nothing to do with economic weakness, though.
Instead, much of the damage to the jobs number came courtesy of Irma and Harvey, two of the most destructive hurricanes we’ve seen in quite some time. In fact, the latest jobs report showed a drop of 105,000 positions in restaurant and bar jobs because of the storms.
Hourly employees in the hurricane-hit regions were unable to work, missed a paycheck, and thus were counted as not having a job.
That’s the biggest reason for the 33,000 drop.
Harvey inflicted about $87 billion of economic losses. Irma inflicted another $83 billion. So, of course, we’re going to see that reflected in jobs losses. But, according to analysts at PNC Financial, “The labor market remains in good shape. The job losses were due to disruptions from hurricanes, not underlying weakness in the economy.”
Plus, according to the Bureau of Labor Statistics (BLS):
“In September, a sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey. The storms caused large-scale evacuations and severe damage to many homes and businesses. In the establishment survey, employees who are not paid for the pay period that includes the 12th of the month are not counted as employed. Many employees in areas affected by the hurricanes were likely off payrolls during the reference pay period for September.”
That’s why the stock market didn’t begin to fall apart on the release of news.
Better, despite the loss of jobs, the unemployment rate still fell to 4.2% from 4.4% -- the lowest number since February 2001. So things are still looking good. And, outside of hurricane-hit regions, more Americans are back to work. In fact, the number of Americans out of work fell to 6.8 million, the lowest number we’ve seen since March 2007.
Even average hourly wages showed improvement, rising 2.9% year over year.
Some analysts say this may have been inflated by a loss of lower-paid workers in storm-hit regions. Higher-paid worker salaries likely boosted the wage figure. However, August 2017 numbers were revised higher to 2.7% from 2.5%, as well, suggesting that pay may be picking up and encouraging more Americans to go back to work.
Overall, unemployment is still improving nicely.
In fact, the continued health could force the Federal Reserve to raise its short-term rate shortly. According to the CME Group, there’s a 98.5% chance of a 100 to 125 basis point hike by November 2017, and an 86.7% chance for a 125 to 150 basis point hike by December 2017.
It’ll be interesting to see what happens next. Whatever happens, The Cheap Investor will keep you informed. Stay tuned.