Tuesday, August 29, 2017

The Impact of Harvey on Unemployment Claims

by Bill McBride on 8/29/2017 03:41:00 PM

My thoughts are with the people of south Texas.

There will be some economic impacts from Hurricane Harvey (housing, oil, etc).

On housing, my initial expectations is that new home sales and housing starts will decline in the September report. Houston and south Texas are a major portion of starts and new home sales, and it will take some time to recover. We will probably also see a decline in existing home sales. We can't look back at Hurricane Katrina for guidance on housing because Katrina happened just after the housing bubble peaked - so starts and sales were already declining.

We can look back at Katrina (and Rita) for the impact on unemployment claims.

The following graph shows the 4-week moving average of weekly claims since 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average.

Hurricane Katrina made landfall on Aug 29, 2005.  Unemployment claims moved higher over the next month, and stayed elevated for a couple of months.

Note that claims also spiked following 9/11 and after Hurricane Sandy in late October 2012.  The increase following Sandy was significant, but only lasted a few weeks (so the 4-week average didn't increase as much as for Katrina).

My expectation is the 4-week average of claims will increase from the current level of 238,000 to over 300,000 over the next month.