Friday, October 06, 2017

Comment: A Hurricane Impacted Employment Report

by Bill McBride on 10/06/2017 10:00:00 AM

The headline jobs number was well below expectations, and there were downward revisions to the previous two months combined.  However wages were up, and the unemployment rate down (the household survey counts people as employed even if there weren't paid during the reference week - like those in hurricane impacted areas).

Earlier: September Employment Report: 33,000 Jobs Lost, 4.2% Unemployment Rate

This negative headline jobs report followed a record 83 consecutive months of positive jobs reports (although this might be revised up - that is what happened following hurricane Katrina).

In September, the year-over-year change was 1.777 million jobs. This is the lowest year-over-year job growth since August 2011.

On the impact of Hurricane Harvey from the BLS:

Hurricane Irma made landfall in Florida on September 10--during the reference period for both the establishment and household surveys--causing severe damage in Florida and other parts of the Southeast. Hurricane Harvey made landfall in Texas on August 25--prior to the September reference periods--resulting in severe damage in Texas and other areas of the Gulf Coast.

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate.
The hurricanes were the key reason I took the under versus the consensus view.

Average Hourly Earnings

Wages CES, Nominal and RealClick on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.9% YoY in September.

Wage growth has generally been trending up.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.1 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs.
The number of persons working part time for economic reasons decreased in September.  This is the lowest level since March 2008. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 8.3% in September.  This is the lowest level for U-6 since 2007.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.73 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.74 million in August.

This is generally trending down, but still a little elevated.

The headline jobs number was disappointing, but that was impacted by the hurricanes.  Wages were up, the unemployment rate down, and U-6 the lowest since 2007 - all positive signs.   Overall this was a hurricane impacted employment report.