Hurricanes deal bad hand to employers in September
October 10, 2017
Keywords: Investment Process
For the first time since the recession, the economy actually lost jobs in September, seemingly a symptom of recent catastrophic weather-related events rather than a sign of a market correction.
According to the Labor Department, employers reduced jobs by approximately 33,000 in September, the first time a nationwide employment dip has occurred in seven years. By most accounts, the pullback was driven by Hurricanes Harvey and Irma, which battered two of the U.S.' highly populated states in Texas and Florida, respectively. Texas is the second-most populous state in the U.S. at roughly 28 million, based on data from the Census Bureau, while the Sunshine State is fourth at around 19.5 million.
Gad Levanon, chief economist at the Conference Board, acknowledged the influence the Category 4 storms had on job creation last month.
"Given the impact of the Hurricanes in August and September, today's job report does not tell us much about the current trend in employment," Levanon explained. "Downward revisions to previous months, along with this month's report, provide reason to slightly reduce expectations about the current trend in job growth."
What the September employment report did clarify, Levanon hastened to mention, was the tightening of the labor market, as the rate of joblessness fell to 4.2 percent, a low last witnessed more than 16 years ago. He further referenced how the labor force participation rate climbed to it's highest point since 2014, at slightly over 63 percent.
In a separate survey obtained by The Wall Street Journal, which polled households rather than companies, job creation reached a total of 906,000 in September compared to August, with the level of unemployment falling to what the Labor Department estimated at 4.2 percent.
Construction sector gets second wind
While many employers continue the recovery process from Harvey and Irma, some of whom have had to rebuild from scratch due to the destruction the hurricanes caused, the aftereffects have created business opportunities in several industries. The Journal noted how the hurricane ravaged regions has seen increased activity related to construction, as both homeowners and companies look to bounce back from the events that led to widespread displacement and relocation.
"The storm brings a curse to many, many, but it brings a blessing to others," said Joseph Brusuelas, the Journal reported. "The construction [effort] is huge."
Prior to the Department of Labor releasing the official report on employment in September, economists suspected a slippage in job creation. The agency revealed about 1 in 13 employers this summer were located in parts of the country where hurricanes made landfall, the equivalent of more than 11 million positions. Still, the losses were more substantial than economists polled by the Journal suspected, forecasting 80,000 job openings for the month overall.
Maria's impact not accounted for
Hurricane Maria also formed and wreaked its devastation in September, as the storm was the 10th most intense hurricane climatologists have ever tracked for those originating from the Atlantic. Though its effects were felt on the U.S. mainland, Maria primarily impacted Puerto Rico, but to a degree that prevented the agency from conducting its analysis for its latest report.
Investors on Wall Street were largely unfazed by the unfavorable employment numbers, as stocks continued to thrive. The Dow Jones Industrial Average closed at 22,775, up 0.5 percent and the Standard & Poor's 500 gained 0.6 percent, finishing the week at 2,552.07. The Nasdaq also gained ground by closing up 0.8 percent to 6,585.36.
The September jobs report serves as a stark example of the investment process: Conditions aren't always what they seem and often require context to get the full story. That's what we aim to provide our clients with here at Miles Capital, delivering clear solutions that cut through the rigmarole to help produce results.
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