October 2, 2017

Chart of the Week: What to Expect in This Week’s Nonfarm Payrolls Report

by Fathom Consulting

We would recommend against reading too much into the hurricane-affected employment figures in Friday’s nonfarm payrolls release, even if they come in significantly above or below our forecast of a net gain of 40,000 payrolls. The readings for employment, hours and earnings will almost certainly have been distorted by Hurricanes Harvey and Irma, which made landfall on 25 August and 10 September respectively, a point acknowledged by the Bureau of Labor Statistics (BLS).

Nearly 11 million workers were employed in the FEMA-designated disaster counties, which represents around 8 per cent of national employment. Many of those workers will not have worked during the week containing the twelfth day of the month, although if they were paid, they will still count as employed as per the BLS’s definitions. The sharp spike in jobless claims in Texas and Florida, however, suggests that a large number of people lost their incomes (at least temporarily) and their jobs (at least technically speaking) due to the hurricanes. Many businesses will not have been able to respond to the payroll survey, and the BLS will need to rely on a number of assumptions when estimating the figures.

When Hurricane Katrina struck in August 2005 (after the data for the employment report for that month had been collected), the monthly average payroll growth at the time was around 250,000. Net payroll gains dropped to 67,000 in September and 84,000 in October, before rebounding to 341,000 in November. The bottom line is that notwithstanding the expected distortions to the data caused by the recent hurricanes, we think that the labour market is in decent shape and will continue to tighten in the coming months.

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