US companies shed 33,000 workers in September, marking the first monthly decline in seven years, the Labor Department reports. The prevailing wisdom is that hurricanes temporarily derailed hiring. A review of macro data from other corners supports the case for dismissing today’s unusually weak employment data as a temporary setback due to weather.
The Labor Department’s on board with the view that the numbers du jour are an anomaly, explaining in today’s release that “the net effect of [hurricanes Irma and Harvey] was to reduce the estimate of total nonfarm payroll employment for September.”
Whatever the source of the slide, last month’s tumble was anything but subtle relative to recent history. The sharp reversal of fortunes last month dragged down the year-over-year change in private payrolls to a weak 1.4% advance, the slowest growth rate since 2011.
Despite the worrisome profile for September, economists are inclined to dismiss the decline as transitory. “I don’t think this is indicative of problems in the labor market — it’s because of the hurricanes,” Gus Faucher, chief economist at PNC Financial Services Group, tells Bloomberg. The weather issues aside, “the economy is in decent shape, the labor market continues to improve, and we’ll bounce back to job growth in the final three months of 2017.”
“The numbers were certainly blown around a lot by the storms,” notes Carl Tannenbaum, chief economist for Northern Trust, via The New York Times. “The interruptions created in the hurricane regions were seen in leisure and hospitality especially, which had a huge decline.” But “as winds calm, my guess is the employment figures will stabilize.”
The case for optimism for the US economy’s outlook still looks encouraging from other data perspectives. Some examples:
* Job cuts fell 26% in September vs. the year-earlier level, according to Challenger, Gray & Christmas. John Challenger, chief executive officer at the firm, advises that “job cuts have remained low since the second half of last year. As companies grapple with potential deregulation and changes to health care costs in a tight labor market, employers are holding on to their existing workforces while many positions requiring skilled labor go unfilled.”
* Initial jobless claims, after spiking higher in early September due to hurricanes, have been falling recently, dipping to 260,000 (seasonally adjusted) last week, well below the latest peak of 298,000 for the week through Sep. 2.
* Employment data for Sep. from other sources reflect a brighter profile than today’s so-called establishment numbers. The ADP Employment Report for last month shows a sharply softer gain, but one that’s still positive via a 135,000 increase. Note, too, that the year-over-year change for ADP’s estimate remains healthy via a nearly 2.0% increase. Also, today’s employment data via the household survey reflects a considerably firmer profile for last month: the number of employed persons in Sep. grew by a strong 906,000, according to this dataset.
* There’s also a bullish aura bubbling in this week’s survey data for the manufacturing and services sectors in Sep. The ISM Manufacturing Index last month jumped to a 13-year high and its services counterpart rose to its strongest reading since 2005.
* Last month’s big-picture economic profile for the US remained upbeat.
Until or if we see deterioration beyond today’s establishment numbers for payrolls, it’s reasonable to assume that the Sep. slide isn’t the start of deeper trouble for the economy and that moderate growth will endure for the near term outlook.