Cogito Ergo Non Serviam
US Loses 33,000 Jobs in September
The US economy shed 33,000 jobs in September according to the Bureau of Labor Statistics. This is the first month of job losses since 2010. The unemployment rate declined to 4.2%. Chief culprits are the hurricanes Harvey and Irma, which disrupted economic activity. However, it is premature to presume this is the beginning of a trend. People who were displaced by the weather are going to go back to work, and new jobs will arise from the clean-up effort.
The expectations were for growth, 90,000 new jobs created. The estimates were wrong because it is almost impossible to model the effects of two hurricanes hitting the US within a couple of weeks of one another. There just isn't enough hard data (for which one is grateful). Moreover, the BLS always revises figures as more data come in, so that fall of 33,000 isn't definite. The same report revised August's figure to 169,000, an addition of 13,000 from the initial print of 156,000.
Reuters reported, "The length of the average workweek was unchanged at 34.4 hours. With the hurricane-driven temporary unemployment concentrated in low-paying industries like retail and leisure and hospitality, average hourly earnings increased 12 cents or 0.5 percent in September after rising 0.2 percent in August.
"That pushed the annual increase in wages to 2.9 percent, the largest gain since December 2016, from 2.7 percent in August. Annual wage growth of at least 3.0 percent is need to raise inflation to the Fed's 2 percent target, analysts say."
The Fed's inflation target of 2%, as this journal has argued literally for years, is too low. Given the kind of economy the US has, given its vulnerability to terrorism and natural disasters, running the economy a little hotter at 3% before tightening kicks in is preferable. However, the Fed's policy is not disturbed by this down-tick.
What does change is the ability of the economists and financial engineers to make predictions for the rest of the year. There is a lot of noise now, and separating that short-term noise from the long-term trends is difficult verging on impossible. One should take economic predictions for the next few months with a lot of salt.
In the markets, the response to the news reflected this. The bond market skipped the job loss, and yields rose owing to the higher hourly earnings and increased participation rate. The equities declined for the same reasons. Gold fell and the dollar rose on the expected interest rate hike that remains on the cards.
This journal believes that regional worker shortages are inevitable in Texas and Florida (Puerto Rico is a different case entirely). The mismatch between skills needed and skills possessed will be particularly noticed. For that reason, the recovery in those areas will take quite some time. There won't be a pop in statistics so much as a gradual return to normal happens.
As it happens, hurricane season runs for a few weeks yet, and a tropical storm called Nate could turn into a category 1 hurricane that will make landfall near New Orleans over the week-end. If that happens, October may well see job losses as well.
Climate change has economic effects, and the non-farm payrolls are turning out to be the place where those changes are most apparent.
© Copyright 2017 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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