Non-farm payrolls fell 33k positions in September, due largely to disruptions caused by Hurricanes Harvey and Irma. The Bureau of Labor Statistics (BLS) cited that the Hurricanes reduced payroll employment, but that there was no discernable effect on the unemployment rate, which dipped to a 16-year low of 4.2%.
In the payrolls survey, workers who were not paid for the week of September 12th due to disruptions caused by the Hurricanes, are not counted as employed. However, in the household survey, which produces the unemployment rate, persons with a job are counted as employed even if they miss work for the entire week. The BLS stated that no changes were made to the survey or estimation procedures for the September figures and that collection rates were within normal ranges.
Details of the September payrolls report are less meaningful, but it is worth noting that September was the first negative month since 2010. Job losses were concentrated in services (-49k), but goods sector hiring was also soft (+9k). The largest losses, not surprisingly, were in the leisure and hospitality sector (-111k) likely due to Hurricane Irma hitting Florida, and its outsized tourist sector, in the reference week.
On the household side, labor market signals continued to strengthen. The participation rate and the employment to population ratio both increased. In fact, the employment-to-population ratio rose to a new post-recession high of 63.1%.
A healthy wage gain, was the most encouraging aspect of the report. Average hourly earnings rose 0.5% during the month. As a result, the year-over-year wage metric accelerated to 2.9% in September.
Key Implications
Given all the noise associated with the hurricanes, September’s payroll disappointing headline should be discounted. Particularly given the healthy results from the household survey. Wage growth is encouraging, but September’s data should be taken with a grain of salt, given that wages might have been affected by the industrial composition of jobs, with the losses seen in relatively lower-paying leisure and hospitality sector potentially affecting the average.
The jobs report is another example of economic data being affected by the Hurricanes, making it more difficult to discern underlying trends in the economy. Looking ahead, we would expect the October jobs report to show a solid rebound. Provided the data excluding the effects of the hurricanes remain solid, we continue to expect the Fed to hike rates in December.
