Everyone is keeping a close eye on what is happening in the labor market, especially considering the fluctuations that will be result of recent natural disasters. How will it affect housing and what are you putting in place to absorb the changes?
The Labor Department releases its October employment report Friday. Economists surveyed by The Wall Street Journal expect employers added 315,000 jobs and see the unemployment rate holding steady at 4.2%.
1 Bumper Bounceback in Job Creation
In September, the U.S. shed 33,000 jobs due to the impact of two late-summer hurricanes, the first monthly decline in payrolls for seven years. That ended the longest stretch of job growth on record, but payrolls are expected to rebound strongly in October. Economists’ expectations of 315,000 new jobs would mark the strongest pace of hiring in two years.
2 Noisy Numbers
Analysts warn that the numbers for October and September could be heavily distorted due to the impact of Hurricanes Irma and Harvey and wildfires in northern California, and that impact may take several more months to play out in the data. Weather-sensitive sectors like leisure and hospitality, construction and mining could be particularly skewed, both to the upside and downside. The Labor Department has estimated that only 8% of U.S. workers were in counties hit by the storms, yet the impact on payrolls in September was much greater than economists had expected. Watch for revisions to September’s numbers, and keep an eye on the three-month average of job creation for a clearer picture of how the underlying jobs trend is progressing.
3 Wages
September’s year-over-year increase in average hourly earnings was 2.9%, matching the best annual gain since the recession ended in mid-2009. Wage gains at or near that level in October could suggest pay is finally starting to creep higher given the strong labor market. The unemployment rate hit 4.2% in September, the lowest since 2001. Higher wages would be welcome news for the Federal Reserve, which has long been predicting a tight labor market will eventually nudge inflation higher. Economists expect average hourly wages rose 0.2% on the month in October, reflecting pullback from September when average hourly earnings jumped 0.45%. September’s figure may have been affected by the storms as many low-wage workers in restaurants and bars were temporarily unemployed, pushing up the overall average.
4 Sector Breakdown
Payrolls in the leisure and hospitality industry were hardest hit by the hurricanes in September, shedding 111,000 jobs. Bars and restaurants, which saw the most jobs go, likely recouped those losses in October. The construction industry is also expected to post job gains as demand for repair work heats up in the wake of the hurricanes, along with the transportation and warehousing services that support construction efforts. Competition for workers in those sectors in the current tight labor market could contribute some upward pressure on wages, too.
5 Longer-Term Trends
The hurricane-related noise surrounding the labor report could pose challenges in getting a firm reading on the health of U.S. employers. Most recent indicators suggest the economy remained on an even keel as it headed into the final quarter of 2017, supported by robust spending by consumers and businesses. Low unemployment, steady — if not spectacular — wage growth and buoyant gains in the stock market and home values in recent months have helped push consumer sentiment higher and spurred households to spend. Those trends likely continued in October. The University of Michigan’s consumer sentiment index hit its highest level since 2004 in October, and sales were strong among major automakers last month — trends which likely sustained businesses’ willingness to hire.
