The unprecedented trio of major hurricanes that slammed the U.S. mainland and Puerto Rico could wipe out job growth for September and October, and some economists are expecting actual declines.
“We’re creating an average 175,000 jobs a month…The problem is it looks like the hurricane disruption will overwhelm those job gains in September to get them close to zero, and we’ll likely see a negative reading in October because of the sheer number of people that were affected in Puerto Rico. We really have a humanitarian crisis there,” said Diane Swonk, CEO of DS Economics.
Hurricane Harvey may have already had a slight impact on job growth in August. There were 156,000 jobs created,less than economists expected. But Irma, which resulted in major evacuations in Florida and other parts of the southeast arrived in September, around the time that the government gathers data for its monthly report.
Jefferies economists expect the combination of both those hurricanes to result in a 45,000 decline in nonfarm payrolls for September. While that appears to be the lowest forecast available so far, some firms have not released estimates yet.
“It was the aftermath of one combined with the initial impact of the other. The area affected was bigger than it was than it was for Hurricane Katrina,” said Tom Simons, money market economist at Jefferies. He said Katrina resulted in a loss of 35,000 nonfarm payrolls in the month after it hit the New Orleans area.
The biggest impact on the employment data could come in October from Puerto Rico, which was struck by the full force of Hurricane Maria six days ago. The tremendous damage to the U.S. territory has left the island without power and with a shortage of potable water.
Swonk said government data shows there are about 930,000 workers in Puerto Rico, and those that are not salaried will be most affected. There are another 31,000 in the U.S. Virgin Islands.
“Some of them are salaried, and the question is how many get paid. You have 89,000 alone that were in leisure and hospitality…You have a lot more hourly workers. A disproportionate number will not show up in the payrolls,” said Swonk.
Economists expect the hurricanes to initially slow U.S. economic growth, which should rebound in future months from rebuilding. The toll on job growth, one of the strongest signs of strength for the U.S. economy, should also reverse.