Short-Term Jobs Hit Expected From Sandy
Job growth in November was likely sluggish as Sandy battered the economy after slamming the east coast.
The consensus forecast of economists is that 93,000 nonfarm payrolls were added in November, down from 171,000 in October, and the unemployment rate is expected to hold steady at 7.9 percent, according to Reuters. But other surveys put the number closer to 80,000.
Yet, some economists see even that number as too high. They say the storm, which hit Oct. 29, was a negative for hiring, since it disrupted commerce in densely populated New York and New Jersey metropolitan areas for days and in some cases, weeks.
The markets are also likely to take the number in stride because the impact from the hurricane should be temporary and ultimately turn into a positive by adding jobs in construction and other areas. "If there was ever a number that people could look past, it would be this one," said Deutsche Bank chief U.S. economist Joseph LaVorgna.
LaVorgna's forecast is at the low end. He expects just 25,000 jobs in total were created in November, and he thinks the dent Sandy made in fourth quarter GDP is greater than expected. "At first, we thought it could be about a half a point, but everything we've gotten since then suggests the impact could be closer to one point," LaVorgna said. He expects fourth quarter GDP growth of 1.3 percent.
"I would guess that the businesses that would be hurt the most would be those that are probably more specific to the east coast. I would think a lot of leisure and hospitality, some retail would be negatively impacted, as well as education. A lot of state and local offices were closed. It would probably be a wide swath of industries hit," said LaVorgna. "You are talking about 23 percent of the economy if you look at all the areas that were affected." The super storm wreaked damage from West Virginia to New England.
An encouraging sign on the employment front was Thursday's weekly jobless claims, which were 370,000, about the same level as before the storm hit. Claims had spiked to 451,000 post-Sandy. The November employment report is released Friday at 8:30 a.m. ET.
Mark Zandi, chief economist with Moody's Economy.com does not expect the November number to be as weak as consensus. He forecasts 105,000 nonfarm payrolls were added, but he expects the unemployment rate to tick up to 8 percent or more since the household survey was taken during the worst week of Sandy's impact.
"I think Sandy, according to our estimates, shaved 86,000 off the number, which means ex-Sandy we were close to 200,000," he said. "There is another technical issue and that is Thanksgiving was early in the month, so that's juicing up the seasonally adjusted number by 65,000." Those 65,000 workers are largely holiday hires in such jobs as retail and restaurants.
Zandi expects to see a drop in hours worked, as many businesses closed and workers weren't able to make it to work during the storm and after. Even with the rush of out-of-state utilities workers into the affected areas and the overtime they and emergency personnel put in, Zandi said the hours worked should still be low.
"Usually everybody else swamps that at least initially," he said of hours worked. "If you look at past storms, generally you see a drop. … I think maybe it goes down 0.1 or maybe 0.2." Zandi expects the payrolls number to return to its trend in December and January, and job growth should go back to its two-year pace of about 150,000 jobs a month, unless Washington lets the economy go off the "fiscal cliff."
The "cliff" is the combination of tax increases and spending cuts that would take hold starting in January, if Congress does not act.
Diane Swonk, chief economist at Mesirow Financial, expects to see double-digit unemployment and an immediate recession, if that were to happen.
As for November, she expects 75,000 payrolls in total, when including public sector layoffs. She said the decline in state and local government jobs would not have been offset by emergency workers.
"You got hit hard on the small-business side, and that was to be expected because small retailers were closed," she said.
But she said the makeup of jobs could start to change in December when workers return to their jobs, and employment starts to benefit from Sandy rebuilding, even outside of the storm hit area. For instance, the building materials industry could benefit wherever it is located, since materials will have to be sent into the hard-hit areas, and transportation companies will benefit from carrying those products.