Sandy’s Impact on Job Growth Will Be ‘Acute’: LaVorgna
Super storm Sandy's aftermath could exact a significant toll on the jobs picture, with November payrolls expected to show little gain as economic growth slows to a standstill, according to the latest projections from Deutsche Bank.
Nonfarm payroll gains will be just 25,000 in November and the unemployment rate could rise to 8.0 percent, economist Joseph LaVorgna said in an analysis that also calls for even less improvement on gross domestic product than expected.
"The data reported last week showed preliminary evidence of Hurricane Sandy disrupting economic activity," LaVorgna said. "We are concerned there may be an acute hurricane impact on November payrolls."
Sandy tore through the East Coast in late October, causing billions in damage and power disruptions through the New Jersey coastline, New York City, Pennsylvania and elsewhere. (Read More: Griping Aside, Post-Sandy Response Not So Bad: Study)
Early damage estimates are about $50 billion, causing comparisons to the destruction from Hurricane Katrina, which decimated New Orleans and the Louisiana panhandle in 2005.
The storm's toll already has shown up in weekly jobless claims, which soared to 439,000 on a seasonally adjusted basis last week, up 78,000 from the previous period.
More economists likely will take down their November payrolls estimate if that trends continues this week, which will be the period the Labor Department uses to gauge the month's jobs activity.
In addition to the weak claims report, retail sales, purchase managers indexes and industrial production, which fell 0.4 percent, also showed signs of slowing. (Read More: Storm Sandy Depresses US Industrial Output in October)
As a result, LaVorgna said already-weak projections for fourth-quarter growth of 1.3 percent also will be lowered.
"The Federal Reserve acknowledged that the hurricane lowered industrial production by a full percentage point last month," he said. "If the November data are also significantly depressed, this will present compelling evidence pointing to GDP growth even lower than we currently project."
The industrial production data is especially troubling.
If the slide continues apace it will mean production will be down 3.4 percent on an annualized basis. Even if it improves to flat, that will still mean a yearly drop of 2.6 percent.
"While there have been occasions in recent history when industrial production contracted but real GDP growth remained positive, weakness in the former is generally an ominous sign for the latter," LaVorgna said.