Hurricanes Harvey and Irma may have wiped as many as 125,000 jobs from the September employment report, resulting in job growth below 100,000.
With the historic double shocks of two Category 4 storms, the 8:30 a.m. ET Friday report is going to be fluky. The forecast for new payrolls falls in an unusually wide range — with expectations between 45,000 jobs lost to a gain of 150,000 or more.
The divergence shows just how difficult it has been to measure the economic impact of the two back-to-back storms that hit the mainland U.S. in late August and early September. Economists say the Fed will look past this report when considering monetary policy, and the employment picture should be much more clear by the time it is expected to consider raising interest rates in December.
The consensus forecast comes out to be a total 90,000 nonfarm payrolls added in September, according to Thomson Reuters. Just 83,000 are expected to be added in the private sector, with 10,000 in manufacturing.
So far this year, job growth has averaged 176,000 each month, which was below the 187,000 in 2016. The unemployment rate is expected to remain at 4.4 percent in September, and average hourly wages are expected to rise 0.3 percent, according to Thomson Reuters.
"For the Fed and markets, it's going to be really hard to figure out. The market might move, but strategists are going to be very reluctant to talk about longer-term implications because the number is 50,000 to 100,000 from where we expected it to be," said John Briggs, head of strategy at NatWest Capital Markets.
Goldman Sachs economists said between flooding and power outages, the two storms affected 10 percent of the U.S. population and caused over $100 billion in damage. "The impact on tomorrow's report is highly uncertain, but our base-case assumes a significant impact of [125,000] that partially offsets continued job growth in the rest of the country," they wrote.
Goldman forecasts just 50,000 jobs were added in September, and they see slightly higher wage growth of 0.4 percent.
The government collected the employment data for the September report during the week of Sept. 12, just a few days after Hurricane Irma struck Florida before moving up the coast into Georgia. In advance of the storm, hundreds of thousands of residents of Florida and other southeastern states evacuated their homes.
UBS economist Sam Coffin expects that 55,000 jobs were lost in the month because of the storms, and many from Irma-related evacuations. But he still expects 125,000 payrolls were added. In Texas, Harvey's unprecedented flooding left neighborhoods under water and temporarily knocked out a big chunk of U.S. oil refining. There was some impact from Harvey in the August report.
"It's unclear how impacted businesses were in Houston and Florida," said Bank of America Merrill Lynch senior U.S. economist Joseph Song. "I'm going to be taking this as an average of whatever September and October are going to be and get some sort of trend for employment over the next quarter." Bank of America expects 80,000 jobs were added in September.
Economists said unsalaried workers would be most affected. "It's going to be primarily in the service sector," said Song. "Leisure and hospitality, those industries are more likely to be hourly, and hourly workers get paid on a weekly basis."
Song said it would make sense that most people will return to work and be counted in the next month's report. "If you do get a weak number, you are going to be a pretty strong rebound in October and potentially in November," said Song.
While Hurricane Maria hit Puerto Rico and the U.S. Virgin Islands in September, the job numbers from those islands are not included in the overall nonfarm payrolls, but their data is collected by the Bureau of Labor Statistics.
JPMorgan says jobs may not bounce back right away. The bank's economists said they expect the increase in payrolls for September was 100,000 and would have been 75,000 higher if not for the hurricanes.
"I think job growth should bounce back at some point, but it's not obvious to me that this will happen in October, at least not with a full bounce back," wrote JPMorgan economist Daniel Silver, in an email. "The claims data are still elevated relative to pre-hurricane levels, which suggest that there are still disruptions."
Silver said it will be more clear when weekly unemployment claims data is released in the week of Oct. 12.