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The job market is on a roll—and no hurricane can stop it

  • The U.S. lost 33,000 jobs in September vs. expectations of a 90,000 gain due to the devastating effects of Hurricanes Harvey and Irma.
  • Moody's Chief Economist Mark Zandi says the hurricanes' impact will be temporary — this job market is strong and will get stronger.
  • The only thing that could potentially derail the job market is the government, Zandi says.
Clay Pace (L) and William Williams (R) take a break from this bicycle ride near downtown Ft. Lauderdale FL September 10, 2017 as Hurricane Irma's wind and rain take effect.
Clay Pace (L) and William Williams (R) take a break from this bicycle ride near downtown Ft. Lauderdale FL September 10, 2017 as Hurricane Irma's wind and rain take effect.

Hurricanes Harvey and Irma did a number on the September job report. That the storms hit job growth hard during the month is no surprise, and while there was much uncertainty over how bad the hit would be, it was worse than most economists, including me, anticipated.

The biggest economic casualties of the storms were retailers and the hospitality industry. Given that the entire state of Florida was ravaged by Irma at the start of the Bureau of Labor Statistics' survey week, this makes sense. Based on data from payroll-processor ADP, the preponderance of the job losses in these industries were at small businesses.

Fortunately, the rebuilding and recovery from the storms is already in full swing. Vehicle sales, which plunged in August, as dealerships in Texas closed, soared in September as flood-destroyed vehicles were replaced. The October jobs numbers will likely show an outsized gain as construction and other jobs related to the clean-up ramp up. And as insurance money and government aid gets to distressed households and businesses, employment gains into next year should be on the strong side.

"The temporary employment impact of the Hurricanes aside, the job market is strong and getting stronger."

The temporary employment impact of the hurricanes aside, the job market is strong and getting stronger. Underlying job growth is almost twice the growth in the labor force and unemployment is falling fast. September unemployment dropped to 4.2 percent, despite a jump in the labor force participation rate and robust labor force growth.

These unemployment statistics may have also been impacted by the storms, but regardless, a sub-4 percent unemployment rate isn't too far off in the horizon. This would be consistent with the tightest labor markets the nation has ever enjoyed. The last time we were here was at the very pinnacle of the technology boom in the late 1990s. Of course, that economy was being juiced by a bubble in the stock market for dot-com stocks. There are no bubbles in today's economy.

Wage growth also picked up in September, which is consistent with the increasing difficulty employers are having filling open job positions, although the gain is probably a bit overstated due to the storm-induced decline in lower-paying retail and hospitality jobs. But wage growth is destined to accelerate substantially more in the coming months as unemployment continues to fall.

The job market is on a roll, and not even two massive hurricanes can stop it. Perhaps the only thing that could is Washington. Just as long as lawmakers stay out of the way and does no harm, the job market is on track to becoming one of the best ever.

Commentary by Mark M. Zandi, chief economist at Moody Analytics, a subsidiary of Moody's Corp., and a leading provider of economic research, data and analytical tools. Zandi is also a co-founder of Economy.com, which Moody's purchased in 2005. Follow him on Twitter @economics_MA.

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