Market Insider

Big rebound in October jobs expected after hurricanes hit September hiring

Key Points
  • Economists expect a sharp rebound in job growth in October of 310,000 jobs, after a 33,000 decline in September.
  • The impacts of hurricanes Harvey and Irma should be short-lived, and hiring is seen picking up in service jobs hit by the storms.
  • The jobs data was the U.S. economic report most negatively affected by the hurricanes.
Jobs report preview: Economist says September's weakness will disappear

Economists expect job growth of 310,000 in October, a rebound after the impact of hurricanes Harvey and Irma resulted in a 33,000 decline in September.

The weak September employment report was the biggest shocker in U.S. economic data, after hurricanes ripped through Texas, Florida and other parts of the South in late August and early September. Other data has mostly come in strong, including GDP, which has now grown at 3 percent for two quarters in a row.

"Our forecast is for 325,000. It's going to be a big number," said Seth Carpenter, chief U.S. economist at UBS. "You're going to get a kind of soft average for those two months."

Goldman Sachs economists expect 340,000 non-farm payrolls, and they say the flooding and power outages from the storms knocked 180,000 jobs off the September payrolls.

Economists said they expect the unemployment rate to remain at an unchanged 4.2 percent, and average hourly earnings are expected to grow by 0.2 percent, or 2.7 percent on a year-over-year basis, according to Thomson Reuters. Wage gains ran at a surprisingly high pace of 2.9 percent.

"Hourly earnings we expect at 0.2 pct on the month, softer than the 0.5 percent we saw in September," said Barclays economist Pooja Sriram. "In our view the strength we saw in the wage number was partly due to disruptions from the hurricanes." Sriram said workers may have received wages for the whole period during the storms, but they could have missed work, raising the pay per hour.

Wages is one area where economists have been hoping to see gains, as an early warning for a pickup in inflation. Low inflation has been a concern for the Fed, which has been waiting to see a pickup even though it is expected to hike interest rates anyway in December.

Barclays is expecting to see 325,000 payrolls. "In September, the sectors that were worst hit were the private sector payrolls in services. Leisure and hospitality had pretty poor numbers. We expect to see a significant rebound in those sectors," said Sriram. "We're looking for 275,000 on private sector services, and goods producing at about 45,000."

She said jobless claims saw a big jump right after the storms but quickly retraced, indicating hiring could have been strong. "It looks like the correction happened within the quarter from the hurricanes, and we don't expect payrolls to be any different," she said.

Carpenter said one area he is watching is retail, which has been lagging as brick-and-mortar stores shut down and let go employees in the face of online competitor Amazon and others. Amazon, however, has been hiring for its warehouses and other businesses and was holding a jobs day this week to hire 6,000 workers for its own brick-and-mortar chain, Whole Foods.

But Carpenter says retail is important since it has been behind a deceleration in overall job growth.

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