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Hurricane hangover still hitting jobs
Friday's jobs reading is forecast to show a rebound, but storms are still a factor.
November 2, 2005: 1:18 PM EST
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - Friday's October jobs report may help answer the difficult question of how much longer a hurricane hangover will hurt the labor market.

The economy lost 35,000 jobs in September, the first loss in more than two years. And the unemployment rate increased to 5.1 percent from 4.9 percent in August, before Hurricane Katrina hit.

The Labor Department also said last week that more than 500,000 people lost their jobs as a direct result of hurricanes Katrina and Rita.

For October, economists surveyed by Briefing.com are forecasting that payrolls rose by 100,000, and that the unemployment rate held steady.

But even that rate of job creation is only about half the pace achieved during the first eight months of this year.

Hurricane impact will take time

One thing worth watching Friday is what happens to the revision of the September payroll number, said Anthony Chan, senior economist for JPMorgan Asset Management.

"There's a huge hurricane hangover," said Chan. "I think the government will have to trip over itself to decide whether to have a huge downward revision to last month or whether the job losses will take a bigger hit this month."

He's forecasting only 75,000 new jobs for October because he expects the September number to see a significant revision.

A number of economists think it will take several months for the impact of hurricanes Katrina, Rita and Wilma to work their way through the job market.

"The September report was taken too early to get the full effect," said Brian Jones, a Citigroup economist who is looking for only a 30,000 gain in October payrolls.

"A lot of the layoffs that occurred in wake of Katrina hadn't taken place the week of Sept. 12, two weeks after the storm, when the government survey (of employers) was taken," he said.

Leading up to the September report, economists had been too pessimistic, and Jones thinks that this time they're being too optimistic. Basically, he said, economists' projections are getting ahead of reality on the ground in the Gulf Coast region.

"We thought originally we would have a massive increase in jobless claims right after the storm. Instead the number of people filing claims climbed more steadily and has remained elevated," said Jones.

Even some economists have higher-than-average forecasts think the hurricane hangover could last a while.

"I think there's gong to be hurricane effect for next couple of readings," said Jeoff Hall, the chief U.S. economist for Thomson Financial, who is forecasting a 130,000 job gain in October. "It's not just Katrina and Rita. Hurricane Wilma was causing evacuations, business closings in October."

Underlying strength

But all three economists see some basic underlying strength in the labor market beyond the impact of the hurricanes. Jones estimates that payrolls would climb about 160,000, or more than five times his estimated gain, if not for the hurricanes, and Hall thinks the gains might be in the 160,000 to 200,000 range.

"I wouldn't say that's spectacular, but I would say it's on trend, especially considering the shocks like energy-price increases," said Hall.

The hurricanes are probably already creating some jobs, both through cleanup efforts and by manufacturers gearing up to produce replacement goods needed by the Gulf Coast area.

Another government report this week, on personal income and spending, reported a large influx of money coming into the economy from insurance payments related to the storms, and much of that money will be spent on new appliances, clothing and other goods by those affected by the storm.

Hall points to the increased employment outlook from the nation's manufacturers in the October survey by the Institute of Supply Management, along with the same survey showing strong new orders and production.

"Manufacturing is not a majority of the labor market any more, but I would expect services will continue to show the trend growth," said Hall.

For a look at other reports on the strength of the labor market, click here.  Top of page

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