Jobs Bounce Back After Hurricanes, Unemployment Continues to Fall

By Roy Maurer Nov 3, 2017
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U.S. employers added 261,000 jobs in October, rebounding from the previous month's significant disruption in job growth brought on by the impact of hurricanes Harvey and Irma.

The monthly report from the U.S. Bureau of Labor Statistics (BLS) shows that restaurants, bars and hotels made up much of the comeback in jobs, offsetting their steep decline in September caused by the storms that hit Florida and Texas.

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The September figure was revised to a gain of 18,000 jobs after an initially reported drop of 33,000. While job creation showed a rebound, the October result fell below analysts' expectations, which were closer to 300,000 new jobs.

"I was hoping the headline jobs number would be higher to account for both new jobs added during October, but also jobs that did not get counted in September as a result of the hurricanes," said Cathy Barrera, the chief economic advisor for online jobs platform ZipRecruiter, based in Santa Monica, Calif. "It's good, not stellar. It's not quite as strong as we have seen from January through August of this year."

Jed Kolko, chief economist at job search engine Indeed pointed out that with the upward revision of September payrolls into positive territory, October's job gain is the 85th straight month of growth. "Last month's hurricane effects were largely reversed—leisure and hospitality jobs rebounded, and job growth was fastest among lower-wage industries," he said.

October job gains in leisure and hospitality rose sharply in October (+106,000), following a decrease of 102,000 jobs in September when many workers were off payrolls due to the hurricanes. Employment also increased in professional and business services (+50,000 jobs), manufacturing (+24,000 jobs) and health care (+22,000 jobs).

Retailers lost 8,300 jobs overall, even though the sector is in the midst of a seasonal hiring boom for the holidays. "With the holiday season right around the corner, companies across industries, including call centers and logistics warehouses, are putting more focus on recruitment efforts to tackle the uptick in seasonal demand," said Amy Glaser, senior vice president, Adecco Staffing.

"For the year, job growth has averaged 169,000 per month, below the 2016 average but still more than enough to keep pushing unemployment down," Kolko said.

The unemployment rate fell a notch, from 4.2 percent to 4.1 percent, its lowest level since 2000. The number of unemployed people decreased by 281,000 to 6.5 million. Since January, the unemployment rate has declined by 0.7 percentage point, and the number of unemployed people has decreased by 1.1 million.

"While the unemployment rate is ticking down, we also see a decline in the labor force participation rate," Barrera said. "This is true even for prime-working-age people, and I think that is something to keep an eye on over the coming months."

Glassdoor Chief Economist Andrew Chamberlain attributes the large drop in labor force participation from 63.1 percent in September to 62.7 percent in October to the hurricanes. "Economists have long predicted that labor force participation will continue to fall in the coming decades due to aging of the population, but this one-month drop shows that BLS surveys continue to be affected by short-term, storm-related disruption in the southeast," he said.

In October, the unemployment rates for adult men (3.8 percent), adult women (3.6 percent), Asians (3.1 percent), Hispanics (4.8 percent) and whites (3.5 percent) declined. The jobless rates for blacks (7.5 percent) and teenagers (13.7 percent) increased.

The number of long-term unemployed—jobless for 27 weeks or more—dropped to 1.6 million and accounts for 24.8 percent of the unemployed.

The number of individuals categorized as involuntary part-time workers—seeking full-time employment but working part time— declined by 369,000 to 4.8 million in October.

Additionally, 1.5 million people were considered marginally attached to the labor force; they are unemployed but want and are available to work, and had looked for a job sometime in the previous 12 months. Among this group, 524,000 individuals were considered discouraged—not currently looking for work because they believe no jobs are available for them.

The remaining 1 million people marginally attached to the labor force in October had not searched for work in the past month for reasons such as school attendance or family responsibilities, according to the BLS.

One weak point in the report was wages, Chamberlain said. "After a very strong 2.9 percent year-over-year wage growth in September, average hourly wages were up just 2.4 percent in October, despite a tightening labor market nationwide."

Even after adjusting for the jump in low-wage jobs, wage growth is running at its lowest level in a couple of years, Kolko said. "It's only a hair above the inflation rate. That means almost no real wage gains for workers."

Based on conversations Adecco has had with clients in the past year, Glaser anticipates there will be an inevitable hike in wages. "In the last few months alone, we've seen many verticals and occupations experience wage growth, including high level IT and engineering employees, manufacturers and seasonal workers in the e-commerce sector," she said.

Barrera pointed to a couple of important factors likely contributing to the disappointing growth in wages this year—younger workers not participating in the labor force and more people working part-time jobs.

"The youngest workers [in their teens and early twenties] are not recovering from the recession the way slightly older age groups are," she said. "I think it'd be great to get these individuals back in the workforce, ensuring that the entry-level part of the labor market is very competitive, which has an impact on wage growth up the chain."

In addition, more people are working part-time for economic reasons than prior to the recession.  "Part-time jobs historically have slower wage growth than full-time jobs," Barrera said. The slight decline in the number of involuntary part-time workers is an important number to track because it could be a sign that the tightening of the labor market is impacting the quality of jobs being offering. "It is possibly the start of a trend getting more people back to full-time work, which will also drive wage growth—time will tell," she said.

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