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Abu Dhabi, UAEWednesday 19 December 2018

U.S. payrolls fall 33,000 on storms; jobless rate drops to 4.2%

About 1.47m people were unable to work due to bad weather, most since Jan. 1996

The Arabian Gulf has high starting salaries, but rarely are there pay raises or bonuses. Alan Diaz / AP
The Arabian Gulf has high starting salaries, but rarely are there pay raises or bonuses. Alan Diaz / AP

The number of workers on US payrolls declined last month for the first time since 2010, reflecting major disruptions from hurricanes Harvey and Irma, US labor department figures showed Friday. The jobless rate fell to a new 16-year-low while wage gains accelerated.

The hurricanes had a “net effect” of reducing nonfarm payrolls in September, while there was “no discernible effect” on the national unemployment rate the labor department said in a special note Friday. Data-collection rates “generally were within normal ranges” for both surveys that produce the figures.

Restaurants and bars -- an industry where most workers only get paid if they show up to work -- had a 105,000 drop in payrolls, according to a statement from the bureau of labor statistics acting commissioner William Wiatrowski.

The numbers reflect Harvey’s impact on Texas in late August, and Irma’s fallout in Florida in September. Data on the labour market and the rest of the economy may be volatile for several months as the weather effects wash out and rebuilding picks up. Puerto Rico, which was hit by Hurricane Maria last month, isn’t included in payrolls.

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It’s hard to measure the exact impact of severe weather on national employment data; state-level figures due Oct. 20 will provide a more detailed look. Federally-designated disaster counties in Florida and Texas accounted for 7.7 per cent of US employment in March, according to the labor department.

The number of Americans who didn’t report to work because of bad weather comes from the labor department’s survey of households, which reflects the calendar week that includes the 12th of the month. The survey still counts a worker as employed even if they missed that entire week’s work for weather-related reasons, regardless of whether they were paid or not for the time off.

The agency’s survey of establishments, which produces the payrolls figure, counts as employed a person who worked at least one hour in the pay period that includes the 12th of the month. Bad weather hurts the payrolls tally if employees got no compensation for that entire pay period.

Other data and recent reports -- such as Institute for Supply Management surveys for employment in manufacturing and service industries -- indicate the underlying labour market is humming along.

The pickup in wages was encouraging, though some economists had already penciled in a boost -- with reasons including storm effects that prevented low-paid Americans from working, and a calendar quirk that tends to produce stronger wage growth when the 15th of the month falls within the survey week.

With the US near full employment, Federal Reserve policy makers have been watching for signs of an acceleration in paychecks that may push inflation closer to their goal. The central bank last month forecast it will raise interest rates once more by year-end, with investors and analysts expecting the move in December.

“There are ample reasons to believe that the underlying labor market picture remains solid,” suggesting that a weak reading on payrolls “should be appropriately discounted,” Matthew Luzzetti and Brett Ryan, economists at Deutsche Bank Securities, said in a note before the report.