Wall Street Opened Lower as Hurricanes Hit US Payrolls

By Joyce Yu

Philadelphia, PA–US non-farm payrolls decreased by 33,000 jobs in September as the country took a hit from Hurricanes Harvey and Irma, according to Labor Department’s latest report. This is far below economists’ forecast of 90,000 job creations.

Momentum from Wall Street’s record-breaking run cooled this morning with limited decline. The S&P 500 added 0.6% on Thursday to close at its sixth consecutive record. The Dow Jones industrial average gained 0.5% while the Nasdaq added 0.8%.

The numbers reflect Harvey’s impact on Texas in late August, and Irma’s fallout in Florida in September. Data on the labor market and the rest of the economy may be volatile for several months as the weather effects wash out and rebuilding picks up.

Labor Department data showed 1.5 million people stayed at home in September because of the bad weather, the most since January 1996. About 2.9 million people worked part-time as a result of the bad weather. Federally-designated disaster counties in Florida and Texas accounted for 7.7 percent of U.S. employment in March. Restaurants and bars suffered the most fall of 105,000 drop in payrolls.

“I don’t think this is indicative of problems in the labor market — it’s because of the hurricanes,” shared Gus Faucher, chief economist at PNC Financial Services Group Inc. in Pittsburgh, with the Bloomberg. Excluding effects of the storms, “the economy is in decent shape, the labor market continues to improve, and we’ll bounce back to job growth in the final three months of 2017.”

Unemployment rate continued to fall to 4.2%, the lowest since February 2001. What is encouraging is the pickup in wages as a result of the storms which prevented low-paid workers from working. Wage rise in September is thus due to probably more of a compositional mix than a surge in wage growth.

Investors have been keeping a close eye to wage increment which is a key consideration for the Fed in rolling out their plans to tighten up monetary policy.

The U.S. central bank said last month it expected “labor market conditions will strengthen somewhat further”, and signaled another rate hike by the end of the year.

“Investors should take the non-farm payrolls report for September with an entire jar of salt,” the Financial Times quoted David Lafferty, chief market strategist at Natixis Global Asset Management。“Weather-related effects from the hurricanes will render it a useless data point for assessing the economy’s larger trend or as a guidepost to Fed policy. Investors should instead focus on wage growth as a harbinger for future inflation.”


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