(Bloomberg) -- Friday’s employment report is the last the Federal Reserve will see before its policy meeting next week. But the data will be tough to parse.
Flooding and power disruptions from Hurricanes Helene and Milton that crippled many business operations risk a hit to the October employment count. In addition, 44,000 workers, a majority at Boeing Co., were on strike as of Oct. 12 — a date that marks the survey week for the report — the Bureau of Labor Statistics said last week.
All told, the median projection of a 110,000 increase in October payrolls would be one of the smallest since the end of 2020 and less than half the advance in September. Estimates in a Bloomberg survey of economists vary widely, from a 10,000 decline to a 180,000 gain.
Just days before the presidential election, it’s not clear how American voters will interpret the caveat-ridden data. A lackluster report, though, could be additional fodder for former President Donald Trump and Republicans, who have sharply criticized Democratic challenger Vice President Kamala Harris on the economy.
With inflation largely trending toward the Fed’s target, officials are now more focused on the labor market, which has been gradually cooling. Policymakers will take the data in stride and stay focused on reducing interest rates from current levels that are widely viewed as having a restraining effect on the economy, according to Mark Zandi, chief economist at Moody’s.
“It would take a pretty surprising jobs number or inflation read to knock them off that course,” Zandi said. “There’s a pretty high bar for them to not follow through on the rate cuts that they’ve articulated to the market at this point.”
Fed Governor Christopher Waller said earlier this month the jobs report “won’t be easy to interpret,” but he expects the hurricanes and Boeing strike to reduce payrolls growth by more than 100,000. The data surface during the Fed’s traditional blackout period on public comments ahead of its Nov. 6-7 policy meeting, when it’s expected to cut rates by a quarter of a percentage point.
Helene made landfall Sept. 26, while Milton struck on Oct. 9 — during the week the BLS surveys businesses in order to tabulate payrolls. But that was probably too late in the reference period to have a large effect on October’s figures, according to Goldman Sachs Group Inc. economist Ronnie Walker.
The jobs report is made up of two surveys — one of households, and the other of businesses — and they each have different criteria for measuring employment.
In order for severe weather to reduce the BLS monthly payrolls — derived from a survey of businesses — employees have to be out of work without pay for the entire pay period that includes the 12th. Even if that person still technically had a job, they wouldn’t be counted as employed.
But the household survey, which is used to calculate the unemployment rate, wouldn’t rule that person out. It also reports the number of people who had a job but weren’t at work due to weather, so economists and Fed officials are likely to lean on this dataset more.
The unemployment rate is forecast to hold at 4.1%, based on the Bloomberg survey of economists. Regardless of the ultimate outcome, the BLS often comments on how the storm affected the figures, and the state-level data released two weeks later will show the impact in North Carolina, Florida and other areas hit by the storms — helping provide further clarity.
What Bloomberg Economics Says...
“We expect October’s US payrolls report to show the first negative jobs print since December 2020... Much of the weakness is due to weather-related disruptions, but we also see a slowdown in cyclical sectors. Excluding the transitory factors and adjusted for sources of overstatement, underlying job growth is likely below the pace needed to stabilize the unemployment rate.”
— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins. For the full note, click here
In addition to the impact on the job market, the hurricanes likely restrained the overall economy at the start of the fourth quarter. Growth typically cools in the month of a natural disaster and the next one before rebounding, Goldman Sachs’ Walker said.
“Helene was the deadliest hurricane since Katrina, almost 10% of the US population was placed under major disaster declaration, and estimates of the combined physical damage — while highly uncertain — are around $90 billion,” Walker said.
Goldman expects a 0.3 percentage point hit to gross domestic product this quarter — due to the impact on industrial production, retail sales and construction — before bouncing back by a similar amount in early 2025. The government’s first estimate of third-quarter GDP, due Wednesday, is expected to show a 3% annualized advance that matches growth seen in the prior quarter, fueled by robust consumer and business spending.
Separate data out Tuesday showed job openings fell to the lowest since early 2021 in September — before most of the impact from the two hurricanes. Layoffs picked up during the month.
--With assistance from Chris Middleton.
(Updates with job openings September data in the last paragraph.)
©2024 Bloomberg L.P.
