Hurricanes Wash Away Jobs
The economy lost jobs in September for the first time in over two years as the convulsions of a devastating Gulf Coast hurricane rattled the labor market, pushing unemployment up to 5.1 percent.
The report, released by the Labor Department on Friday, provided the most extensive picture of the jobs climate in the aftermath of the deadly and destructive Hurricane Katrina, the costliest natural disaster in U.S. history. The impact of Hurricane Rita was "negligible" on the latest figures, the department said.
Payrolls fell by 35,000 in September. That marked the first decline since May 2003, when the labor market was struggling to get back on its feet after being set back by the 2001 recession. The drop in September was the largest since a decline of 54,000 jobs in April 2003.
Despite the drop, the damage to national payrolls was less than many had feared. Economists were forecasting a loss of at least 150,000 jobs.
"The unemployment rate was expected to go up just about what it was, employment was expected to go down considerably more, so all in all, this is not a bad report," Peter Sperling, professor of finance at the Sy Syms School of Business at Yeshiva University, told CBS Radio News.
Neil Leibovits of Ajilon Professional Staffing was more optimistic.
"The news is incredibly encouraging. I mean, it clearly shows that there is underlying strength in the job market despite any of the hurricane news," Leibovits said. However, the Sept. 12 cut-off date for this report "still wasn't able to give the best indication of the situation down there" and there could be more consequences of the hurricanes in upcoming reports.
The unemployment rate in September rose to 5.1 percent, the highest since May. The increase — which matched economists' expectations — came after the jobless rate had fallen to a four-year low of 4.9 percent in August.
Katrina ripped through parts of Louisiana, Mississippi and Alabama in late August, destroying businesses, homes and lives. The blow was compounded by Rita, which struck on Sept. 24. Both hurricanes hobbled important oil and gas facilities along the Gulf Coast.
The August employment figures didn't capture the impact of Katrina because information was collected for that report before the hurricane struck. The snapshot in August showed clearly that the jobs market was in good shape before the double blow of the two hurricanes.
The economy added 211,000 jobs in August, following a gain of 277,000 in July. Payrolls for both months were revised up from previous estimates.
Federal Reserve Chairman Alan Greenspan said last week that the central bank will be closely monitoring economic activity to assess the impact of the back-to-back hurricanes.
Fallout from the Katrina alone — viewed as the more catastrophic of the two hurricanes — doesn't pose a "persistent threat" to the nation's economic health, Greenspan and his colleagues concluded at their last meeting on Sept. 20.
More worried about inflation worsening because of the hurricane, the Fed at that meeting boosted interest rates for an 11th time since June 2004. Economists predicted Fed policy-makers will raise rates again at their next meeting, Nov. 1.
The Labor Department didn't break out job losses specifically attributable to Katrina.
"It is clear that Hurricane Katrina adversely affected labor market conditions in September. However, we cannot quantify precisely the overall effects of the disaster and its aftermath on the September employment and unemployment figures," said Philip Rones, deputy commissioner of the Bureau of Labor Statistics. "We hope to get additional insight as more data becomes available."
"The jobless claims that were up 365,000 just don't seem to have shown up on this report, so I suspect that we're going to see this trail into the coming months," Leibovits told CBS Radio News.
Meanwhile, President Bush — with approval ratings near a low point — is feeling the sting of anxious consumers whose confidence has been rattled by high energy prices and economic uncertainties exacerbated by the natural disasters.
Consumer confidence remains low, with high energy prices, war and fallout from hurricanes Katrina and Rita sapping American's enthusiasm about the nation's economic health and their own.
The RBC CASH Index, based on polling by Ipsos, showed that consumer confidence clocked in at 66.8 in October. That was up slightly from September's reading of 61.5, the lowest since early March 2003 when the nation was on the brink of war.
In the employment report, jobs in the retail industry took the biggest hit in September, falling by 88,000. That reflected employment losses at clothing and accessory stores, sporting goods stores and building material and garden supply shops.
Employment in leisure and hospitality fell by 80,000 in September, partly due to the hurricane, the department said. Employment in food services, which includes bars and restaurants, dropped by 54,000.
Manufacturers, meanwhile, continued to cut jobs for the fourth month in a row. Factories eliminated 27,000 jobs in September. The department said that this job decline was concentrated in transportation equipment manufacturing, reflecting a strike at Boeing.
On a more positive note, employment in health care grew by 37,000 in September and construction employment rose by 23,000 jobs. Professional and business services employment went up by 52,000.