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Jobs preview: Get ready for an ugly report

(MoneyWatch) Superstorm Sandy and the so-called "fiscal cliff" are likely to make Friday's November jobs report an ugly one. Early readings suggest that the economy may have produced no more than 80,000 new jobs last month, according to economic forecasts. That would be less than half of the 171,000 jobs generated in October. But before you get too worried, the good news is that these are short-term trends that are likely to reverse course in January.

To gauge the Sandy effect, it's useful to review the data after Hurricane Katrina. According to Calculated Risk, while "Katrina was a much larger storm, and large areas were devastated, Sandy struck an area with a much larger population - so the impact on employment might be similar." It took three months after Katrina to return to the previous trend job growth, which means that by January, things should settle down.

Additionally, uncertainty over the fiscal cliff negotiations has put a wrinkle in corporate planning and future initiatives. Many companies are waiting to see the final deal on taxes and government spending cuts before allocating capital to new projects or embarking on more robust hiring levels.

The ISM manufacturing index indicated contraction in November, with the Purchasing Managers Index declining to 49.5 percent, its lowest level since July 2009 (below 50 is contraction). The ISM's measure of factory employment shrank for the first time in more than three years, suggesting that businesses are putting off hiring. While the fiscal cliff may be impacting this report, it's more likely that a general slowdown in global growth is the culprit. The ISM Non-Manufacturing Report painted a rosier picture, with the service side of the economy expanding in November for the 35th consecutive month, increasing by 0.5 percent to 54.7 percent.

It's clear that some businesses may be putting off investing and hiring until Congress and the Obama administration finish wrangling over the fiscal cliff. And Sandy definitely has put a damper on job creation.

The good news? The impact of these man-made and natural disasters on the economy is likely to be fleeting. "It still looks as though annualized GDP growth in the fourth quarter will be close to 1 percent," said Paul Dales, U.S. senior economist with Capital Economics, in a research note. "But this survey supports our view that conditions should look a bit better in a few months' time when all the distortions have unwound."

Of course, even if the dip is temporary, the U.S. economy looks likely to remain in slow-growth mode well into 2013, a condition that has persisted for almost two years. And as long annual growth is stuck well below 3 percent, the economy will struggle to create the hundreds of thousands of jobs per month required to dramatically lower unemployment.