By Steve Hovland
Director of Research, HomeUnion
The headline September jobs number was appalling, but not totally unexpected due largely to the spate of Hurricanes that ripped through the South over the past few weeks. With a net loss of 33,000 jobs, the U.S. job market broke a seven-year stretch of positive gains, the largest in the post-war era. However, there’s a modest chance revisions will be significant enough to turn the number positive. Beyond the impact of two hurricanes, there isn’t any reason to believe that the job market took a sudden turn downward. Therefore, we would have expected approximately 150,000 jobs to have been created during the month, so the hurricanes probably account for a 150,000 to 210,000 swing in the headline number.
The pace of hiring should accelerate in the coming months to make up for reported losses during September. After hurricanes Katrina and Rita struck Louisiana in 2005, job growth dropped to an average of 75,500 jobs during September and October. In the previous 12-month period, payroll gains averaged 214,000 new positions monthly. Employers accelerated additions to 273,000 jobs during the following four months, recouping all of the losses. The timeline for recouping the current cuts could be shorter due to relatively lighter damage relative to what New Orleans suffered during Hurricane Katrina. We anticipate approximately 2 million jobs this year, representing a gain of 1.4 percent gain. To date, we’ve added 1.3 million new jobs. Over the last three months of the year, we anticipate hiring to jump to 200,000 positions per month as companies ramp up for the holidays, struggling retailers pause layoffs, and the nation makes up for ground lost during September.
The professional and business services sector was the largest concern last month as average growth dropped by nearly 35,000 jobs compared to the previous 12 months. After the catastrophic hurricanes, companies with employees in impacted areas may have paused their hiring efforts to focus on the well-being of their workers. We believe this temporary pause will be reversed by the October survey period.
On a positive note, insurance money and federal aid will be pumped into impacted markets in the South, and sectors aligned with that type of spending should benefit. In addition to the obvious construction and retail sectors, the leisure and hospitality industry should also benefit. Many residents flush with insurance money will spend those proceeds at local restaurants, where we expect to see a surge in hiring. Furthermore, the influx of construction workers into these markets will support local hotels and restaurants in the short term.
Overall, the economic recovery is maintaining momentum, but that momentum isn’t particularly spectacular. Higher home prices and interest rates will calm some of the big-ticket spending and auto sales through the end of the current recession. Employers will continue to expand, but at a pace comparable to economic growth. They have already covered the slack generated by the last recession. One of the things that we often fail to consider is the boost in technology that creates greater productivity from each individual worker. The first iPhone came to market less than six months prior to the Great Recession. Since then, the number of smart phones and access to high-speed networks has expanded quickly, enabling many workers to split their time between an office and worksite. Administrative and entry-level professional roles have been significantly impacted by the ability of computers and connected workers to execute their jobs more efficiently.