The September national employment report, though disappointing — a loss of 33,000 jobs — did not cause economists to lose faith in the strength of the U.S. economy.
Knowing that hurricanes Harvey and Irma disrupted Texas and Florida in late August and early September, economists discounted the results. The median forecast was for an increase of 75,000 jobs. Payrolls declined for the first time since September 2010.
“The numbers were certainly blown around a lot by the storms,” Carl Tannenbaum, chief economist for Northern Trust, told The New York Times. “As winds calm, my guess is employment figures will stabilize.”
“This really does look like what happened following Hurricane Katrina 12 years ago, where there were two very soft employment numbers followed by a reassertion of the underlying trend in subsequent months,” Joe Brusuelas, chief economist at RSM US LLP, which provides audit, tax and consulting services for companies, told The Washington Post. “This is nothing to worry about.”
The Labor Department’s report included some positive numbers. The unemployment rate fell to 4.2 percent, the lowest since 2001, and average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.5 percent, to $26.55. During the past 12 months, average hourly earnings have increased by 74 cents, or 2.9 percent.
“Investors will find solace in a whole host of other labor market indicators that reveal an underlying labor market that continues to show evidence of resilience and continued tightening,” Scott Anderson, chief U.S. economist at Bank of the West in San Francisco, told Reuters.
CNBC said the household survey — one of two measures the Labor Department uses to put together its monthly report — showed that 906,000 more Americans were at work in September than in August. The household survey counts the number of people who are working; the department’s establishment survey counts jobs.
“You had a pretty nice pickup of people entering the jobs market and people getting jobs. That’s a really good combination,” Beth Ann Bovino, U.S. chief economist at S&P Global Ratings, told CNBC. “That, to me, is reason to believe that this jobs market is a lot more upbeat than 33,000 lost jobs in that establishment employment report.”
The Conference Board said its Leading Economic Index for August rose 0.4 percent, which CNBC said exceeded the 0.2 percent increase that the economists Reuters polled were expecting.
“The August gain is consistent with continuing growth in the U.S. economy for the second half of the year, which may even see a moderate pickup,” Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, said in a statement. “While the economic impact of recent hurricanes is not fully reflected in the leading indicators yet, the underlying trends suggest that the current solid pace of growth should continue in the near term.”
The August reading followed solid June (0.6 percent) and July (0.3 percent) increases.
Consumer confidence fell slightly because of the hurricanes, but the nation’s two primary gauges of the public mood remained at high levels in September.
The Conference Board’s Consumer Confidence Index declined to 119.8 in September from a revised 120.4 in August, although the research association said it “decreased considerably” in Texas and Florida because those states were the ones that Harvey and Irma affected the most.
“Despite the slight downtick in confidence, consumers’ assessment of current conditions remains quite favorable and their expectations for the short term suggest the economy will continue expanding at its current pace,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.
Consumers’ assessment of current conditions moderated in September, The Conference Board said. Those who said business conditions are “good” decreased slightly, from 34.5 percent to 33.9 percent, and those who said conditions are “bad” increased from 13.2 percent to 13.8 percent.
Consumers’ optimism about the short-term outlook was somewhat better. The Conference Board said the percentage of consumers that expect business conditions to improve during the next six months rose slightly, from 19.8 percent to 20.2 percent, but those who expect conditions to worsen increased from 8 percent to 9.9 percent.
Meanwhile, the University of Michigan’s final Consumer Sentiment Index for September also slipped, to 95.1 from 96.8 in August, but remains “very favorable.”
“The resilience of consumers has again been demonstrated as concerns about the impact of the hurricanes on the national economy have quickly faded,” Richard Curtin, chief economist of the university’s Surveys of Consumers, said in a statement. “Given that the survey was able to reach most households in Florida and Texas in late September, it should be no surprise that small declines were recorded in the current financial situation of households.”
Curtin also said that during the past year, “there has been a long list of issues that could have derailed the overall level of consumer confidence, including the unprecedented partisan divide, North Korea, Charlottesville and the hurricanes. Confidence has nonetheless remained very favorable, moving sideward in a very narrow positive range.”
Curtin said the index has averaged 96.2 during the first nine months of this year, just ahead of averages of 91.9 and 92.9 in the prior two years, making 2017 the highest recorded since 2000.
“While consumer resilience has lowered precautionary saving motives and increased willingness to spend and incur debt, those changes will still be constrained by slower income growth and consumers who are still more risk-averse,” Curtin added. “Overall, consumer expenditures are expected to increase by 2.6 percent in 2017 and in the first half of 2018.”
Auto sales were strong. The Detroit News said September was the best month of 2017. Industrywide, more than 1.5 million vehicles were sold, 6.1 percent more than in the same month last year.
General Motors Co. sold 279,176 cars and trucks in the United States during the month, nearly 12 percent more than in the same month last year. Ford Motor Co. sold 221,643 vehicles, an increase of nearly 9 percent.
“September was the month the U.S. auto industry had been hoping for,” Michelle Krebs, executive analyst for Autotrader, told the newspaper. “Vehicle sales surpassed forecasts, thanks to a strengthening economy; August sales disrupted by and replacement demand created by hurricanes Harvey and Irma; and attractive model-year-end deals.”
Sales of new homes slowed in August to the weakest pace since last December. The Commerce Department said sales fell 3.4 percent, to a seasonally adjusted annual rate of 560,000 units, from July, and the rate was 1.2 percent lower than in August of last year.
Reuters said the Commerce Department suggested that Harvey and Irma probably affected August sales, but the news service also said the housing market was softening before the hurricanes struck. The problems include a shortage of homes available for sale, skilled labor and suitable land for building.
“The U.S. housing market entered a strange kind of twilight zone over the summer in which home prices kept rising steadily, but actual home sales activity largely leveled off at fairly underwhelming levels,” Svenja Gudell, chief economist at Zillow, told Reuters.
Home resales were lower in August for the fourth time in five months as a shortage of homes for sale crimped activity in the market. The National Association of Realtors said sales fell 1.7 percent, to a seasonally adjusted annual rate of 5.35 million, from 5.44 million in July.
“Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales,” Lawrence Yun, the NAR’s chief economist, said in a statement. “What’s ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it’s putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale.”
Personal income rose 0.2 percent in August, and inflation remained weak. The Personal Consumption Expenditures Price Index, the inflation gauge the Federal Reserve prefers to use, rose just 0.1 percent. It excludes volatile food and energy prices.
“We think current economic conditions are heavily impacted by the effect of the recent hurricanes,” Chris Rupkey, chief economist at MUFG in New York, told Reuters. “The Fed will rightly look over any soft patch for economic growth in the third quarter.”
The economy expanded during the second quarter at a pace faster than was earlier estimated, but the hurricanes are expected to curb third-quarter growth.
The nation’s gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said. The pace was the fastest since the first quarter of 2015, and it followed a 1.2 percent rate during the January-March period.
“The destruction caused by hurricanes Harvey and Irma and the resulting disruption ... are expected to be a drag on third-quarter growth,” Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Mich., told Reuters. “Nonetheless, the economy remains on track.”
This article originally appeared in the October 2017 issue.