Hurricanes Impact Job Numbers in September

According to the Employment Situation for September 2017, reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment decreased by 33,000 in September. According to the BLS, “A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey.” Employment growth has averaged 148,000 per month so far this year, compared with the average monthly growth of 171,000 over the first 8 months of 2017 and 187,000 over all of 2016. Meanwhile, the unemployment rate declined to 4.2% in September, from 4.4% in August.

Figure 1 presents the relationship between the monthly change in payroll employment, average weekly unemployment insurance claims and the occurrence of hurricanes from 2001 to now. The unemployment insurance (UI) weekly initial claims measure emerging unemployment and are shown by the red line. The dark blue bar is the monthly change in payroll employment. The light blue bars represent hurricanes.

First, the figure above suggests that hurricanes can coincide with increases in UI claims. For example, in 2005, UI claims spiked during the period that Hurricanes Katrina and Rita made landfall; in 2010, UI claims rose when Hurricanes Alex and Earl made landfall; in 2012, UI claims increased when Hurricane Sandy made landfall. The two largest spikes on the red line, in 2001 and between 2008 and 2009, occurred during recessions.

Second, spikes in claims of UI coincide with either lower monthly growth or outright declines in employment. For example, in 2005, as UI claims spiked the monthly growth in employment fell to 67 thousand, from 196 thousand; in 2010, when UI claims rose employment dropped 36 thousand monthly; in 2012, UI claims increased, meanwhile, the monthly growth in employment slowed down to 132 thousand, from 146 thousand.

However, the figure suggests that the spike in UI that occurs in the presence of a hurricane as well as the lower growth or outright decline in employment over the same period are not persistent. Instead, UI claims typically return to their pre-hurricane path (absent another adverse shock) and employment growth strengthens.

These findings are consistent with the existing literature of Ariel R. Belasen and Solomon W. Polachek (2008) which concludes that counties hit by hurricanes experience a negative net effect on employment, but that these effects dissipate over time.

In contrast to the nationwide response, the construction industry added jobs over the month, however the number of jobs added was less than its increase in the previous month. Monthly employment data released by the BLS Establishment Survey indicate that construction added 8,000 jobs in September, following the 19,000 increase in August.

However, residential construction employment decreased by 3,500 in September, after the 8,400 increase last month. Over the last 12 months home builders and remodelers have added 80,600 jobs on a net basis. Since the low point of industry employment following the Great Recession, residential construction has gained 710,500 positions. In addition to the results discussed above, Belasen and Polachek also find that the temporary decline in employment in response to a hurricane coincides with an increase in earnings. This suggests that, although the effects of Hurricanes Irma and Harvey will likely be short lived, the impact on residential construction employment could be multidimensional, encompassing both the supply and cost of labor.

In September, the unemployment rate for construction workers rose to 5.7% on a seasonally adjusted basis, from 5.4% in August. After reaching a peak rate of 22% in February 2010, the unemployment rate for the construction sector has been steadily declining and remains relatively low.



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