September jobs report to reveal impact of Harvey, Irma

This might be one jobs report to ignore.

The impact of two major hurricanes is expected to emerge Friday in the Labor Department’s tally of September job creation, convincing investors to look further down the road. Economists predict the latest jobs report will reveal a gain of 90,000 U.S. jobs, lower than the 156,000 jobs added in August. Given the economic disruptions caused by Hurricanes Harvey and Irma, the September jobs report could hold far less significance than usual.

Scott Wren, senior global equities strategist for Wells Fargo Investment Institute, said the market should view the report as a blip on the radar. September growth could see a negative hit of up to 100,000 jobs, though Wren noted that it’s difficult to quantify.

“If you look at past incidences, it’s very likely that the market is going to pay virtually zero attention to this jobs report,” Wren said, adding that he couldn’t recall a recent jobs report that was less meaningful. “[The hurricanes] are going to hurt these job numbers initially and help them later.”

Harvey, which brought record flooding to Houston and southeastern Texas, forced businesses to close for extended periods. Likewise, Irma’s damage in Florida brought economic activity to a crawl. The Labor Department receives data from companies during the week of the 12th of each month, and employees are counted as long as they worked at least one hour.

After Hurricane Katrina, the number of U.S. jobs fell 35,000 in September 2005. The storm’s impact, particularly in New Orleans, also contributed to mediocre job growth of 56,000 people in October. The economy picked back up in November, creating 215,000 jobs.

Market strategists believe Harvey and Irma could distort the nation’s job count beyond September, yet hiring is projected to recover once the data account for new construction workers in Texas and Florida. The next few months could also be subject to sharp revisions because of the storms.

The market “won’t be hanging on every data point” in the September report, said Jeff Zipper, a U.S. Bank Private Wealth Management regional investment strategist based in Palm Beach, Fla. “The main theme here is the hurricanes, and what effect that has on the numbers. It could be more than a one-month thing. It’s going to skew economic growth in the short term.”

Economists believe the unemployment rate will remain steady at 4.4%. Wage growth, which has been stuck at 2.5% over a 12-month period, is also likely to hold firm.

Wren said investors will be most interested in hourly wages. Looking toward next year, if wage growth picks up near 3%, companies might begin to feel pressure on their bottom lines. Still, September’s employment data won’t significantly change the current view of the U.S. economy.

“All of this is a long string of good, not great, employment reports,” he said. “We’re in a modest growth economy, and not a lot of inflation.”