The Financial Express

US job growth seen surging after storm-related disruptions

| Updated: November 06, 2017 13:53:56

US job growth likely to rebound in Oct

US job growth likely rebounded sharply in October after hurricane-related disruptions depressed employment in September, in a move that could seal the case for an interest rate increase from the Federal Reserve in December even as wage growth probably slowed.

According to a Reuters survey of economists, the Labour Department’s closely watched employment report on Friday will likely show that nonfarm payrolls increased by 310,000 jobs last month. That would be the largest gain since October 2015, reports Reuters.

Payrolls declined by 33,000 jobs in September, the first drop in seven years, as employment in the leisure and hospitality sector tumbled by a record 111,000.

The drop was blamed on hurricanes Harvey and Irma, which devastated parts of Texas and Florida in late August and early September, leaving workers mostly in lower-paying industries temporarily unemployed.

A rebound in employment growth in October would reinforce the Fed’s assessment on Wednesday that “the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions.”

The U.S. central bank kept interest rates unchanged on Wednesday and financial markets have almost priced in an increase in borrowing costs in December. The Fed has hiked rates twice this year.

 “It will confirm the Fed’s view of solid growth, meaning they are on track to raise interest rates in December,” said Bricklin Dwyer, a senior economist at BNP Paribas in New York. “While distorted by storms, the overall picture is of an economy that is reaccelerating in the second half of the year.”

But the return of lower-paid industry workers is expected to slow wage growth in October. Average hourly earnings shot up 0.5 per cent in September, lifting the annual increase to 2.9 per cent. They are seen gaining 0.2 per cent in October, which would lower the year-on-year increase to 2.7 per cent.

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