September Jobs Report: 33K Jobs Lost, Likely Affect of Hurricanes

This morning's employment report for September showed a 33K decrease in total nonfarm payrolls, which was worse than forecasts and is most likely the effect of Hurricanes Irma and Harvey. The unemployment rate ticked down to 4.2%. The Investing.com consensus was for 90K new jobs and the unemployment rate to remain at 4.4%. July and August nonfarm payrolls were revised for a total loss of 38K.

Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:

The unemployment rate declined to 4.2 percent in September, and total nonfarm payroll employment changed little (-33,000), the U.S. Bureau of Labor Statistics reported today. 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.

Here's the BLS' note about the hurricanes:

Hurricanes Irma and Harvey
Hurricane Irma made landfall in Florida on September 10--during the reference period for both the establishment and household surveys--causing severe damage in Florida and other parts of the Southeast. Hurricane Harvey made landfall in Texas on August 25--prior to the September reference periods--resulting in severe damage in Texas and other areas of the Gulf Coast.

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures. For both surveys, collection rates generally were within normal ranges, both nationally and in the affected states. In the establishment survey, employees who are not paid for the pay period that includes the 12th of the month are not counted as employed. In the household survey, persons with a job are counted as employed even if they miss work or the entire survey reference week (the week including the 12th of the month), regardless of whether or not they are paid. For both surveys, national estimates do not include Puerto Rico or the U.S. Virgin Islands.

Further discussion of the impact of the recent hurricanes on the September estimates can be found in the Commissioner's Statement on the Employment Situation, at www.bls.gov/news.release/jec.nr0.htm. For additional information on how severe weather affects employment data, see Question 8 in the Frequently Asked Questions section of this news release.

BLS will release the state estimates of employment and unemployment on October 20, 2017, at 10:00 a.m. (EDT).

Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend.

PAYEMS Monthly Change

The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets.

Unemployment and the Market

Now let's take a look at the unemployment rate as a recession indicator or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close.

Unemployment and Recessions

We've added another chart to illustrate the reality of the unemployment rate - the unemployment rate divided by the labor force participation rate.

The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It is now at 1.1%, unchanged from the previous month.

Unemployed 27+ Weeks