Economists: Sandy Probably Dealt Blow to Jobs Rebound

Sunday, 02 Dec 2012 03:43 PM

 

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The damage wrought by Sandy probably extended to the job market in November as the superstorm forced businesses to close, upending the recent pickup in U.S. hiring, economists projected a report this week will show.

Payrolls rose by 90,000 workers last month, the smallest gain since June, according to the median forecast of 71 economists surveyed by Bloomberg ahead of Labor Department figures coming out Friday. Manufacturing and services grew at a slower pace, other reports may show.

Sandy, the largest Atlantic storm ever to hit the nation, left about 8 million homes and businesses without power for days after making landfall in the Northeast on Oct. 29. In addition, concern about the looming fiscal cliff may be limiting employment, one reason why Federal Reserve policy makers are weighing increasing stimulus early next year.

“The storm was certainly very disruptive and the numbers will reflect that,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The bigger picture is we’re seeing measured progress in the labor market. Job growth in recent months has been somewhat better than people expected, but we’ve still got a lot of ground to make up. The Fed will do additional Treasury purchases.”

The payrolls report may also show the jobless rate held at 7.9 percent last month, according to the survey. Private employment, which excludes government agencies, also rose by 90,000 in November, less than half the prior month’s 184,000 increase that was the biggest since February, the survey showed.

Job Gains

Through October, the U.S. had recovered 4.5 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

Economists at Deutsche Bank Securities Inc. and UBS Securities LLC estimate Sandy cut November payrolls by about 150,000 workers, based on comparisons with the damage caused by Hurricane Katrina in 2005. History suggests the “temporary hiring stall” will extend into December, after which employment should “meaningfully recover within a couple of months,” Joe LaVorgna, Deutsche Bank’s chief U.S. economist, said in a Nov. 26 note.

The bankruptcy of Hostess Brands Inc., the baker of Twinkies and Wonder bread, will also depress payrolls in coming months. The Irving, Texas-based company on Nov. 22 began firing 15,000 workers, temporarily keeping about 3,200 of its remaining employees to clean plants and mothball equipment.

On the brighter side, an early Thanksgiving may have provided a boost of about 75,000 to payrolls last month, UBS projects.

Holiday Hiring

Businesses stepping up hiring to cater to holiday shoppers include Macy’s Inc. The second-biggest U.S. department-store chain said it would add about 2,000 more seasonal workers than the 78,000 it hired last year. Toys ‘R’ Us Inc., the world’s largest toy retailer, reported plans to employ 45,000 temporary staff, up 5,000 from the 2011 season.

“Although the economy continues to expand, we must grow faster if we are to put all of our jobless workers and idle businesses back to work,” William Dudley, president of the Federal Reserve Bank of New York, said in a Nov. 29 speech.

Dudley is focusing on “unacceptably high” joblessness as he considers whether the Fed should step up easing to stimulate the economy.

An improving labor market, rising home values and cheaper gasoline are boosting Americans’ moods, another report on Dec. 7 may show. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment in December probably held close to the prior month’s five-year high, economists in the Bloomberg survey predicted.

Fiscal Cliff

Companies remain concerned about the outlook, which will affect hiring and investment, ahead of the so-called fiscal cliff of $607 billion in tax increases and government spending cuts that will take place in early 2013 unless lawmakers act to avert it.

“We’re expecting the same sort of a slow-growth environment, that’s our best view of 2013,” Fredrik Eliasson, chief financial officer of CSX Corp., the largest eastern U.S. railroad, said on a Nov. 28 teleconference with analysts. “There are a lot of uncertainties out there in the world at this point between what’s going on here with the fiscal cliff and between Europe and China.”

The Standard & Poor’s 500 Index has swung between gains and losses amid lawmakers’ comments on whether a budget agreement can be reached. The S&P 500 advanced 0.5 percent this week and rose 0.3 percent for the month.

Manufacturing Cools

Cooling global demand and U.S. fiscal policy concerns will be reflected in manufacturing data this week. Factory orders stagnated in October, the Commerce Department may report Dec. 5. The Institute for Supply Management Inc.’s factory index, due Monday, fell to 51.5 in November from 51.7 the prior month, according to the Bloomberg survey median. Fifty is the dividing line between expansion and contraction.

Wednesday, the Tempe, Arizona-based ISM group’s services index, which covers almost 90 percent of the economy, may come in at 53.5, down from the prior month’s 54.2 reading, according to economists surveyed.

© Copyright 2014 Bloomberg News. All rights reserved.

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