Tags: Superstorm | Sandy | Jobs | employment

Deutsche Bank Economist: Superstorm Sandy to Jar Jobs Data

Monday, 19 Nov 2012 01:40 PM

Superstorm Sandy will bruise November jobs data, said Deutsche Bank economist Joseph LaVorgna.

Expect the economy to add a scant 25,000 nonfarm payrolls in November, which would boost the headline unemployment rate up to 8.0 percent.

The economy added 171,000 jobs in October and the unemployment rate came in at 7.9 percent.

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"The data reported last week showed preliminary evidence of Hurricane Sandy disrupting economic activity," LaVorgna said in an analysis referring to soft industrial output figures and jobless claims, according to CNBC.

"We are concerned there may be an acute hurricane impact on November payrolls."

Hurricane Sandy morphed into a post-tropical superstorm and knocked out power for millions in the Northeastern U.S., bringing commerce to a halt.

Not only will the labor market suffer, broader growth will as well, with fourth-quarter gross domestic product estimates of 1.3 percent likely facing downward revisions,

"The Federal Reserve acknowledged that the hurricane lowered industrial production by a full percentage point last month," Lavorgna said.

"If the November data are also significantly depressed, this will present compelling evidence pointing to GDP growth even lower than we currently project."

Industrial production contracted 0.4 percent in October after expanding 0.2 percent in September, the Federal Reserve reported.

While Sandy played a role, uncertainty surrounding the fast-approaching fiscal cliff, a combination of tax hikes and spending cuts kicking in at the same time early in 2013 that could drive the economy into a recession, prompted business to throttle back on operations.

Congress must steer the economy away from the cliff but until then, businesses and individuals won't know what they will be paying taxes next year, which is hampering economic activity.

"The big thing that stands out are the declines in business equipment, machineries and construction supplies. When you see that kind of weakness, you can't really attribute it to the storm," said Christopher Low, chief economist at FTN Financial in New York, according to Reuters.

"It's a pattern of weakness that has happened in the past three months. The most likely explanation is the weakness in capital equipment orders, which could be attributed to caution about the fiscal cliff and its possible impact on the economy."

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