US hiring last month was likely held back by Sandy

By Christopher S. Rugaber

Associated Press

Published: Wednesday, Dec. 5 2012 10:35 p.m. MST

In this combination of Associated Press file photos, a firefighter surveys the smoldering ruins of a house in the Breezy Point section of New York, Tuesday, Oct. 30, 2012, left, and James Dresch of MND Partners Inc. works on the floor of the New York Stock Exchange Wednesday, Nov. 7, 2012 in New York, right. The combination of U.S. employers that shut down because of Superstorm Sandy and fears over looming tax increases and spending cuts likely slowed hiring sharply in November. A private survey released Wednesday, Dec. 5, 2012, showed that companies added fewer workers last month than in October. (AP Photo)

The Associated Press

WASHINGTON — The combination of U.S. employers that shut down because of Superstorm Sandy and fears over looming tax increases and spending cuts likely slowed hiring sharply in November.

A private survey released Wednesday showed companies added fewer workers last month than in October. The same picture is expected when the government issues a more comprehensive jobs report for November on Friday.

Still, most analysts say the underlying economy remains healthy and is creating jobs at a still-modest but steady pace.

Economists expect Friday's government report to show employers added 110,000 jobs in November, according to FactSet. And they think the unemployment rate will remain 7.9 percent.

Other analysts expect much lower job gains, roughly 25,000 to 50,000, because of Sandy and anxiety over the tax increases and spending cuts set to take effect in January.

Yet without the depressive effects of Superstorm Sandy, many think employers would have added up to 200,000 jobs last month — even stronger than the solid 171,000 jobs added in October.

"We don't think the labor market has lost any underlying momentum," Paul Edelstein, an economist at IHS Global Insight said. "We just have these two issues."

Superstorm Sandy tore into the East Coast on Oct. 29, closing restaurants, retailers and other businesses and cutting off power to 8 million homes in 10 states.

The government would count people who couldn't get to work and weren't paid as job losses, even if they were temporary. Those subtractions would reduce net hiring.

Though Sandy shrank some company payrolls, it might not have affected the unemployment rate. The rate is calculated from a separate government survey of households.

The government asks about 60,000 households each month whether the adults have jobs and whether those who don't are looking for one. Those without a job who are looking for one are counted as unemployed. Those who aren't looking aren't counted as unemployed.

Many workers who were temporarily dropped from payrolls because of Sandy would still consider themselves employed. As a result, the unemployment rate might not change much, if at all, for November.

Tens of thousands of people were put at least temporarily out of work. Two weeks after the storm hit, about 75,000 people in New York and New Jersey applied for unemployment benefits.

Several economists estimate that Sandy might lower the government's count of company payrolls by as many as 150,000. Those estimates are based in part on the effects of previous storms, such as Hurricane Katrina in 2005.

Kevin Cummins, U.S. economist at UBS, noted that Sandy hit a heavily populated area where many jobs pay above-average wages. The average weekly pay figure included in the jobs report is likely to decline as a result.

ADP, a payroll provider, said Wednesday that private companies added 118,000 jobs in November, down from 157,000 in the previous month. Mark Zandi, chief economist at Moody's Analytics, which helps compile data for ADP, estimated that the storm lowered the job gains by about 86,000.

But the payroll losses from the storm could be higher in the government's total. That's because ADP counts people as employed if they remain on a payroll — even if they're not paid. By contrast, the government counts people as employed only if they're paid.

The effect on hiring from impending tax increases and federal spending cuts — the "fiscal cliff"— is harder to quantify. Those measures are set to take effect in January unless Congress and the White House reach a budget deal first.

Companies might not be cutting jobs because of the fiscal cliff. But the uncertainty surrounding the outcome is likely delaying some hiring, economists say.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS