WASHINGTON, Oct 6 (Reuters): US employment fell in September for the first time in seven years as Hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring, the latest indication that the storms undercut economic activity in the third quarter.
The Labor Department said on Friday nonfarm payrolls decreased by 33,000 jobs last month amid a record drop in employment in the leisure and hospitality sector.
The decline in payrolls was the first since September 2010. The Department said its analysis suggested that the net effect of Harvey and Irma, which wreaked havoc in Texas and Florida in late August and early September, was to "reduce the estimate of total nonfarm payroll employment for September."
Economists had forecast payrolls increasing by 90,000 jobs last month. Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed.
Many of the dislocated people will probably return to work. That, together with rebuilding and clean-up is expected to boost job growth in the coming months. Leisure and hospitality payrolls dived 111,000, the most since records started in 1939, after being unchanged in August.
There were also decreases in retail and manufacturing employment last month. Stripping out the effects of the hurricanes, the labor market remains strong. The government revised data for August to show 169,000 jobs created that month instead of the previously reported 156,000.
Harvey and Irma did not have an impact on the unemployment rate, which fell two-tenths of a percentage point to 4.2 percent, the lowest since February 2001. The smaller survey of households from which the jobless rate is derived treats a person as employed regardless of whether they missed work during the reference week and were unpaid as result.
The decrease in the unemployment rate reflected an increase in household employment. It also came despite more people entering the labor force.
The dollar rose against a basket of currencies after the data, while prices for U.S. Treasuries fell. U.S. stock index futures were trading lower.
The length of the average workweek was unchanged at 34.4 hours. With the hurricane-driven temporary unemployment concentrated in low-paying industries like retail and leisure and hospitality, average hourly earnings increased 12 cents or 0.5 percent in September after rising 0.2 percent in August.
That pushed the annual increase in wages to 2.9 percent, the largest gain since December 2016, from 2.7 percent in August. Annual wage growth of at least 3.0 percent is need to raise inflation to the Fed's 2 percent target, analysts say
The mixed employment report should not change views the Federal Reserve will raise interest rates in December. Fed Chair Janet Yellen cautioned last month that the hurricanes could "substantially" weigh on September job growth, but expected the effects would "unwind relatively quickly."
The U.S. central bank said last month it expected "labor market conditions will strengthen somewhat further." The Fed left interest rates unchanged in September, but signaled it expected one more hike by the end of the year. It has increased borrowing costs twice this year.
The employment report added to August consumer spending, industrial production, homebuilding and home sales data in suggesting that the hurricanes will dent economic growth in the third quarter.
Economists estimate that the back-to-back storms, including Hurricane Maria which destroyed infrastructure in Puerto Rico last month, could shave at least six-tenths of a percentage point from third-quarter gross domestic product.
Growth estimates for the July-September period are as low as a 1.8 percent annualized rate. The economy grew at a 3.1 percent rate in the second quarter.
Private payrolls fell by 40,000 jobs, the biggest drop since February 2010. Manufacturing employment slipped by 1,000 jobs pulled down by declines at motor vehicle assembly and chemical plants as well as textile mills.
Retail employment fell by 2,900 jobs as food stores payrolls tumbled 6,900. There were also declines in employment at department stores. Construction payrolls rose 8,000 in September as a 3,900 drop in jobs at homebuilding sites was offset by increases elsewhere.
