As noted earlier, Wall Street was completely clueless ahead of today's payroll, with most expecting a small positive print but two brave forecasters went so far as to predict that the recent hurricanes would result in a negative print, and sure enough, moments ago the BLS reported that in September, the US economy lost 33,000 hurricane distorted jobs, the first payrolls decline since September 2010.
While the September number was expected to be noise, the historical revisions were more problematic: total nonfarm payroll employment for July was revised down from +189,000 to +138,000, while August was revised up from +156,000 to +169,000. With these revisions, employment gains in July and August combined were 38,000 less than previously reported. After revisions, job gains have averaged 91,000 over the past 3 months.
Offsetting the poor headline print from the Establishment survey, according to the BLS Household Survey, the number of employed Americans soared by 906,000 to 154.435 million, a sharp 1.6% jump from the year prior.
The BLS also reported that the unemployment rate tumbled from 4.4% to 4.2%, on expectations of no change...
... as some 1.47 million people were not at work due to bad weather. This is how the BLS explained it:
In September, 1.5 million workers had a job but were not at work for the entire reference week due to bad weather, the highest level for this series over the past 20 years. This series is highly sensitive to the timing of weather events and thus does not capture the immediate effect of all such events on the job market.
Meanwhile, as jobs tumbled, the labor shortage created by the hurricanes pushed wages sharply higher as we had previewed, and as the BLS confirmed moments ago: in September, average hourly earnings rose by 0.5% M/M, above the 0.3% expected, and far above the 0.2% in August, while on an annual basis, the increase was an outlier 2.9%, also well above the 2.5% expected, and the highest since the financial crisis.
As a result of the spike in wages, the odds of Fed hike by year-end have climbed above 75% for the first time. Which, of course, is precisely as Bloomberg's David Finnerty said earlier:
"Any weakness will be attributed to hurricanes, while a beat on payrolls or wages would be seen as supporting a Federal Reserve interest rate increase in December."
Sure enough that's precisely how the market reacted.
Commenting on the Hurricane impact, this is what the BLS said:
In September, 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.
The storms caused large-scale evacuations and severe damage to many homes and businesses. 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. Many employees in areas affected by the hurricanes were likely off payrolls during the reference pay period for September.
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 for 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.
Elsewhere, the participation rate rebounded from 62.9% to 63.1% as the number of people not in the labor force shrank by 368,000 to 94.417 million even as the number of employed Americans surged by over 900,000.
Some more details from the report:
Total nonfarm payroll employment was little changed in September (-33,000), after adding an average of 172,000 jobs per month over the prior 12 months. In September, a steep 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. Employment rose in health care and in transportation and warehousing.
Employment in food services and drinking places dropped sharply in September (-105,000), as many workers were off payrolls due to the recent hurricanes. Over the prior 12 months, food services and drinking places had added an average of 24,000 jobs per month.
In September, health care added 23,000 jobs, in line with its average monthly gain over the prior 12 months (+27,000). The employment increase in ambulatory health care services (+25,000) was partially offset by a decline in nursing care facilities (-9,000).
Employment in transportation and warehousing increased by 22,000 in September. Job gains occurred in warehousing and storage (+5,000), couriers and messengers (+4,000), and air transportation (+3,000).
Employment in financial activities changed little in September (+10,000). A job gain in insurance carriers and related activities (+11,000) largely reflected hurricane-recovery efforts. The gain was partly offset by losses in activities related to credit intermediation (-4,000) and in commercial banking (-3,000). Over the year, financial activities has added 149,000 jobs.
In September, employment in professional and business services was little changed (+13,000). Over the prior 12 months, job growth in the industry had averaged 50,000 per month.
Manufacturing employment was essentially unchanged in September (-1,000). From a recent employment trough in November 2016 through August of this year, the industry had added an average of 14,000 jobs per month.
Employment in other major industries, including mining, construction, wholesale trade, retail trade, information, and government, showed little change over the month.
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in September. In manufacturing, the workweek also was unchanged at 40.7 hours, and overtime held steady at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. (See tables B-2 and B-7.)
In September, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents to $26.55. Over the past 12 months, average hourly earnings have increased by 74 cents, or 2.9 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees increased by 9 cents to $22.23. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for July was revised down from +189,000 to +138,000, and the change for August was revised up from +156,000 to +169,000. With these revisions, employment gains in July and August combined were 38,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 91,000 over the past 3 months.