Economics, U.S. Economy

Did Sandy miss the labor market?

Image Credit: Paul Lowry (Flickr) (CC BY 2.0)

Image Credit: Paul Lowry (Flickr) (CC BY 2.0)

In their report, the BLS writes that “Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November,” citing that “survey response rates in the affected states were within normal ranges.” This is shocking news given the enormity of the damage Sandy inflicted on such a densely-packed region of the country.

With respect to the response rates, if anything, BLS is understating the case. The response rate for the payroll survey was 76.2% for November, well above the average response rate in 2011 (71.1%), 2010 (70.4%), and 2009 (73.3%).

The unemployment rate dropped to 7.7% in November, a 0.2 percentage point drop from October. Was this due to the labor force contracting as unemployed workers stopped searching for jobs in response to the hurricane? Not as far as I can tell. The labor force did shrink by 350,000 workers from October to November. But even if the labor force had held constant, November’s unemployment rate would still be quite similar to October’s.

What about nonfarm payroll jobs? We added 146,000 new ones, handily beating the consensus forecast of 100,000.

November did see 1.1 million usually-full-time workers working less than 35 hours. From 2002 – 2011 the average for this statistic for November equals 263,000. Same goes with workers employed in nonfarm industries but not at work due to bad weather. There were 369,000 such workers in November, over five times as many as the average over the previous ten years.

So the news is extremely surprising: Apart from full-time workers staying home or working fewer hours, we can conclude that Sandy impacted the labor market much less than was expected.

Apart from Sandy, where does this report find the labor market? Improving, but not nearly fast enough. The employment-to-population ratio fell one-tenth of a percentage point to 58.7%. This remains unacceptably low. The most expansive measure of the unemployment rate — which includes persons marginally attached to the labor force and persons employed part-time for economic reasons — stands at an extremely high 14.4%, down 0.2 percentage points from October. It is still the case that over 40% of the unemployed have been unemployed for longer than six months.

The three-month average of the monthly change in nonfarm payroll jobs is 139,000. It’s good that we’re adding jobs, but we need to add them at a much brisker pace if we’re going to see a sustained drop in the unemployment rate.

The next few months don’t offer much hope, as uncertainty over the fiscal cliff finds many employers reluctant to hire new workers. My mother asked me yesterday what I want for Christmas. A government that doesn’t actively restrain economic growth, I replied.

Michael R. Strain is a research fellow at the American Enterprise Institute. Follow him on Twitter @michaelrstrain.

2 thoughts on “Did Sandy miss the labor market?

  1. How do you reach this conclusion? “The labor force did shrink by 350,000 workers from October to November. But even if the labor force had held constant, November’s unemployment rate would still equal 7.7%.” If you add the 350,000 leaving the labor force in Nov. to the 12,029,000 unemployed and back into the labor force don’t you get an unemployment rate of 8% (12,379/155,641 = .07954)?

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