Commentary for Thursday: As we noted last week, Hurricane Harvey may impactnumerous data series over the next several months (see US Economic Notes:"Potential impacts of Hurricane Harvey on US economic data"). The first risk maybe jobless claims. As the chart below illustrates, jobless claims spiked by 96kin the wake of Hurricane Katrina, which struck Louisiana on August 29, 2005.
However, claims increased only modestly in the first week after the storm struck,rising only 8k during the week of September 3, with the aforementioned jump inclaims coming two weeks after, during the week of September 10. Thus, If historyis any guide, then it is possible claims rise only modestly this week, which willcover the period from August 27 to September 2, with the bulk of the potentialsurge occurring in next week's data covering September 3 to 9. While claimssubsequently reversed in 2005, falling -65k during the week of September 24,there was still a noticeable impact on the monthly employment data at the timeas claims were up a little over 100k during the September 2005 survey periodcompared to August.
Case in point, the initially reported September 2005 employment report showed-35k decline in nonfarm payrolls after averaging 174k over the three monthsending in August 2005. While the revised data eventually indicated a 67k gainin the month, this was still down nearly 200k from the revised three-monthtrailing average of 272k. in other words, the subsequent benchmark revisionsdid not diminish the magnitude of the impact all that much, at least relative towhere nonfarm payrolls gains were tracking leading up to the event. It is alsoimportant to remember that in 2005, it took a couple of months for payrolls torecover. For example the initially reported October 2005 payroll gain was just56k (subsequently revised up to 84k) and it wasn't until November 2005 thatpayrolls finally bounced—the initially reported figure was 215k (subsequentlyrevised up to 341k).
While there has been some chatter about wage inflation being impacted in thewake of hurricanes, specifically in the construction sector, there is no historicalevidence of this, at least from what we can glean from the post-Katrina data.
Average hourly earnings for the construction did not show any outsized gains in the six months following Katrina, thus we doubt that this will be a factor thatwould muddy the wage inflation picture for Fed policymakers. Whatever thepotential distortions to the near-term data, they should not have any impact onthe Fed's decision to commence its balance sheet normalization program at theSeptember 20 meeting.
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