The number of workers on U.S. payrolls unexpectedly fell slightly in September, as Hurricane Floyd disrupted business along the East Coast, while the nation's unemployment rate remained at a 29-year low of 4.2 percent, the Labor Department reported yesterday.
The department estimated that roughly 60,000 payroll jobs were lost because of the hurricane. But with a reported decline of 8,000 for the month, even under normal weather conditions, only about 50,000 jobs would have been added. A gain of that size would still have been much smaller than most analysts had been anticipating.
"Employment in some areas and industries was held down by Hurricane Floyd, but employment growth was weak even in those areas and industries largely unaffected by the hurricane," said Katharine G. Abraham, the commissioner of labor statistics.
Separately, the department also reported a sharp increase in average hourly wages, which some economists said may have been due partially to a shift in the mix of jobs away from those that pay low wages to those with higher pay.
Some analysts said the 7-cent jump in average hourly earnings was an indication that the low unemployment rate and employers' efforts to find additional workers were causing wages to rise more rapidly.
The weak job numbers could be either a sign economic growth is slowing or that the extremely tight labor market is making it impossible to hire new workers, analysts said.
"I think it would be very hard to draw the inference that this is a substantial sign of a slowing of the economy, because we have had a string of other strong data," said White House economist Martin N. Baily.
Initial claims for unemployment benefits continue to run at a very low level, Baily pointed out, and the most recent survey of conditions in manufacturing found manufacturers expanding their businesses.
Clinton administration economists, who used a different method to calculate them from the Labor Department, put the job losses attributable to Hurricane Floyd at 85,000.
"The bottom line is that we will probably never know exactly what job growth would have been ex-Floyd, but it was almost certainly quite weak," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y. "The key question remains, why? Weaker demand or a lack of labor supply?"
The September decline in jobs came on the heels of a 103,000 increase in August, which also was well below the average monthly gain of 213,000 over the past year. Should this slowing trend continue--though there is likely to be a rebound in the October figures with a return to normal weather--it would be much less likely that Federal Reserve officials would raise interest rates at their next policymaking session Nov. 16.
The employment report, which also showed a jump in average hourly earnings to $13.37, "will be confusing to the Fed staff, just like they are for us," said Ray Stone of Stone & McCarthy Research Associates, a financial markets research firm. "Given this confusion, these data support the thesis that the Fed will stay on hold through the November meeting and probably through year-end."
On the other hand, Stone said, other economic data that have shown strength in the economy could change that.
"Our view remains that the Fed will tighten further, the question in our minds is the timing," Stone said.
The Fed raised its target for short-term interest rates in June and August in two quarter-percentage-point steps, and earlier this week policymakers said they are "biased" toward raising rates because of continuing strong economic growth. However, Fed officials also said that having such a bias "did not signify a commitment to near-term action."
In their announcement, Fed policymakers said "the growth of demand has continued to outpace that of supply, as evidenced by a decreasing pool of available workers willing to take jobs." Yesterday's report may have heightened that concern.
The measure of the pool of available workers favored by Fed Chairman Alan Greenspan includes all those aged 16 through 64 who don't have a job and say they want one, regardless of whether they are actively looking for work. According to Fed staff estimates, that pool included 10.58 million people in September 1998, but as of this August had shrunk to 9.85 million and last month it declined to 9.59 million, a new low.
According to the Labor Department analysis, most of the payroll jobs lost due to the hurricane were in retail trade, which includes eating and drinking places, and in services. Small jobs gains were recorded in construction, transportation and public utilities and wholesale trade. Both state and local and federal government employment fell by 10,000.
The unemployment rate in the District was 6.1 percent in August, according to the most recent local jobs survey data, virtually unchanged from the 6 percent rate in July, reflecting the yearlong rebound of the District's economy.
The jobless rate in the District suburbs was unchanged at 2.2 percent, while the August rate for the entire metropolitan area was 2.6 percent, up a fraction from July's 2.7 percent rate, as available workers remained in short supply.