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--Past Severe Weather Impacts on Job Growth Short-Lived, Fed Economist Tells MNI
--Labor Market Tightness in State Could Slow Recovery Response
By Jean Yung
WASHINGTON (MNI) - The Federal Reserve Bank of Dallas estimates that
Hurricane Harvey subtracted between 70,000 and 90,000 jobs from Texas payroll
growth in September, but the effect is likely to be short-lived as statewide
jobs growth returns to trend as soon as October, a bank economist told MNI in an
The Fed bank expects job losses of between 37,800 and 60,400 for the state
in September rather than a gain of 29,800 had there not been a storm. For
October, it expects employers in the state to add 115,000 to 144,000 jobs rather
than 27,400 without any weather disruption, which will more than make up for
September's job losses.
"We expect the impact of Hurricane Harvey on Texas and the Gulf Coast to be
transitory in terms of employment and other business activity," regional
economist Laila Assanie said.
"We expect the long-term impact to be limited, because Houston should
rebound because it's the energy capital of the U.S. and it's a center for
business and trade. Other thriving parts of the Gulf Coast economy will recover
over the long term as well."
Economist surveyed by MNI expect the United States to have added just
73,000 jobs in September though forecasts range widely from -25,000 to 125,000.
The economy has been seeing jobs growth at an average pace of around 180,000 per
month in the past year.
Seven severe weather events, defined as those causing over $1 billion in
damage, have hit the Gulf Coast since 1975. But the Dallas Fed's analysis of
these events shows declines in job growth tend to be limited and short-term,
despite the Gulf Coast recovering slightly more slowly than Texas overall.
The last time a hurricane barreled through the region was Ike in September
2008, a couple months prior to the global financial crisis spreading to Texas.
Near the peak of the business cycle, jobs along the Gulf Coast declined by
29,000 that September but bounced back by 16,000 in October.
"When we looked at employment data for the Texas Gulf Coast, which is the
area most impacted by hurricanes, we found that the impact on employment was
transitory," Assanie said. Though the disruptions wrought by Harvey are of a
larger magnitude than Ike -- damage estimates for Harvey range from $75 billion
to $100 billion, compared to $35 billion for Ike -- the effect is likely also
temporary as has been the case in the past, she said.
The immediate spike in initial jobless claims after Harvey struck was much
larger compared to Ike, which also led to widespread flooding in Houston. After
Ike, claims levels returned to trend within five weeks, but they may remain
elevated for slightly longer this time, Assanie said.
Overall, the Fed bank estimates jobs in the Gulf Coast will recover to an
annual growth rate of 1.5% to 1.6% by either November or December while the
state could see jobs growth of 3.1% to 3.2%.
"Even though Houston and parts of the Gulf Coast were affected, other large
metros in the state were not impacted at all, so the expectation is those metros
will continue to add jobs and offset the declines along the Gulf Coast," Assanie
Supporting the prognosis is the fact that the Texas economy and labor
market had been robust this year. Through August, the state saw job growth at an
annual rate of 2.6%, slightly above the state's long-term rate of 2%, according
to the Fed bank's analysis. The unemployment rate in August had dropped to 4.2%,
the lowest since July 2007.
"It was a pretty healthy picture for Texas -- good solid growth and very
low unemployment," Assanie said.
With the unemployment rate at 4.2% and companies reporting difficulty
hiring, the state's labor market is "pretty tight," she said. "As labor demand
increases because of post-hurricane restoration work, that will likely
exacerbate the worker shortages and will push up labor costs and material costs,
especially in construction."
The Gulf Coast's capacity as an oil and gas hub also does not appear to
have been seriously disrupted. The Dallas Fed's monthly business outlook
surveys, released last week, all remained positive in September.
About half of Gulf Coast companies surveyed said they expect to find it
more difficult to hire workers over the next six months. However across the
state, just one in four of respondents said they expect more difficulty while
nearly 70% said they expect no change in their ability to hire workers.
--MNI Washington Bureau; +1 202-371-2121; email: firstname.lastname@example.org