Remember all those reports filed by the mainstream media predicting doom and gloom right after Katrina devastated New Orleans? Well, the first significant piece of economic data to be released since the hurricanes hit suggests that these media prognostications – as predicted by the Free Market Project on September 6 – had no basis in fact.
This morning, the Labor Department released employment numbers for the month of September, and they were much stronger than forecast. In fact, they were so strong that the U.S. dollar rallied against most of the world’s currencies in expectation that the Federal Reserve might raise interest rates further than many economists had hoped.
To refresh everyone’s memory, here is a sampling of what the media were saying about the economy after Katrina first made landfall:
- Edmund L. Andrews of The New York Times wrote this on September 3: “That would have been encouraging news to many forecasters, but it was overwhelmed by a growing expectation that Hurricane Katrina is likely to cause substantially slower growth for at least the next several months.”
- Joel Havemann of the Los Angeles Times took a similar approach: “But Hurricane Katrina will probably end the economy's 27-month streak of job gains. Katrina's effects — not only on the Gulf Coast regions where it struck but also on the national economy via higher energy prices and disrupted ports — could result in the loss of as many as 500,000 jobs in September, analysts said.”
- The Washington Post’s Nell Henderson wrote this: “Hurricane Katrina, by forcing an exodus of workers and families from New Orleans and surrounding areas, appears likely to rank alongside Sept. 11, 2001, and the Arab oil embargo of 1973 as one of the nation's most serious and sudden economic shocks – particularly in terms of job losses – in recent memory.”
- And, just this morning, Andy Serwer of Fortune magazine said on CNN’s “American Morning”: “You can see the 200,000 estimates of jobs lost.”
Despite all this bearishness, the Labor Department reported this morning that payroll employment was little changed, with a net loss of 35,000 jobs in September. The unemployment rate went to 5.1 percent, but that’s still lower than any month from 2002 to 2004, as The Heritage Foundation’s Tim Kane pointed out.
The Bureau of Labor Statistics said, “The measures of employment and unemployment reported in this news release reflect both the impact of Hurricane Katrina, which struck the Gulf Coast in late August, and ongoing labor market trends. Over the 12 months ending in August, payroll employment grew by an average of 194,000 a month and the unemployment rate trended downward.”
To put this in perspective, analysts had been looking for a decline of 150,000 in these non-farm payrolls. As such, when combined with the upward revisions of 77,000 jobs to the original July and August estimates, this report was surprisingly strong. In fact, factoring out job losses directly related to Katrina, the economy has added more than 200,000 jobs per month the last three months, which is outstanding.
Maybe this explains why Serwer and CNN’s Soledad O’Brien seemed amazed when the new numbers were released:
O’Brien: “That new jobs report we've been talking about all morning is out. To break down the numbers, here is Andy Serwer.”
Serwer: “Let’s get right to it, Soledad. 35,000 jobs net lost in the economy in the month of September. The first time we've lost jobs since May 2003. How could it only be 35,000?”
O’Brien: “You're saying the estimates were going as high as 400,000?”
The Associated Press followed with an article entitled “Katrina Pushes Unemployment Rate Higher” with the sub-heading “Economy Loses Jobs in Sept. for 1st Time in Over 2 Years; Katrina Pushes Unemployment Rate Up.” Jeannine Aversa began her report:
“The economy lost jobs in September for the first time in over two years as economic convulsions from a devastating Gulf Coast hurricane shook the job market and pushed the national unemployment rate up to 5.1 percent.
“The report, released by the Labor Department on Friday, provided the most extensive picture of the jobs climate in the aftermath of the deadly and destructive Hurricane Katrina, the costliest natural disaster in U.S. history.”
Curiously, nowhere in this report did Aversa mention that this job loss was significantly lower than economists had been expecting, or that most analysts cheered the news. For instance, here’s how Joe Richter of Bloomberg framed the same announcement:
“Hurricane Katrina pushed the U.S. unemployment rate up to 5.1 percent in September as the economy lost 35,000 jobs, fewer than expected and evidence that the storm wasn't strong enough to derail the expansion."
Richter then quoted economists who were also bullish about this report:
“‘The Fed is going to look at this number and go full-steam ahead with 25-basis-point increases at its next two meetings to keep inflation in check,’ said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ‘This is a pretty good payroll number for September.’”
“‘It's a very resilient economy that's likely to be doing extremely well in a few months,’ said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York, who predicted payrolls would be little changed from August.”
Kane, Heritage’s labor policy research fellow, wrote in his assessment of the numbers: “The bottom line is that the next few months’ job numbers will be much more important signals than today’s about where the economy is heading.” But the impatient media haven’t waited to let the American economy do what it does so well – grow.
First reported by the Free Market Project