Hurricane Milton to make labor data murky through October

Wolfe Research’s chief economist Stephanie Roth, joins Seana Smith and Brad Smith on Morning Brief to break down how the devastation caused by Hurricane Milton could affect labor market data that the Federal Reserve depends on as it assesses whether to cut rates at the November meeting.

“The data are going to be really messy from here, and that’s one other reason why it’s more likely than not that the Fed will be cutting in November, because the employment data is likely going to look fairly weak, and it’s hard for them to discern exactly what’s attributed to the hurricane, even though they know that there will be an impact,” Roth tells Yahoo Finance.

The economist says she expects the jobless claims and the employment report to be impacted by the storm. “After some significant hurricanes in the past, you’ve typically had a rise in claims for the couple of weeks after the hurricane… So we’re likely to see higher unemployment claims for the next couple of weeks, largely, likely, through much of October, and the employment report is certainly going to be impacted too.”

While employment data is potentially distorted, Roth says “we would lean on the spending data to some extent,” explaining, “You don’t really have really strong spending if economic employment is slowing pretty materially.”

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This post was written by Naomi Buchanan.

Video Transcript

We’ve been closely tracking the developments at a hurricane Milton, the destruction that it left in its path.

We saw some the impact of past hurricanes.

Hurricane Helene on the Jobless claims number that we got out yesterday.

I’m curious, when do we typically see a peak?

Are, are we likely going to see maybe elevated readings on that jobless claims number over the next couple of weeks?

Yeah, the data are gonna be really messy from here and that’s one of the reason why it’s more likely than not that the fed will be cutting in November because the employment data are likely gonna look fairly weak and it’s hard for them to discern exactly what it, what’s attributed to the hurricane even though they know that there will be an impact.

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So what tends to happen is after, after some significant hurricanes in the past, you’ve typically had a rise in claims for the, the couple of weeks after the hurricane, it tends to, to peak roughly two week after the hurricane hits probably because there’s, there’s power shortages and that’s not, maybe the filing an unemployment claim isn’t necessarily the first thing that somebody would go about doing.

But in the, in the couple of weeks after the hurricane, you do tend to see that, that spike.

So we’re likely to see higher unemployment claims for the next couple of weeks, likely, likely through much of October.

Uh, and the, the employment report is certainly gonna be impacted too.

If you were rowing back to what happened in Beryl, the, the BL Ss said there was no discernible impact.

But if you look at the state data, there was a significant drag from the state of Texas.

So we’re expecting a softer reading kind of across the board and it’s going to make it hard for the fed to, to sort of pause just because we don’t know what’s impacted by the weather and what’s slowing in the economy.

Yeah.

And, and that’s a footnote or, you know, not even a footnote.

It’s usually within the first page of the BLS monthly report too.

Once we get those updates and acknowledge what some of the damage has been, especially on the employment situation front after some of these events, all that considered here, what is the, the underlying strength that you’re seeing right now in the employment situation that the FED is gonna be monitoring most closely?

Yeah, I mean, first, just look at unemployment claims before all of the hurricane impacts, they were very, quite steady.

You see, consumer spending really quite strong.

So that was at, at mismatch with what we were seeing from the from the jobs report, at least as of as of before last Friday.

So it looked like there was a, a slowing in the payrolls employment report, but that wasn’t met elsewhere in the economy.

And to us that, that signal that there was kind of AAA discrepancy there.

You don’t really have really strong spending.

If, if economic uh employment is, is slowing pretty materially, we will lean on the, the spending data to some extent.

And that’s kind of what what played out you got big upward revisions to the payrolls data.

The three month trend is now 100 86,000 as reported through the month of uh uh of July, it was just 100 16.

So there was a pretty big upward revision to the trend in terms of payrolls growth.

We think that’s closer to the reality.

We think payrolls are trending around 100 50,000 per month, which is in line with what it was in in the last cycle, which was a very solid hiring uh expansion.

Stephanie Roth, who is the chief economist over at Wolf research.

Stephanie, always a pleasure to get some of your insights.

Thanks so much.

Thank you.