Jobless claims soared in the last week, climbing higher than they have in more than two years, the Labor Department said Thursday, in the wake of Hurricane Harvey.
That is likely to be a temporary thing – although a stronger hurricane is threatening the Atlantic coast and seems sure to cause more economic displacement after its expected landfall this weekend.
“The underlying trend remained consistent with a strong labor market,” Reuters’ Lucia Murtikani wrote, but the article acknowledged that the recovery could be prolonged. Murtikani observed that the increase in claims “offered an early glimpse of Hurricane Harvey's impact on the economy.”
The flooding caused by the hurricane was unprecedented in Houston and caused disruption to production and delivery of oil, natural gas and petrochemicals. The disruption led to panics in cities as far north as Dallas.
Elena Holodny of Business Insider noted that economists expected jobless claims to be “one of the earliest indicators of Harvey's impact” and observed that “similar trends were seen after Katrina and Sandy.”
“Hurricane Harvey is the principal culprit for the spike in jobless claims,” said John Engle, president of Illinois-based Almington Capital, a family office merchant bank, “and its effects will likely be felt for quite a while. But once the rebuilding effort begins, we should expect a significant rise in jobs surrounding the reconstruction.”
More than 95% of the new jobless claims were filed in Texas, which took the brunt of Hurricane Harvey, although Louisiana and other coastal states experienced strong winds and heavy rain from the storm. In all, there were 62,000 initial jobless claims in the week ending Sept. 2, resulting in a seasonally adjusted 298,000. Economists originally expected a much smaller increase from 236,000 claims to 242,000.
In spite of the increase, jobless claims remained below 300,000, the generally accepted benchmark for a healthy labor market.
“There are two sides to the impact of Hurricane Harvey on initial jobless claims,” said Marc Prosser, co-founder of New York City-based FitSmallBusiness.com, “those who hire short-term and seasonal workers in areas potentially impacted by the hurricane delayed hiring plans and workers also delayed looking for a job to focus on taking care of themselves and their families. During the storm and in its aftermath, hiring was not a priority. As a result, many workers that would have quickly found jobs instead filled for benefits.”
Engle said the increase in joblessness should be short lived.
“Over the long run,” he said, “the current rise should be seen as a blip. But if the recovery is botched or slowed by political ineptitude and mismanagement, regional employment and economic development could be hampered and contribute to dragging down national employment numbers.”
