Hurricanes and Boeing strike will make economic data messy
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It is a delicate time for the economy, with mixed signals as to whether the job market is chugging along fine — or faltering. Assessing what's going on is about to get harder.
The big picture: The triple whammy of Hurricane Helene, Hurricane Milton, and the Boeing strike are likely to distort economic data in the coming weeks, making the usual indicators of the economy's health more difficult to dissect.
- Payroll employment is likely to be depressed, along with industrial production and some measures of consumer spending, in ways that don't reflect the economy's underlying trajectory.
- There is also likely to be a bounce-back surge in economic output as rebuilding occurs in the next few quarters, because in GDP arithmetic, rebuilding a destroyed building counts as a positive.
- But it's hard in moments like this to know how much of any apparent weakness in the data should be chalked up to one-time effects.
State of play: We got an early sign of this with Thursday's report on jobless claims, which saw a spike fueled in part by claims in Helene-afflicted North Carolina and aerospace-heavy Washington state. (Striking workers are not eligible for unemployment benefits, but furloughed workers elsewhere in the Boeing supply chain are.)
- Goldman Sachs economists estimate the Boeing strike is on track to subtract 33,000 from October job growth, and Hurricane Helene about 50,000.
- This week is the "reference week" for the October jobs numbers, meaning anyone not working this week in Florida due to Milton — an hourly employee who evacuated, for example — will not count toward payroll employment.
- The numbers could be affected by both people who are temporarily not working and depressed response rates to the Bureau of Labor Statistics' surveys, as the officials who usually fill them out are busy dealing with crisis conditions.
What they're saying: October jobs numbers "will likely show flat or negative growth in total employment and an increase in unemployment — to the point that we are not likely to get clean looks at the major economic data series until late 2024 or early 2025," per a note from RSM chief economist Joe Brusuelas.
Flashback: There is a useful historical analogue to the situation. In August 2005, Hurricane Katrina walloped New Orleans, followed soon after by Hurricanes Rita and Wilma. There was also a 28-day Boeing strike.
- As then-Federal Reserve economist David Stockton put it in a Nov. 1 policy meeting that year, "we are now in a thick data fog that makes it difficult to separate the underlying trend in the economy from the influence of the storms."
- One can hope that this part of Stockton's 2005 assessment applies in 2024 as well. He added that "we are feeling increasingly comfortable arguing that the data support our earlier view that the economy would retain its momentum this fall."
- Indeed, while national job growth was weak in September and October of 2005, it bounced back in November, as the nation added a whopping 355,000 jobs.
