U.S. Loses 35,000 Jobs After Storm

The government’s first formal look at Hurricane Katrina’s effect on national employment suggested far less damage than many analysts had feared.

The Labor Department reported Friday that the economy lost a net 35,000 jobs in September, far fewer than the widely predicted decline of 130,000 to 200,000.

The decline in payrolls was the country’s first monthly job loss since May 2003.

The Labor Department also revised upward, by a total of 77,000 jobs, the payroll increases for July and August.

The unemployment rate rose to 5.1% last month from 4.9% in August, but was still lower than it had been for any full year since 2001.

William C. Dudley, chief U.S. economist for investment bank Goldman Sachs & Co. in New York, said that if Katrina had not devastated coastal regions of Louisiana, Mississippi and Alabama, the national economy probably would have gained nearly 200,000 jobs, in line with the average for the previous 12 months.

Dudley said Katrina’s impact on the job market would be clearer when the Labor Department published state-by-state figures in two weeks. A complete picture will be available only when figures are available for October or even November.

The department’s data for September from the Gulf Coast were spotty, and its survey was conducted during the week of Sept. 12, before Hurricane Rita struck Texas and Louisiana.

Even in the best of times, the agency’s figures are imprecise, susceptible to all the normal errors of surveys.

September was a particularly difficult month for accuracy because many Gulf Coast businesses that the department ordinarily surveys had been obliterated, and many families had been evacuated.

Although the department used traditional statistical techniques to compensate for the undercount, it admitted to greater imprecision than usual.

More complete information, coupled with Rita’s effect, may show a gloomier job picture in subsequent months, some analysts said.

“Let’s not jump up and down yet,” said Neil S. Lebovits, president and chief operating officer of Ajilon Professional Staffing in Saddle Brook, N.J. “Let’s see what’s reported next month.”

There were some early indications, though, that the future reports could be just as bullish. Surveys in August and September by the National Federation of Independent Business found that after Katrina struck, 17% of the group’s small-business members still planned to hire new workers -- the same proportion as before Katrina.

Jared Bernstein, senior economist with the labor-backed Economic Policy Institute in Washington, calculated that Katrina cost 229,000 jobs in September. Without the storm, the economy would have added 194,000 jobs, he said.

Economists agreed that the September job data all but guaranteed that the Federal Reserve would stick to its course of raising its benchmark short-term interest rate by 0.25 percentage point at each meeting of its Federal Open Market Committee. After Katrina, there was speculation that the Fed might pause in case the economy slowed.

The benchmark federal funds rate, which applies to overnight loans between banks, is 3.75%, up from 1% in June 2004. It is expected to be raised to 4% on Nov. 1 and 4.25% on Dec. 13.

The leisure and hospitality sector, which includes hotels, restaurants and casinos, lost 80,000 jobs nationwide in September, the biggest hit apart from retail trade’s decline of 88,000. Katrina forced 16 casinos in Mississippi and Louisiana to close and virtually halted the tourist trade in New Orleans.

Not all the economy’s unemployment in September could be traced to the devastation along the Gulf Coast. Lynn Reaser, chief economist of the investment strategy group at Bank of America, said aerospace and airline industry strikes cost 21,000 jobs.

Employment in the manufacturing sector continued to fall, with a loss of 23,000 factory jobs from August to September and 170,000 for the 12 months ended in September. Manufacturing now accounts for scarcely more than one in 10 American jobs.

Construction employment, by contrast, gained 23,000 in September, and it figures to continue growing as workers rebuild New Orleans and other Gulf Coast cities.

The gap between the unemployment rates for whites and blacks shrank in September. The white jobless rate rose to 4.5% from 4.2%, while the rate for African Americans fell to 9.4% from 9.6%.

The Labor Department report showed wage growth continuing to be mild for a period when job markets are tightening and, at least in most of the country, unemployment is declining. Average hourly earnings of production workers rose 0.2% in September, to $16.18 from $16.15.

Dudley, of Goldman Sachs, said there was no sign that the accelerated price inflation of recent months was driving wages up.