With rise in rates, Friday’s jobs report just got a lot more important


There’s one wildcard in the works for this week’s report: Hurricane Florence, which thrashed the Carolinas and could be a principal factor should the payroll count miss expectations. Barclays economist Michael Gapen said Florence’s effects “are a touch less negative” than expected, but still will be felt.

One forecaster, though, thinks that Florence not only will affect the number, but will do so dramatically.

Beth Ann Bovino, chief U.S. economist at S&P Global Ratings, expects payroll growth of just 125,000, which would be the worst number going back to September 2017.

However, Bovino thinks the pain will be short-lived and the jobs market eventually will return to trend growth.

“Despite the possible weather-related distortions, there’s continued strength in sentiment readings for both businesses and households as initial jobless claims hover around a 49-year low, leaving the jobs market picture upbeat,” she said in a note.

Interestingly, Bovino said the storm actually might have an upward impact on the hourly earnings number because workers on the lower end of the wage scale didn’t get paid during the storm.

“This will skew the survey results by accounting for more relatively higher-paid, likely salaried, workers, artificially boosting the monthly number,” she wrote. “These distortions will likely reverse the following month, just as was the case after last year’s hurricane-related distortions.”

Florence will push the weekly hours-worked number down a touch to 34.4, she added.

However, neither Bovino nor Besecker thinks the report will impact the Fed, which is expected to approve one more rate increase before the end of the year and three more in 2019.

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