employment report for September could get ugly.
, economists expect that payrolls for the month declined by 109,000. That would be a minor improvement over August's surprise drop of 113,000. Experts are divided over whether the report will reflect the Sept. 11 terrorist attacks, and if so, to what extent. Unemployment, which hit a four-year high of 4.9% in August, should rise to 5%, according to the consensus estimate.
"There is a fair amount of uncertainty about how much will actually show up from the post-attack disruptions," said Peter Hooper, chief U.S. economist at Deutsche Bank. Hooper expects payrolls to decline by 100,000, but said as many as 150,000 jobs could vanish. Payrolls declined by 165,000 in April. By comparision, the recession of 1990-1991 led to monthly declines of 200,000.
"We expect the unemployment rate to go up to 5%, but we don't know how the effects of the
attacks will affect that survey," said Jim Glassman, chief U.S. economist at J.P. Morgan Chase. "How many poll takers actually got out there and responded in a week that has high trauma?"
There's little question that the disaster left many workers jobless. The Labor Department said Thursday that new claims for unemployment benefits rose 71,000 in the week ended Sept. 29 to 528,000, their highest level in nine years. Several major air carriers, including
, the parent company of United Airlines, and
, made the most noise by setting plans to lay off thousands of workers shortly after the attacks. Large hotels and restaurants followed suit. Plenty of smaller companies that wouldn't make headlines likely let workers go as well.
The September employment data may be another matter. According to releases on its Web site, the Bureau of Labor Statistics said that layoffs related to the attacks, even those in the days immediately following Sept. 11, probably won't show up until October because of the way pay periods and unemployment are defined in its surveys.
Up, Up, Up
Source: Bureau of Labor Statistics
Few economists wanted to make forecasts for October, but Hooper speculated job losses could reach 300,000 or more for that month. Asha Bangalore, an economist with Northern Trust in Chicago, expects the job losses related to the attacks to be reported in October and in the fourth quarter. Bangalore conservatively forecast a drop of 65,000 in payrolls for September, but projected that unemployment will average 5.2% in the fourth quarter and 5.5% in first quarter of next year.
For his part, Glassman offered a word of caution about interpreting the September numbers. "When you hear layoff announcements, you don't know how a company is going to carry those out, whether by attrition, overseas layoffs, whether they're going to sell assets to other companies," he said. "Some companies are going to announce layoffs in order to convince shareholders that they're doing something. If the faucet is on in the tub, that doesn't tell you how high the water is. You don't know, because you don't know what the drain looks like."
Even if the fallout doesn't show up in this month's report, September probably won't show an improvement over August's report. Recent data suggest that the economy took a tumble prior to the attacks, just when economists were starting to talk more convincingly about a bottom.
"We think, as the
Bureau of Labor Statistics has told us, that payrolls and household surveys shouldn't be affected by the terrorist attacks, but we saw signs that the labor market was weakening even before the attacks," said Merrill Lynch economist Mary Dennis, citing jobless claims and consumer confidence figures, among other statistics.
Several economists said the most important component of Friday's report, and the most likely to be affected by the attacks, is aggregate hours, which measures total hours worked for the month. Dennis forecast aggregate hours tumbled 3% for the month, which would confirm negative GDP growth for the third quarter, she said.
But ultimately, the real concern is what happens to the consumer, which had been keeping the U.S. economy's head above water before showing signs of crumbling in recent weeks. After last month's surprisingly weak jobs report, confidence plunged.
In response to the slowing economy, the
Federal Reserve on Tuesday cut interest rates for the ninth time this year, dropping the fed funds target rate to 2.5%. Many economists expect that stimulus, together with government fiscal programs, will get the economy moving forward by the spring of next year.
"There is some risk that a big negative surprise
in the employment report would be another blow to the consumer sector and could well add to the downward momentum in the near term," Hooper said. "But I don't think we'll get a recession throughout 2002 because of all the policy stimulus in the pipeline."