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Sandy, fiscal cliff fears likely slowed hiring in Nov., though job market may be strengthening


FILE - In this Wednesday, Nov. 14, 2012 file photo, the interior of the Food Network Kitchen is seen in the reflection of a mirror at the Fort Lauderdale-Hollywood International Airport, in Fort Lauderdale, Fla. U.S. service companies grew at a slightly faster pace in November because sales and new orders rose, a good sign for the economy. The Institute for Supply Management says its index of non-manufacturing activity rose to 54.7 from 54.2 in October. Any reading above 50 indicates expansion. November's figure is above the 12-month average of 54.4 (AP Photo/J Pat Carter, File)

WASHINGTON - Superstorm Sandy is widely thought to have slowed U.S. job growth last month. The only question is how much an answer that's expected to emerge Friday in the government's jobs report for November.

Yet once the storm's impact is cleared away, the report may reveal that the job market is strengthening.

Many economists predict employers added fewer than 100,000 jobs last month, and some think it was fewer than 50,000. That would be far below the 171,000 created in October and normally a sign of a weak market. The unemployment rate is expected to remain 7.9 per cent.

Analysts caution, though, that Sandy likely reduced the November job gains significantly. And some employers might have delayed hiring because of concerns that the economy will fall off the "fiscal cliff" next year. That's the name for tax increases and spending cuts that will take effect in January if Congress and the White House fail to reach a budget deal by then.

If not for those factors, some analysts estimate the job gains in November might have been as high as 200,000. That would represent the best month of hiring since February.

Sandy forced restaurants, retailers and other businesses to close in late October and early November in 24 states, particularly in the Northeast. Many people couldn't get to work and weren't paid. The government counts those cases as job losses, even if they are temporary. Those subtractions would reduce net hiring.

One encouraging sign is that the storm's effect is fading. Weekly applications for unemployment benefits have tumbled in the past three weeks after spiking in early November to an 18-month high of 451,000 because of Sandy.

Last week, applications fell to a seasonally adjusted 370,000. That's roughly the same level as before the storm and is consistent with moderate hiring.

Payroll provider ADP said Wednesday that businesses added 118,000 jobs in November, down from 157,000 in the previous month. Mark Zandi, chief economist at Moody's Analytics, which helps compile data for ADP, estimated that the storm lowered the job gains by about 86,000.

The payroll losses from the storm could be higher in the government's total. That's because ADP counts people as employed if they remain on a payroll even if they're not paid. By contrast, the government counts people as employed only if they are paid.

The fiscal cliff's impact on hiring may be harder to quantify. Even if companies aren't cutting jobs because of the cliff, the uncertainty surrounding the outcome is likely delaying some hiring, economists say.

Measures of hiring fell in two surveys released this week by the Institute for Supply Management, a private trade group of purchasing managers. Some companies in the service sector told the ISM that economic uncertainty was delaying hiring.

The storm also held back consumer spending and income, which drive economic growth. Consumers spending fell 0.2 per cent in October, the weakest showing since May. Incomes were flat, after rising 0.4 per cent in September.

Work interruptions caused by Sandy reduced wages and salaries in October by about $18 billion at an annual rate, the government said.

The U.S. grew at a solid 2.7 per cent annual rate in the July-September quarter. But many economists say growth is slowing to a 1.5 per cent rate in the October-December quarter, largely because of the storm and threat of the fiscal cliff. That's not enough growth to lower the unemployment rate.

Still, many say economic growth could accelerate next year if the fiscal cliff is avoided. The economy is also expected to get a boost from efforts to rebuild in the Northeast after the storm.


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