- The Washington Times - Friday, November 4, 2005

Employment was flat for a second straight month in the wake of the Gulf Coast hurricanes that left businesses both in and outside the region hesitant to hire as long as consumers feel burdened by high energy bills.

The Labor Department’s jobs report yesterday showed a sharp deceleration in the economy after Hurricanes Katrina and Rita threw more than a half million people out of work, devastated critical Gulf Coast oil and gas facilities and sent energy prices soaring.

Unemployment ticked up, and then inched down again last month to 5 percent. With only half of the Gulf’s drilling facilities working as of yesterday, the threat of high energy prices continues to loom over the economy and weigh down consumer sentiment, which plunged after the storms.

“The U.S. economy continues to roll along, but the one-two punch of hurricanes and energy costs has definitely made it wobble,” said Bill Cheney, chief economist with John Hancock Financial Services Inc. The disasters “interrupted the solid trend of job growth” that had begun earlier this year.

Hiring by department stores, restaurants, auto dealerships and other retailers fell by 55,000 in the two months after Katrina hit Aug. 29, while jobs at leisure and hospitality establishments dropped by 81,000.

Those job losses were partially offset by an increase of 45,000 construction jobs as rebuilding got under way and a modest revival of manufacturing jobs last month, with a 12,000 job gain that reversed job losses in earlier months.

Overall, job growth in the usually robust services sector was anemic at 7,000 last month, after contributing to gains of nearly 200,000 a month earlier this year.

“Job losses in retail, hotels and restaurants may simply reflect the tribulations of the tourist industry in the Gulf Coast region, but it may also be a sign of consumers finally reacting to the impact of energy costs on their discretionary spending power,” Mr. Cheney said.

Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, said hiring was below par nationwide, as businesses pulled back in what appeared to be fallout from the sharp consumer reaction to high gas prices.

The best news in the report was a hefty wage gain of 0.5 percent for average workers, which Mr. Cheney said likely was a temporary boost from reconstruction efforts. The increase was not enough to keep up with inflation, which soared during the month.

Millions of workers have dropped out of the work force in the past two months, perhaps because they were dislocated by the storms and are uncertain about the job outlook, Mr. Cheney noted.

“I still believe that there are millions of people waiting for job opportunities to show up before they start looking seriously,” he said. “They’re not counted in the unemployment rate.”

Christian E. Weller, analyst with the Center for American Progress, said wages, adjusted for inflation, are lower than at the beginning of the economic recovery in November 2001.

Many workers have gone deeply into debt to maintain their standard of living. “Middle-class families struggle to bridge the growing gap between stagnant incomes and rising prices,” he said.

Richard Berner, chief economist with Morgan Stanley, said he expects recovery from the storms to be gradual, stretching out for several years — not producing the immediate boom that some economists predicted.

The recovery of energy facilities has been slow and painful. Replacing the hundreds of rigs and platforms as well as public infrastructure destroyed by the storms could take years and cost from $50 billion to $90 billion, he said.

As few as half of the homes rendered uninhabitable in New Orleans may be rebuilt, because many former residents may choose not to return, while some areas may be declared unsuitable for building because of environmental contamination or vulnerability to further flooding, he said.

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