- The Washington Times - Friday, October 7, 2005

The unemployment rate edged up to 5.1 percent last month as the economy lost jobs for the first time in two years in the wake of Hurricane Katrina, the Labor Department reported yesterday.

The number of people reporting they are out of work jumped by 270,000, reflecting deep job losses in retail, hospitality and manufacturing businesses.

The finding closely tracks a separate report on first-time claims for jobless benefits, which as of last week found 363,000 people displaced from their jobs by Hurricanes Katrina and Rita, a Gulf Coast storm that struck later in the month after the department completed yesterday’s unemployment survey.

But the blow to the economy from Katrina was less than expected for the many analysts on Wall Street who give greater weight to a measure of payroll changes by businesses in yesterday’s report.

That measure recorded a smaller net decline of only 35,000 jobs in September, following two robust months of job gains over 200,000.

The business survey comforted the financial markets, as it suggested that outside the hard-hit Gulf region, businesses continued to create jobs and added close to 200,000 in spite of the hurricanes, offsetting many of the storm-related losses.

“It suggests that the impact of Katrina may not have been as awful as we feared,” said Bill Cheney, chief economist at John Hancock Financial Services.

The payroll figure may have been flawed, economists said, because the department was not able to reach businesses and individuals in New Orleans, which was evacuated and flooded at the time of the survey, so it had to estimate the job losses there.

“The picture is still murky and I think we’ll have to wait for the employment report next month to see what kinds of reverberations and revisions occur,” Mr. Cheney said.

The biggest danger to the economy, at any rate, is not so much from the job losses as from the huge spike in energy prices that resulted from the shutdown of oil and gas-production facilities in the Gulf region, he said.

“My prime concern for the rest of the year is the impact of higher energy prices on consumer spending,” he said. “For large parts of the country, the cost of heating homes this winter is expected to double and gas prices are already sapping cash from consumers’ wallets.”

“Consumers have been pretty resilient, but at some point, maybe Christmas, truly discretionary spending looks like it will get squeezed,” he said. “For many lower-income consumers, even essential spending will be at risk this winter because of higher energy prices.”

The best hope, he said, is that “the huge burst of federal government spending for the Gulf Coast reconstruction effort will filter through the economy and be enough to offset dampened consumer confidence and spending.”

Two separate surveys of small businesses, which create the most jobs in the United States, also showed mixed results last month. A National Federation of Independent Business survey found hiring held steady at a high level, while a survey by SurePayroll, a payroll services firm, found a decline in hiring.

Christopher Piros of Prudential’s Strategic Investment Research Group said, “We have to wait and see” if the more optimistic surveys prove accurate.

“Chances are … many [Gulf Coast] firms did not respond to the [department’s] survey. People may have been treated as employed even though they were not in the area,” he said.

Philip Rones, deputy commissioner of the Bureau of Labor Statistics, which produced yesterday’s report, conceded that “we cannot quantify precisely the overall effects of the disaster and its aftermath. … We hope to get additional insight as more data become available.”

Business owners from New Orleans report many difficulties restarting and restaffing. Restaurateur Ralph Brennan testified to Congress this week that he’s had to start from scratch rebuilding his eateries.

“Two of my three restaurants in New Orleans are now open, but with limited menus, partial staff and boiled water restrictions. One of my biggest challenges is finding employees to staff my restaurants. Many of my staff have not come back to the city or have found employment elsewhere,” he said.

One of the biggest problems, Mr. Brennan said, is “finding adequate housing for restaurant employees since 70 percent of the houses in New Orleans sustained water damage.”

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