The November jobs report (released on December 7th) will be the first one to include household and payroll survey data gathered after Hurricane Sandy. It is likely that November’s unemployment rate will jump from its current level of 7.9% to 8.0% or 8.1% due to Hurricane Sandy. Sandy had a devastating impact on the tri-state area of New York, New Jersey and Connecticut where about one eighth of U.S. output is produced. A leading indicator of the unemployment rate is the weekly report of new unemployment insurance claims. A spike in new jobless claims means that a large number of workers were displaced from their jobs. As I explain below, Hurricane Sandy displaced 145,000 workers as measured by new jobless claims in the first full week after the storm hit.
During the week of November 10th (the most recent week for which detailed state data are available) over 63,000 jobless workers in New York filed for first-time unemployment insurance benefits, compared to about 21,400 new claims one year ago. Similarly, over 46,000 jobless workers in New Jersey filed for first-time unemployment insurance benefits during the week of November 10th, compared to just over 12,000 new claims one year ago. The rate at which workers lost their jobs nearly quadrupled in New Jersey and nearly tripled in New York compared to November 2011.
The following charts compare the year-to-year change in new unemployment insurance claims the week of November 10th, the first report to reflect Hurricane Sandy effects, and four-week moving averages of year-to-year changes in new claims over the previous 20 weeks. For example, the annual percentage change in new claims for November 3rd is based on a comparison of data for the week of November 3rd and the three previous weeks to the corresponding weeks in 2011. The charts indicate that, for New York and New Jersey, new jobless claims were consistently below 2011 levels until Hurricane Sandy hit.
Hurricane Sandy caused about 80,000 people to lose their jobs and file for first-time unemployment insurance benefits in one week in New York and New Jersey alone. Although the effect of Hurricane Sandy on the rest of the country is smaller, it isn’t negligible. The following chart compares the year-to-year change in new jobless claims the week of November 10th to four-week moving averages of year-to-year changes in new claims for the rest of the United States (excluding New York and New Jersey). The chart indicates that new jobless claims were up about 12% in the first full week after Hurricane Sandy, or an increase of 65,000 claims.
Hurricane Sandy’s displacement of 145,000 workers in one week is enough to increase the U.S. unemployment rate by 0.1 percentage point, from 7.9% to 8.0%. The November unemployment rate is based on worker’s labor force status for the week ending November 17th. That means that one more week of new jobless claims data will factor into November’s unemployment rate. The preliminary new claims data for the week of November 17th shows a smaller increase in displaced workers, probably half as many as the 145,000 displaced in the prior week. We will know more on November 29th when more detailed and complete data for the week of November 17th are released. At this point it is most likely that the November unemployment rate will jump to 8.0% or 8.1%.