Here Is The Reason For Today's Big Jobs Miss

While on the surface, today's jobs report was a disappointment due to the September payrolls miss with only 134K jobs added in a month when consensus expected 185K new payrolls, a cursory look between the lines reveals the reason for this miss, and it had to do with the one non-recurring factor we highlighted previously: the impact of Hurricane Florence, which affected one job category in particular.

As the BLS noted, employment in leisure and hospitality declined by -17,000 in September, whereas prior to this month, employment in the industry had been on a modest upward trend. And as the BLS explicitly states, "some of the weakness in this industry in September may reflect the impact of Hurricane Florence." This is shown visually below:

Suggesting that it was indeed the weather that adversely affected September payrolls, the BLS also noted that 299,000 people were not at work due to bad weather, which is over 210K higher than the 85K average for September.  Another 1,489K workers who usually work full-time could only work part-time due to the weather last month.

And confirming this, Ian Shepherdson from Pantheon Macro said that "the headline payroll number is a weather story. The 121K private payroll gain undershot the 230K ADP reading, as it always does in months affected by severe weather. ADP counts names on payroll lists, regardless of whether people were paid, but the official data only include people who were paid something - anything - in the survey period."

This means that next month, the September job report will be revised sharply higher, likely coming in line with initial expectations.

Also offsetting the headline September weakness was the revision to the August jobs report, which was nudged higher from 201K to 270K, while July was revised from 147K to 165K. With these revisions, employment gains in July and August combined were 87,000 more than previously reported.

Finally, confirming that wage gains remain on a solid trend, we found that both monthly and annual hourly earnings rose by 0.3% and 2.8%, respectively, in line with both expectations and the recent upward trend in higher wages.

To summarize: stripping away the weather distortions, the jobs report was not only not "weak", but one can make a case that it was somewhat strong.