Unemployment Rises After Hurricane Katrina

Hurricane Katrina bruised the economy in September, causing the first nationwide job loss in two years, but the damage wasn’t as awful as many had feared.

Payrolls fell by 35,000, with jobs in retailing, lodging, bars, restaurants and leisure pursuits such as gambling all taking a hit.

The unemployment rate climbed to 5.1%, from a four-year low of 4.9% in August.

The snapshot, released by the Labor Department, provided the most extensive picture of the jobs climate in the aftermath of the deadly and destructive Katrina, the costliest natural disaster in U.S. history.

The impact of the next hurricane, Rita, was “negligible” on the latest figures, the department said.

To be sure, the loss of lives and livelihoods in the ravaged regions is devastating and will be long felt. But yesterday’s report suggested overall economic activity and national employment - which each showed stamina before the storms - will withstand the trauma and not thrust the economy into recession.

“The job market was not as severely impacted by the hurricanes as initially feared. Outside the affected region, it would appear that job growth remained fairly solid,” which helped temper overall job losses, said Stuart Hoffman, chief economist at PNC Financial Services.

Before the report was released, economists were forecasting a loss of at least 150,000 jobs. The rise in the unemployment rate to 5.1%, the highest since May, matched economists’ expectations.

“This indicates that the job market is holding together pretty well,” said Mark Zandi, chief economist at Economy.com.

Excluding the disaster areas, employment would have increased “in line” with the more than 190,000 jobs generated each month over the past year, said Philip Rones, deputy commissioner of the Bureau of Labor Statistics. Job losses from Katrina were around 230,000 for the month, economists estimated.

Katrina ripped through parts of Louisiana, Mississippi and Alabama in late August, destroying businesses, homes and lives. The blow was compounded by Rita, which struck on Sept. 24. Both hurricanes hobbled important oil and gas facilities along the Gulf Coast, pushing energy prices even higher.

Federal Reserve Chairman Alan Greenspan says the Fed will be closely monitoring economic activity to assess the impact of the back-to-back hurricanes.

Fallout from the Katrina alone - viewed as the more catastrophic of the two hurricanes - doesn’t pose a “persistent threat” to the nation’s economic health, Greenspan and his colleagues concluded at their last meeting on Sept. 20.

More worried about inflation worsening because of the hurricane, the Fed at that meeting boosted interest rates for an 11th time since last summer. Economists predicted Fed policy-makers will raise rates again at their next meeting, Nov. 1.

Meanwhile, the unemployment report helped stocks eke out tiny gains after three straight days of losses.

But while the Dow Jones industrial average rose as much as 60 shortly after the opening bell, stocks gave up most of their gains during the course of the day amid some skepticism about the report.

The Dow climbed 5.21 to 10,292.31, while the Nasdaq edged higher by 6.27 to 2,090.35.

By Jeannine Aversa
The Associated Press