Transcripts

How Will The Nation's Employment Picture Change Post Hurricane Katrina

PAUL KANGAS: The monthly employment report is a look back at where the economy has been. And the report for August, released today, looks good. But with hundreds of thousands of people left homeless and jobless in the wake of hurricane Katrina, a big question remains over the future employment picture. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The economy added 169,000 new jobs in August and the unemployment rate fell to a four year low. Manufacturing lost jobs but other sectors gained, led by leisure and hospitality and construction. In addition, the report sharply revised upward the job creation number for July and the unemployment rate of 4.9 percent is lower than the Federal Reserve`s expected 5 percent for the end of the year. It is a strong combination.

DEAN MAKI, CHIEF US ECONOMIST, BARCLAYS CAPITAL: I think what this report tells the Fed is that growth both in GDP and in the labor market were quite solid heading into the hurricane. That`s all we can learn from today`s report but that signal is quite positive.

GURVEY: But the report says nothing about the elephant in the economic room, the future impact of hurricane Katrina on jobs and the overall economy. Hundreds of thousands of people are out of work in the hurricane`s aftermath. Many face long term unemployment and may have to move to find work. But new jobs for cleanup and reconstruction will be created. Even gathering statistics for next month`s employment report will be difficult in the effected area where government offices have been destroyed.

ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS: At this time we are being hit with this major uncertainly and I think the only clear thing you say about the hurricane effects is that it creates a major uncertainly. Even once we move ahead by a month and we could do this interview and look back, we would still say, oh, these numbers we`re looking at now reflect major uncertainties about what`s going on in the economy so policy is going to have to deal with this situation and so the most obvious thing is that policy is going to become much more careful and much less aggressive.

GURVEY: The hurricane`s destruction cuts growth in the short term, but the reconstruction will add to it later and the short term effect on prices increases inflation. The Federal Reserve will have to sort through out all the conflicting data when it meets next to review interest rates on September 20. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.