Today, the Bureau of Labor Statistics released its estimates for the employment situation in September. The data used for this report cover the period two weeks after Hurricane Katrina roiled the Gulf Coast, and therefore, should be considered in the context of those extenuating circumstances. Unemployment rose by 0.2 percentage points to 5.1 percent and employment fell by 35,000 jobs, the largest drop since April 2003. In the private sector, employment declined by 66,000 jobs in September – its largest decline since March 2003. The job losses were especially pronounced in retail trade, particularly food and clothing stores, restaurants, and transportation equipment manufacturers, with declines of 88,000, 53,700, and 22,000 jobs, respectively. State-by-state estimates will not be available until October 21, but it is safe to assume that many, if not most job losses were concentrated in the Gulf States hit hardest by Hurricane Katrina.
As today’s figures show, strong labor market protections are imperative to help workers cope with the fall-out from Katrina. While Katrina has certainly had a negative effect on the economy and the labor market, the employment situation was already weak prior to September of this year. Average employment growth had been an abysmally low 0.02 percent per month – about one ninth the average employment growth rate from 1945 to 2001. Since the current business cycle started in March 2001, only seven months showed employment growth that was higher than the average from 1946 to 2001. Due to weak employment growth, it took the labor market 45 months to regain all jobs lost in the recession and the initial stages of the economic recovery. It took even longer – 49 months – for all private sector jobs to reappear.
The employment situation in the areas most affected by Hurricane Katrina was already weaker than in the nation at large before the storm hit. According to the BLS, the average unemployment rate in the areas most affected by the hurricane was 6.0 percent in August, compared to 4.9 percent nationwide.
Amid well-below-average employment growth, it is no surprise that employers felt no pressures to raise wages. In fact, by August 2005, inflation-adjusted weekly earnings were below those of more than four years ago in March 2001, when the current business cycle began. For all of 2005, inflation-adjusted weekly wages declined by 0.8 percent and hourly wages fell by 0.9 percent.
Compared to the nation as a whole, incomes were already substantially lower in the affected Gulf States. In 2004, the last year for which data are available, the typical family income in Mississippi’s impacted areas was $34,925, in New Orleans $31,369, and in Alabama’s affected regions $19,932, compared to $44,684 nationwide. It is also important to keep in mind that these incomes reflect the fact that inflation-adjusted family incomes had not risen for five years in a row.
The labor market fall-out from Hurricane Katrina has thus constituted yet another blow to middle-class families in the Gulf States. For the sake of those impacted by the hurricane and by this prolonged labor slump, it is crucial that labor market protections that will allow them to find good paying jobs remain in place, as a valuable first step toward normalcy and independence. These protections would ensure that people in the Gulf States not only get new jobs, but that those jobs pay decent wages.
The labor market fall-out from Hurricane Katrina constituted a second blow to middle-class families in the affected states. It is crucial to maintain labor market policies that will allow those impacted by the hurricane and the prolonged labor market slump to prosper. This requires not only new jobs, which are likely to be created by the rebuilding efforts, but also that those jobs pay decent wages. The Bush administration’s policy, which has been to waive prevailing wage protections, affirmative action provisions, and minority contractor rules, is exactly the wrong approach. The Associated Press reported this week that only 1.5 percent of the $1.6 billion awarded by the Federal Emergency Management Agency (FEMA) has gone to minority businesses, instead of the 5 percent normally required. Families in the regions hit by Hurricane Katrina need a second chance. Waiving rules that ensure government contract jobs go to those in the Gulf States who need them, and that also ensure those jobs will pay decent wages, are bound to hurt those most in need.
Christian E. Weller is senior economist at the Center for American Progress.