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The Bureau of Labor Statistics (BLS) is set to release its October US jobs data report on Friday and economists are expecting a sharp rebound as the effects of hurricanes Harvey and Irma have been reversed.

Employment growth faced its first decline in seven years when hurricanes Harvey and Irma tore down parts of Texas, Florida and other parts of the South in late August and early September, which left payrolls to fall by 33,000 in September, even as unemployment rate hit a 16-year low of 4.2 percent.

The Labor Department saw that only 8 percent of US employees were affected by the storms at that time, but still the impact on employment growth in September was more severe than economists expected.

Sharp Rebound on Employment Growth

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Non-farm payrolls data for last month is expected to increase within the range of 300,000 to 340,000, its highest monthly forecast in over seven years and its largest gain since October 2015.

If this happens, it would leave average gains for the past two months to 139,000, less than the 172,000 monthly average in last twelve months to August.

In addition, if the estimates turned out right, economist Bricklin Dwyer said that it will be supporting the Federal Reserve’s view of solid economic activity growth, meaning that they are on track for a rate hike in December.  

Economists also expect unemployment rate to remain unchanged for the most part as they believed that the US economy is already close to full employment and further losses is unlikely to happen. Unemployment rate has not been lower than 4 percent since the late 1960s.

Economist Pooja Sriram said that they expect to see a significant rebound in the leisure and hospitality sector in October after both areas took the worst hit in September, leaving the sectors to lose a record of 111,000 jobs.

They expect private sector services to add 275,000 jobs and goods producing at about 45,000.  

Higher Wages to Support Pickup in Inflation

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Average hourly wages is estimated to rise by 0.2 percent or 2.7 percent year-over-year. This is also the area where economists are hoping to see gains since it could provide hints of a pickup in inflation.

Higher wages mean good news for the Fed, which has long been expecting that a tight labor market will eventually lift inflation up, although it is expected that they will be hiking interest rates anyway in December.            

For the time being, moderate wage growth would reinforce views that inflation will continue to fall short from its 2 percent target.       

Distorted US Jobs Data

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Analysts however, warned that the figures for October and September might be indefinite due to the impact caused by hurricanes Harvey and Irma, as well as wildfires in northern California, and that effect may take several more months to appear in the data.

Weather-sensitive sectors, such as leisure and hospitality, as well as construction and mining could be particularly distorted both in the positive and the negative aspect.   

Dwyer on the other hand, said that while the numbers were distorted by the storms, the overall picture is of an economy that is recovering in the second half of the year.

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