Hurricane Beryl Likely Had Minor Impact on US Labor Market in July, According to Reuters

By Lucia Mutikani

WASHINGTON – Unemployment in Texas experienced a slight increase in July, indicating that Hurricane Beryl had a limited effect on the state’s labor market. This aligns with a notable slowdown in job growth observed across the U.S. last month.

According to the Labor Department’s state employment report released on Friday, Texas’ unemployment rate rose to 4.1% in July, up from 4.0% in June. The state, which faced significant weather-related challenges from Beryl in early July, saw a reduction of 14,500 jobs in nonfarm payrolls, with the leisure and hospitality sector reporting a minor decrease and a significant drop in professional and business services.

There had been discussions regarding the extent of Beryl’s impact on the slight rise in nonfarm payrolls and the national jobless rate, which climbed to 4.3%, nearing a three-year high. “This is not material enough to account for anything more than a small part of the slowing in payroll gains in the month,” stated Conrad DeQuadros, a senior economic advisor at Brean Capital.

The decline in Texas’ payrolls contrasts with the average monthly increase of roughly 20,000 jobs that had been seen over the past year, leading some economists to expect a rebound in payroll figures and a decrease in the unemployment rate for August. “This suggests some upside for August in the state, but likely not a windfall in hiring,” remarked Ben Ayers, a senior economist at Nationwide.

In total, 13 states reported increased unemployment rates last month, with the most significant rises observed in Massachusetts, Michigan, Minnesota, and South Carolina. Both Michigan and South Carolina are home to numerous motor vehicle assembly plants, which typically undergo temporary shutdowns in July for model retooling.

Meanwhile, jobless rates remained largely unchanged in 36 states and the District of Columbia. Payrolls increased in states like New York and Oregon, but Missouri saw a reduction of 22,400 jobs, primarily within the manufacturing sector, likely reflecting the temporary auto plant closures.

Overall, payrolls were relatively stable across 47 states and the District of Columbia. “This aligns with a broader pattern of slower job gains, but there is little sign of a collapse within state labor markets,” noted Ayers.

The slowdown in labor market momentum can be attributed to the cumulative 525 basis points of interest rate hikes implemented by the Federal Reserve in 2022 and 2023, which have tempered hiring. However, layoffs remain at historically low levels.

The U.S. central bank has kept its benchmark overnight interest rate within the 5.25%-5.50% range for over a year and is anticipated to commence a cycle of easing next month.