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Market Fears Huge September Job Losses Due to Katrina

Weeks of guessing the impact of Hurricane Katrina (search) on the U.S. labor market in September will end Friday with the release of the first major government report covering the aftermath of the devastating storm.

Economists surveyed by Reuters estimate 129,000 jobs were lost last month as Katrina-related layoffs offset gains in the rest of the country, but the range of forecasts from the 37 analysts was huge: from a loss of 25,000 to 400,000 jobs.

"Hurricane Katrina has turned forecasting September's payrolls into little more than a game of pin the tail on the donkey," said Capital Economics economist Paul Ashworth. The complications of the September jobs report are myriad, and analysts say even Friday's report from the Labor Department (search), due at 8:30 a.m. EDT, will offer only a rough guess of the storm's true impact.

Normally, the Bureau of Labor Statistics (search) contacts 400,000 work sites to determine how many jobs were added or lost each month, and, separately, 60,000 households to calculate the jobless rate. The two surveys are taken in the week or so around the 12th of the month.

But because Katrina made it impossible to contact many worksites and households for weeks after the hurricane slammed into the Gulf Coast on Aug. 29, government statisticians have revamped the job count.

If employers could not be reached, the BLS assumed all jobs at that work site were lost — a move analysts say will likely overestimate the number of layoffs.

On the other hand, if households could not be contacted, the statistics agency dropped them from the survey and gave more weight to those reached — a strategy that may mask what would otherwise have been a sharp rise in the jobless rate.

While analysts are hoping the BLS will reveal how much of September's job loss is a direct result of Katrina, the statistics agency said last month it would not be able to "precisely quantify" the impact of the storm.

One hint comes from unemployment insurance claims. The Labor Department has said some 279,000 new claims made in the four weeks since Katrina could be attributed to the storm.

The expected drop in payrolls in September would mark the first monthly job loss since May 2003, and erase much if not all of August's 169,000 gain.

Still, September's toll is just the start. Economists will immediately turn their attention to October for signs of secondary impacts of the storm. New Orleans said on Tuesday it would lay off 3,000 city workers in a delayed response to the devastation.

Economists are also worried that the spike in energy prices which followed hurricanes Katrina and Rita hurt both businesses and consumers — which could in turn depress hiring.

"The September number is not going to tell us a whole lot, because there are other effects that are coming that we won't even see," said Joel Naroff, president of Naroff Economic Advisors. "I think the labor market was doing okay, but a lot has changed."

Aside from the headline tally of layoffs, Friday's report will also measure the unemployment rate, length of the work week, and average hourly earnings.

Analysts believe the unemployment rate (search) will rise to 5.1 percent from 4.9 percent in August because of Katrina, but said most of the other measures will escape the storm's impact.

"Effects on the work week or on average hourly earnings will depend on whether the missing workers worked longer or shorter work weeks and received higher or lower average wages than the norm," explained Goldman Sachs economist Ed McKelvey.

The economists surveyed by Reuters said average hourly earnings would rise 0.2 percent in September after a 0.1 percent rise in August, while the workweek was expected to hold steady at 33.7 hours.