Payrolls Unscathed by Ho Ho Strike — Superstorm Sandy Another Matter

Photograph by Emile Wamsteker/Bloomberg

People fill gas cans at a Sunoco Inc. station in Bloomfield, New Jersey, after superstorm Sandy.

The strike that triggered the bankruptcy of Hostess Brands Inc., the baker of Twinkies and Wonder bread, is not showing up in government data, which means it will probably not depress U.S. November payrolls to be reported next week.

There were 1,300 workers on strike as of Nov. 12, unchanged from the same day last month, according to Labor Department data issued today in Washington. That means the government hasn’t take into account the roughly 5,000 members of the Bakery,Confectionery, Tobacco and Grain Millers International Union who walked off their jobs at Irving, Texas-based Hostess on Nov. 9 after a bankruptcy judge imposed contract concessions that 92 percent of the union’s workers rejected.

The Labor Department subtracts striking employees from the monthly payroll readings and adds them back once the disputes are resolved and they return to work. Today’s report indicates that won’t be the case this time. It remains to be seen if the December payroll count will be affected as Hostess won court approval to shut down and start selling assets.

The 82-year-old company, which also made Hostess CupCakes, Ding Dongs, Ho Hos and Drake’s Devil Dogs, began firing 15,000 workers on Nov. 22, temporarily keeping about 3,200 of its remaining employees to clean plants and mothball equipment.

The Labor Department’s payroll totals reflect employees who receive wages for the pay period that includes the 12th of the month. That means those let go in subsequent weeks will not show up until the December totals are issued in January. The November reading comes out on Dec. 7.

The damage to the labor market caused by superstorm Sandy will dwarf anything wrought by Hostess. The job losses caused by the largest Atlantic storm to hit the U.S. may cut November payrolls by about 150,000 workers, according to estimates by economists at Deutsche Bank Securities Inc. and UBS Securities LLC based on comparisons with the damage done by Hurricane Katrina in 2005.

Joseph LaVorgna, the New York-based chief U.S. economist at Deutsche Bank Securities, currently forecasts that companies hired 35,000 additional workers in November, the smallest gain in private payrolls since the post-recession job slump ended in February 2010. Employment excluding government agencies grew by 184,000 workers in October, the most in eight months.

There will be additional storm-related weakness in December, LaVorgna said in a Nov. 26 research report.  “Fortunately, history also suggests that job growth should meaningfully recover within a couple of months,” LaVorgna wrote.

 

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