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WASHINGTON-When employment data came out for September, many observers were caught off-guard when losses were only around 35,000 following the two major hurricanes rather than several times that. “I think there was a surprise there,” NAFCU Senior Economist Jeff Taylor remarked. Though unemployment rose from 4.9% to 5.1% last month, this month’s data will likely be more telling as reporting from the area becomes more regular and accurate through the clean up. He explained that some people in the Gulf Coast region could have been counted as employed on paper but actually had no job to go back to. What it does indicate, according to Taylor, is “Aside from the area, it looks like manufacturing is holding up really well.” While he admittedly expects greater weakness next month when newer figures come out, Taylor noted that natural disasters are “stimulative in an ironic way as well,” as new jobs are created in the clean up efforts. It also demonstrates that the economy on the national level still has momentum. Taylor has revised his forecast to 3.5% gross domestic product growth in the third quarter and down as far as 3.0% in the last quarter before rebounding to 4.0% for the start of 2006 and leveling off. Treasury Secretary John Snow grabbed hold of this as well. After the jobs numbers came out, he stated, “We would not be seeing this kind of performance in the face of such a great challenge unless the fundamentals of our economy were exceptionally strong.” The other impact of these figures is that the Federal Open Market Committee is not likely to hold off on raising the target interest rate 25 basis points at its next meeting Nov. 1 to 4.0% Taylor said. And, as these rates rise, so will the rates of all the credit union members who have taken out adjustable rate mortgages. Though the back-to-back massive storms may have a stimulative effect on employment, energy costs are expected to rise a good deal. “That’s not going down; that’s going up,” Taylor said. The one-two blow of rising ARMs and the storms could serve to dampen consumer spending on luxury items and drag consumer confidence down. He added that he had heard from individual credit unions that they are beginning to see an uptick in delinquencies on credit cards and home equity loans, though he did not have any data on that since Hurricanes Rita and Katrina hit. “Delinquencies are up a little bit but asset quality is really good at credit unions,” Taylor said. -

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