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Old Man Winter hijacking jobs?

By Mark Hamrick ·
Monday, March 3, 2014
Posted: 6 am ET

He's become that guest who overstays his welcome. He's stuck on the couch and is making everybody miserable, but no one seems to be able to do anything about it.

No, we're not talking about a family member. We're calling out Old Man Winter here and now. Ah, but this is an economics blog, you say. Correct! But the weather has become the story over these past several months.

Just when you hoped the U.S. economy was gaining traction, all kinds of statistics have been spinning their numerical wheels. Picture a highway in the South where they don't have equipment or road salt to deal with ice and snow. Hear those tires spinning? That's what the economy has been up against.

A flurry of data

Economists assessing the weather effect will have these reports to sift through this week:

  • The Commerce Department releases January personal income and spending figures (Monday).
  • The Institute for Supply Management reports on February manufacturing activity (Monday).
  • Car manufacturers release February sales figures (Monday).
  • The Institute for Supply Management reports on February services activity (Wednesday).
  • The Federal Reserve's Beige Book economic survey is due (Wednesday).
  • The Labor Department releases February employment figures (Friday).

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Another chilly jobs report?

Let's review: Employment reports for December and January both revealed slower-than-expected job creation. At the same time, the combination of modest hiring and declining numbers of people looking for work helped to pull the unemployment rate down to 6.6 percent in January.

It appears likely that the job market hasn't yet broken free of winter's grip.  As a result, the best guess is that employers added fewer than 200,000 jobs in February.

It could be baseball season before we get a jobs report that isn't distorted by weather. "I really think it is going to be some time before we get a really good read," says Scott Brown, chief economist for Raymond James & Associates.

Snow-bound growth

The government last week issued a downward revision for growth in the final three months of last year, in part because of slower consumer spending. The new fourth-quarter gross domestic product estimate is put at 2.4 percent, down from the previous reading of 3.2 percent.

Now that we've flipped the calendar over to March, growth appears to be running below 2 percent in the current quarter. But is anything more serious than the weather putting the brakes on the economy? Most people don't seem to think so.

"It looks like 1.5 percent, with harsh winter weather shaving about a half percent off the top," says Diane Swonk, Mesirow Financial's chief economist. As for other culprits contributing to the slowdown in growth, Swonk cites a reduction in business inventories and last year's expiration of tax breaks encouraging equipment purchases. That means there's less incentive for such purchases now.

The Fed's perspective

The Federal Reserve's regional economic roundup is due this week. When Chair Janet Yellen spoke to a Senate panel last week, she referred to "adverse weather conditions" as at least partly responsible for the recent series of soft economic reports, including jobs readings.

The Fed's Beige Book will be mined for further clues on the question of what's going on with the economy. The survey of the Fed's regional banks serves as a reference for the central bank's next policy-setting session in mid-March.

Experts look for the Fed to continue reducing its asset purchases, unless more ominous economic signs appear. "I think the Fed is still basing policy on where it expects the economy to be six to 12 months from now. That outlook really has not changed much with all the noise we have had from the weather," says Brown.

In other words, the Fed likely expects that the unwelcome guest, Old Man Winter, will head out the door before long. For the sake of economic momentum, as well as for those of us eager for better weather, it can't happen soon enough.

This week in business history

On March 6, 1926, Alan Greenspan was born. He served as chairman of the Federal Reserve from 1987 to 2006, first appointed by President Ronald Reagan. With his birthday, Greenspan turns 87.

Follow me on Twitter: @hamrickisms.



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