Weather and Unemployment

Written by: Rose Renick

Did the weather affect our unemployment rate? Ben Leubsdorf says in an article titled “Economists React: For Economy ‘Winter From Hell’” in the Wall Street Journal, “U.S. employers added 113,000 jobs in January, and the unemployment rate fell to 6.6%. It was the second straight month of weaker-than-expected job growth, with December’s number revised up a bit to 75,000.”

This harsh weather has also affected states and jobs by ice paralyzing Atlanta, schools shutting down, altering travel and many more things. Even the number of jobs in the ISM service survey report states that this severe weather has been a huge factor. The weather is affecting everyone. Closing schools is putting teachers out of a job momentarily and receiving smaller paychecks because of fewer hours worked. So far, four of six major economic reports say that the harsh weather has messed up some of output and sales.

"We already saw it in auto sales," said Diane Swonk, chief economist at Mesirow Financial. "It literally freezes the economic activity, and you don't get the activity to resume until we get a thaw." Disruption to air travel alone has been massive. According to FlightAware, 39,000 flights were canceled in the last month, the most since 21,000 in October 2012. Then Hurricane Sandy dragged through the East Coast. A few weeks ago, there were already 3,300 flights cancelled by mid-morning, with many of them in New York, New Jersey, Chicago and Boston. Eventually we will be able to recoup but not in the same way and not in the places that need the most help.

David Woo, head of global rates and currency research at Bank of America Merrill Lynch, says “weather in December is more correlated than other winter months to weaker jobs growth, which may bode better for the January employment report. This year's winter weather is the worst since 1988.” He expects the weather to continue to be reflected in economic reports, and markets, but said there should be a strong rebound in economic activity in the spring.

Correlation between deviation from 3m MA and average monthly temperature
                                  November December January February
NFP(change)                       21%       72%         42%       29%
Retail Sales (m/m)                39%       16%         27%       41%
Housing Starts (m/m)           -17%       62%         23%       41%
Existing Home Sales (m/m)    35%      28%          43%     -11%

Note: SOURCE: BOFA MERRILL LYNCH GLOBAL RESEARCH
"Our spending on utilities would be stronger, and that would be adding to consumer spending," "That's one thing that argues against the slowdown. … But I think net-net, consumer spending on goods ... in shops and malls, the slowdown there is going to trump whatever extra spending consumers do to heat their homes this winter. We haven't seen it for a while, but weather can provide a pretty significant headwind for
GDP growth."

Economists say that March will, hopefully be, the month to save the economy. March does not belong to winter or spring. March is the month that could possibly be our clean up month of the terrible winter. Economists want to prove that "This was the year of no more excuses, no more fiscal drag, no more fiscal headwind," DiClemente said. "We were finally going to see the economy on its own, and along comes this absolutely bizarre winter. I'm hoping we can revise [GDP] up again."

Works Cited
"Here’s how bad winter weather is hurting the economy." CNBC.com. N.p., n.d. Web.
10 Feb. 2014. <http://www.cnbc.com/id/101393284>.

"ISM - Institute for Supply Management."ISM - Institute for Supply Management. N.p.,
n.d. Web. 10 Feb. 2014. <http://www.ism.ws/index.cfm>.

"Off-the-charts weather may be net bad for economy." CNBC.com. N.p., n.d. Web. 9
Feb. 2014. <http://www.cnbc.com/id/101392215>.

"The Wall Street Journal." Real Time Economics RSS. N.p., n.d. Web. 10 Feb. 2014.
<http://blogs.wsj.com/economics/2014/02/07/economists-react-for-economy-winterfrom-
hell/>.