MacroScope

Weather to make February jobs report a crap-shoot too

March 7, 2014

Blaming bad economic news on winter is getting as tiresome as tales of snarled traffic, flight cancellations and trips out with the snow shovel in freezing winds.

The February jobs report will be no exception to this U.S. season of climactic howling.

Most of the 97 forecasters who contribute to the Reuters Poll on non-farm payrolls have stuck to their forecasts, resisting the temptation to make last-minute changes based on even more disappointing data this week.

“Weather makes the report a crap-shoot,” said Robert Brusca, chief economist at Fact and Opinion Economics, who held to his original forecast.

A re-poll of top contributors in the last 24 hours found about a dozen people chopping their view, mostly based on a plunge in the employment gauge of the Institute for Supply Management’s services survey that was steeper than an Olympic ski jump slope.

The 8.9-point collapse in that employment gauge was the worst since November 2008, a couple of months after the collapse of investment bank Lehman Brothers that triggered the financial crisis.

A few economists took a hatchet to their payroll forecasts, notably Goldman Sachs, Deutsche Bank,  Wells Fargo, Lloyds Banking Group and G+Economics.

But the Reuters consensus forecast has barely budged. It’s now down a sliver to 149,000 from 150,000 before.

Cooper Howes, economist at Barclays Capital, said:

There is certainly an element of downside risk but we generally find that the explanatory power of that index (ISM jobs) is diminished when you take into account things like jobless claims which have continued to move lower. Especially given the anecdotal evidence of one-off factors such as the weather … we haven’t made a change to our call.

The thing is, the Federal Reserve has made it crystal clear it would take an economic disaster to take it off its course to end its quantitative easing stimulus by the end of this year.

And plenty of Fed officials now have also made it clear that it sees Q1 U.S. data as distorted by weather.

So no matter how bad the February jobs number is, it will probably mean nothing for the outlook for monetary policy.

QE will probably end by December, and interest rates are likely to rise sometime in the second half of next year.

But there will still plenty of jockeying in financial markets after the jobs data are released at 0830 EST / 1330 GMT today.

And there will be plenty more people blaming it all on the weather.

 

– with reporting by Deepti Govind and Rahul Karunakar

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