This has economists warning about a “spring swoon,” which is something that the U.S. economy has experienced in recent years.
“One long-running theory is that the severity of the recession in the final quarter of 2008 and first quarter of 2009 has distorted the seasonal adjustments made to the major economic indicators,” writes Paul Ashworth of Capital Economics. “As a result, the adjustments now ‘expect’ the data to be worse than they actually are in those quarters and consequently create an upward distortion.”
But Ashworth argues that the actual data doesn’t support this. Here are a few of their points:
- Adjustment methods put “greater weight on the observed seasonal pattern in the most recent year or two and a lot less weight on what happened four or five years ago.”
- “[T]he timing of these annual slowdowns doesn’t line up exactly.”
- “There were few signs of a spring slowdown in private payroll employment in 2010, which is the year that should have been most affected.”
- “[T]he evidence of a slowdown in early 2011 is also mixed.”
“We are not convinced this weakness has anything to do with seasonal adjustment problems,” they write. “The most likely explanations for the weakness of the March data are the unseasonably cold weather and/or a delayed response to the expiry of the payroll tax cut a few months ago.”
For the most part, the recent spring slowdowns are largely due to non-recurring shocks. Here’s Ashworth:
What explains the mid-year slowdowns
Along with some bouts of unusual weather, the more likely explanation is that growth in activity and employment has been hit by a succession of one-off shocks over the past few years. In 2010, we had the emergence of the euro-zone crisis with the first Greek bail-out in May 2010, which sent markets into a renewed tailspin.
The Japanese earthquake and tsunami hit in March 2011, resulting in supply problems for US manufacturers. The euro-zone crisis flared up again, with the Portuguese bailout in May of 2011 and the second Greek bailout in July. The latter coincided with the first debt ceiling stand-off in Congress that nearly led to a Federal government shutdown. All of these factors conspired to slow US growth in mid-2011.
Activity in the first few months of 2012 was boosted by the record warm weather, which developed into a serious drought that reduced crop yields during the summer months. Hurricane Sandy hit fourth quarter activity and employment, with the clean up spending probably spilling over into the start of 2013.
Having said all of that, Ashworth is optimistic that the slowdown won’t stick. Among other things, he notes that gas prices have come down notably, which is good news for the American consumer.
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