In a new note out titled Is The Economy In For A Deep Freeze? Goldman’s Kris Dawsey examines the impact of harsh cold weather on the economy.
Dawsey notes that cold weather does have a negative impact, and that it’s likely to impact this Friday’s jobs report. Construction employment, for example, is negatively impacted by cold weather. December auto sales — which came in weak — may have been one victim of the temperature.
From the note:
A potential concern is that recent warmer winters may have distorted seasonal factors for weather-sensitive series to expect a smaller decline in economic activity during the winter months. If so, even normal winter weather could result in weak seasonally-adjusted data. We do not find substantial evidence that this is the case.
Adverse weather so far this winter―including record low temperatures set in parts of the country―has focused attention on the potential impact on economic data. For instance, our auto analysts note that disappointing December sales could in some part be attributed to unfavorable weather. Regarding the near-term data calendar, we expect that colder-than-normal weather during the survey period for the December payroll report probably pushed employment growth below its recent trend. (Our preliminary forecast is for a 175,000 gain in total payrolls to be released this Friday.)
Early-January snowstorms affecting the Northeast and Midwest have also been in focus. However, these snowstorms will probably not have a major impact on January employment data. For one, according to the National Oceanic and Atmospheric Administration’s (NOAA) Regional Snowfall Index―a measure of snowstorm severity on an increasing scale of 1 to 5―the most recent snowstorms ranked only a 1 for the Northeast and a 2 for the Ohio River Valley. In addition, the snowstorm occurred fairly early in the month, leaving plenty of time until the end of the payroll survey period. Despite this, the January data might nonetheless be distorted by extreme cold temperatures before the month is through.
Big picture, this doesn’t sound like a huge thing to be concerned about, but more something to note while examining the data.
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