Both the December and January Non-Farm Payrolls reports were pretty weak, and there’s been a lot of debate about whether this was all about the weather.
In his latest note to clients, Citigroup currency specialist Steven Englander produces this chart, which compares the change in non-farm payrolls (dark blue line) to the change in non-farm payrolls across 9 warm states that haven’t been affected by weather much.
Unfortunately, the state-by-state data isn’t available for January yet, but just based on December, it does appear that there was a break and that the warm states didn’t drop by as much as the rest of the country.
If we use employment in these States to predict December national employment, we would have a prediction of 184k, very close to what market analysts were looking for. Playing with lags and the States that we treat as weather unaffected we can get anywhere from 138k to 210k as a ‘weather unaffected’ national forecast. If we use only contemporaneously State data we get a forecast for December payrolls ex-weather of around 140k but the regression prefers having a couple of lags and including these lags we are in the 180-200k range. The actual print was 74k so weather probably accounted for at least half the disappointment in the print.
Again, it’s just one month, and soon we’ll be able to test this against January data, and hopefully soon the weather will be a non-issue in any of the data coming up. But if you’re looking for some evidence either way on this debate, then this is an interesting thing to consider.
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