Think the economy is back on track? Blame mild winter for ‘falsely inflating employment numbers’

http://www.dailymail.co.uk/news/article-2126614/Think-economy-track-Blame-mild-winter-falsely-inflating-numbers.html

  • Some employers began spring hiring early because of warm weather, creating unreliable employment numbers
  • Job growth slowed to 120,000 last month, smallest increase since October

By Daily Mail Reporter

PUBLISHED: 14:51 EST, 7 April 2012 | UPDATED: 14:51 EST, 7 April 2012

The unseasonably mild winter kept the mercury high, but could have inflated something else as well – the economy.

Cities like New York, Detroit, Chicago, and Minneapolis saw some of their warmest winters on the books, but the relatively balmy temperatures weren’t all good news.

The warm weather likely gave a false boost to the sluggish job market, which had been showing surprising strength since December.

Tiptoe through the tulips: Though the warm weather brought tulips and cherry blossoms to DC early, economists say the warm weather could have falsely inflated the economyTiptoe through the tulips: Though the warm weather brought tulips and cherry blossoms to DC early, economists say the warm weather could have falsely inflated the economy

 

Exhaustible: Economists say that consistently creating 200,000 jobs a month is tough; the economy hasn't put together four straight months of 200,000 or more new jobs since early 2000Exhaustible: Economists say that consistently creating 200,000 jobs a month is tough; the economy hasn’t put together four straight months of 200,000 or more new jobs since early 2000

Even as the unemployment rate fell to a three-year low of 8.2 per cent, job growth slowed to 120,000 last month, the Labour Department said on Friday, the smallest increase since October.

That was less than half the average monthly increase in the prior three months and way below the lowest estimate in a Reuters survey.

Economists had expected an increase of 203,000 and the jobless rate to hold at 8.3 per cent.

The report was also closely watched in political circles. If employers retreat on hiring, consumers could lose confidence in the economy and potentially dim President Barack Obama’s re-election hopes.

A warm January and February allowed construction companies and other businesses that work outdoors to hire workers a few weeks earlier than usual, effectively stealing jobs from March. It helps explain a 7,000 drop in construction jobs.

Burst bubble: Hiring slowed dramatically in March, clouding optimism about the strength of the recoveryBurst bubble: Hiring slowed dramatically in March, clouding optimism about the strength of the recovery

 

Warm weather slump: Economists are blaming the mild winter for falsely boosting employment numbersWarm weather slump: Economists are blaming the mild winter for falsely boosting employment numbers

That sinking feeling: Job creation plunged in March after numbers were upThat sinking feeling: Job creation plunged in March after numbers were up

Alan Amdahl, who has run his own construction company in Sioux Falls, South Dakota, for three decades, said a mild winter helped contribute to a flurry of new remodelling jobs. He started hiring in January.

‘Our winter didn’t really exist,’ he said. ‘It’s just incredible. People didn’t hibernate.’

Economists also say the numbers can bounce around from month to month. Consistently creating 200,000 jobs a month is tough. The economy hasn’t put together four straight months of 200,000 or more new jobs since early 2000.

They are still encouraged by the recent hiring trend: Each month from January through March has generated an average of 212,000 jobs.

The numbers likely reflected the fading boost from unseasonably warm winter weather and brought the job market, which had been showing surprising strength since December, more in line with signs of a broader slowdown in the overall economy.

It also backed the caution expressed by Fed Chairman Ben Bernanke last week about whether the labor market could sustain gains above the 200,000 mark when economic growth is tracking a sub-par rate.

Warm weather: Many industries started their spring hiring early because of balmy temperaturesWarm weather: Many industries started their spring hiring early because of balmy temperatures

The data raises the chances of the central bank launching a third bond buying program or quantitative easing.

‘The economy may not be growing as strongly as the data around the turn of the year, benefiting from favourable weather, suggested,’ said Michelle Girard, senior economist at RBS in Stamford, Connecticut. ‘While QE3 may not be seen as the odds-on bet, nothing can be ruled out.’

Retail employment surprisingly fell for the second straight month, resulting in the vast private services sector adding jobs at the slowest pace in seven months.

Economists were puzzled by the drop given that retailers such as Macy’s and Target reported brisk business in March.

Prices for Treasury debt rallied on the report, pushing yields to more than three-week lows, as investors anticipated further bond purchases by the Fed. The dollar fell against a basket of currencies.

Stock futures fell more than one per cent, suggesting that shares could fall on Monday when the New York Stock Exchange reopens after being closed for the Good Friday holiday.

Boost: On Thursday, President Obama signed the Jumpstart Our Business Startups (JOBS) Act Boost: On Thursday, President Obama signed the Jumpstart Our Business Startups (JOBS) Act

The cooling in hiring last month, if sustained, could hurt President Barack Obama’s chances of re-election in November.

Chairman of Federal Reserve Board Ben Bernanke said the economic recovery remains slowChairman of Federal Reserve Board Ben Bernanke said the economic recovery remains slow

White House economic adviser Gene Sperling said the data showed the economy is making progress, but still has a long way to go.

‘The economy’s on a much, much better trajectory than it was when the president came to office and we just have to keep at the policies and keep doing the things that are helping the economy recover,’ Sperling told Reuters TV.

In one of only a few bright parts of the report, a broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, fell to a three-year low of 14.5 per cent from 14.9 per cent.

The economy is believed to have slowed in the first quarter to around a two per cent annual growth rate from the three per cent rate in the October-December period.

Despite the slowdown in job growth last month, several economists said it was not the start of a new trend and were hopeful the labour market would not see a repeat of the spring of 2010 and 2011 when job creation faltered.

‘This is not the new run rate for payrolls, but it will feed fears that will work to the advantage of the Fed because it will keep rates lower,’ said Eric Green, chief economist at TD Securities in New York.

‘This will fade because we have had this adjustment for the seasonal effects. What we do from here is we move back to 200,000 (jobs) in coming months.’

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Posted on April 7, 2012, in Economy / Finance and tagged , , , , . Bookmark the permalink. Leave a comment.

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