It seems like January has been associated with adverse weather for as long as January has existed. I think even the simple folk that lived in more agrarian times were aware that winter tended to be very evident in January, and could vary in intensity from year to year. Jean-Paul Sartre realized the impact of January weather when he said, “to read a poem in January is as lovely as to go for a walk in June.”
Apparently, to update Sartre, to be extra cold in January is to defer consumption to June.
As if to further a point I made earlier today about economists’ overwhelming desire for the mathematical, Bloomberg screamed with an article headlined, Frigid Winter Spells Trouble for U.S. Economy. The meat of that argument was provided by, of course, the economists at Bank of America Merrill Lynch. Disseminated in the form of David Woo, head of global rates and currencies, there is a mathematical correlation for winter weather.
[Woo] found a 48 percent correlation between first-quarter economic growth and temperature over the past decade. With Woo calculating January to be the coldest in the U.S. since 1988 and February set to stay chillier than usual, his growth prognosis isn’t optimistic. Much of the Northeast this week faced snowstorms and more may come this weekend.
I find it curious, as you can often do with statistics, that such a correlation is presented across only the last decade. If it was truly durable, would it not be present further back in time? I don’t have temperature statistics in front of me, but I will hazard a guess that the correlation wouldn’t hold much before the year 2001 because the economy actually grew once upon a time to the degree (pun intended) that weather didn’t really offer much by way of explanation. And even if weather held some real explanatory power, it was so minor in comparison to overall growth as to be trivial. That has certainly changed since this millennium of bubbles rolled in.
By way of this morning’s jobs report, that correlation broke. January was warm enough that payroll growth was expected to be much higher. Who said so? David Woo and the economists (statisticians) at Bank of America Merrill Lynch, just three days ago:
Extreme winter weather probably weakened its grip on the U.S. labor market in January only to send retail sales into a deep freeze, according to Bank of America Corp.’s David Woo.
The outlook for payrolls is brighter. While employment in December rose by 74,000 workers, the smallest gain since January 2011 and less than the lowest forecast of any economist surveyed by Bloomberg, January could bring an improvement, Woo said. Economists at Bank of America project an increase of 185,000 ahead of the Labor Department’s report on Feb. 7.
So which is it, too warm or too cold? Like taking an average of all the numbers in a phone book, it may not be worth the time to calculate.
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