Look Ahead: Blame the Snow for Bad Economic Data
If you are worried about weaker looking economic data lately, blame the snow, not a double dip recession.
Stocks fell Thursday on anxiety about Greece and other sovereign issues, but also on worse-than-expected jobless claims and durable goods data.
Jobless claims unexpectedly rose by 22,000 to 496,000 last week, above the 455,000 expected by forecasters. Overall durable goods orders jumped 3 percent, but excluding transportation, new orders were 0.6 percent lower.
The data is the latest in a string of weaker-than-expected numbers, following a big slide in consumer confidence and a report of record low new home sales this week. The negative trend is creating worry about the strength of the recovery and raising concerns the economy could double dip.
Economists say, surprisingly, that some of the blame for the bad numbers is the effects of the unusual series of heavy snow storms that hit the east coast this winter. The latest storm dumped snow on the the northeast Thursday and was expected to continue into Friday with heavy winds and snow.
"All the data will get affected by this. It was a pretty significant weather event in the most populated part of the country. It's going to be weak for February, but we'll see it bounce back in March and April. The calls for a double dip are probably premature," said Mark Zandi of Moody's Economy.com.
Zandi said he doesn't now expect to see a double dip, but he doesn't totally rule it out as a possibility. "I think the most likely time would be later this summer rather than now. That's when the odds would be highest," he said. But he also noted that policy makers will be alert to it, and the timing is also right before the November election.
"I think the odds are we'll make our way through without one but I don't think the coast is clear. And I don't think anyone can conclude that, until hiring resumes more vigorously," he said.
Diane Swonk, chief economist at Mesirow Financial, said she is in fact adjusting her expectations for February's jobs report to a greater loss of non farm payrolls because of the weather. "The reality is the weather did exacerbate the unemployment numbers..it does really show how unresilient we are at the moment. It's another sign of the fragility of the recovery," Swonk said.
"I think we will have bigger losses on jobs. There is no question. We knew the snow storms were going to do it and a lot of temporary hourly workers were laid off. We should recoup much of that in March, plus we'll have the lift of government census hiring," she said.
Zandi said weather could impact the monthly jobs number by as much 100,000, based on the losses during previous major storms. He lowered his expectation to a loss of 75,000 non farm payrolls for February. That report is released by the government next Friday.
Swonk said the drop in consumer confidence is a direct result of the storms. "I think the storms exacerbated the losses. We did blanket much of the east coast. That did have an impact and it had real impact...it's going to disrupt housing starts..We cant afford to lose ground while the government stimulus is there because the government stimulus is going to go away," she said.
Swonk said she does not expect a double dip recession, but she says it's still possible. A catalyst would be an unexpected secondary dip in credit markets. One sign would be "if you start to see some big resurgence in bank write-offs of both commercial and residential mortgages," she said.
What to Watch
Friday's data includes existing home sales at 10 a.m.; consumer sentiment at 9:55 and Chicago purchasing managers at 9:45 a.m. The second look at fourth quarter GDP is released at 8:30 a.m.
New York Fed President William Dudley; Chicago Fed President Charles Evans; Fed Gov. Daniel Tarullo and Minneapolis Fed President Narayana Kocherlakota are scheduled to attend a conference on monetary policy in New York.
In Washington, the Joint Economic Committee holds a hearing on prospects for jobs and growth, starting at 10:30 a.m. The Financial Crisis Inquiry Commission holds a forum Friday and Saturday.
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