Behind the Money

Record Winter to Distort Key Jobs Report Next Week

The winter conditions will hurt visibility for Wall Street traders even after their commute home today is over. The nearly unprecedented winter conditions the Northeast region and really the whole country has seen this past month could distort the biggest market-moving event of next week: the jobs report.

“For Friday’s employment report, we are projecting nonfarm payrolls to decline by 75,000, although the risk is for an even weaker number since there were two major winter storms (Feb 4-6 and Feb 9-10) during the employment survey week,” wrote Joe Lavorgna, chief U.S. economist for Deutsche Bank, in a note to clients entitled “Do not be swayed by the February payroll chill.”

Lavorgna is based in New York City, where the February snowfall just surpassed the previous monthly record in Central Park. As of mid-day Friday, 35.9 inches fell in February, according to the National Weather Service, surpassing the previous monthly record of 30.5 inches, set back in March 1896.

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The last thing the market needs is jobs data even more confusing to sort through, as the figures have become crucial to determining the direction of the stock market, according to traders.

The slowing of job losses over the last 6 months has closely tracked the stock market’s rebound from its 12-year low reached in March, according to Brian Kelly, founder of Kanundrum Capital. He and others argue that the market won’t restart until the economy can prove it’s strong enough to actually create jobs, instead of just lose fewer. Kelly was selling short the S&P 500 SPDR this week in part because of concern over consumer confidence and tightening credit, both side effects of joblessness.

The S&P 500 will end February about little changed to down slightly.
During the last “major weather events” in Feb. 2007, Jan. 1996 and Feb. 1994, “the subsequent print on nonfarm payrolls was notably below the three-month trend leading up to the event by roughly 100,000,” wrote Lavorgna. Absent weather effects, the economist would be forecasting a gain of 85,000 jobs this Friday.

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