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– Best wishes to all, John Williams

February’s Heavy Snowstorms Had Some Negative Economic Impact. Severe weather that shutdown normal day-to-day activity in areas of the East for a number of days during February had to take some toll on regional retail sales, industrial production and housing starts, dampening activity that already was headed into new decline (more on that tomorrow). The impact on payroll employment and unemployment results, however, should have been minimal, despite the blizzards of the survey week and comments by Larry Summers, economic advisor to President Obama. People generally do not lose their jobs due to snow days.

Reuters reported that Larry Summers, in a CNBC interview (Monday, March 1st), claimed "winter blizzards were likely to distort February jobless figures." I take such comments from an Administration official — in the week of the employment report release — as an effort to alter market expectations and to soften potential negative market impact from worse than expected results. Of course, no one outside the Bureau of Labor Statistics — including the President and the Fed Chairman — is supposed to have access to the employment data before the markets close later today. Against expectations of 9.8% unemployment for February, up from 9.7% unemployment in January, I’d take Mr. Summers’ comments as an indication of a 10% or worse unemployment rate in the offing, if I am correct in my interpretation as to the nature of the public comment. I easily could be misreading this. 

Where Briefing.com showed no increase in the consensus outlook for the February unemployment rate (still 9.8%), subsequent to the Summers’ comments, the expected decline in nonfarm payrolls widened from 20,000 last week to a decline of 65,000 as of this morning’s estimate.

Again, the impact on employment and unemployment from the bad weather should be nil, and significantly deteriorated employment results would reflect not only potential renewed weakening in the economy, but also catch-up from distortions in recent seasonal adjustments that were otherwise of poor quality.

Census Hiring Will Help Jobs Data. With the 2010 federal census scheduled for measuring everyone in place in the United States as of April 1st, some minimal hiring by the government for the process took place in January. Based on hiring patterns reported by the BLS for the 2000 census, February hiring should pick, perhaps in the 20,000 range, with March hiring likely to top 100,000, and with even greater gains in April and May. Such hiring, though, will be temporary and monthly data likely will be cited in the next several months both in aggregate and ex-census.

Seasonal Warping Leaves Near-Term Reporting Uncertain. Separate from any games being played by the Administration with the markets, I still expect both a higher unemployment rate and deeper payroll decline than the consensus forecasts, given catch-up in bad seasonal factors and renewed slowing in the general economy. While the depression’s impact on skewing seasonal factors may not have run its course, yet,  in "improving" reported employment-related data, it should be close to having done so, with some overstatement in the other direction likely in reporting of the next couple of months.

The weekly new claims for unemployment insurance number appears to have stabilized well off its peak at around an average of 470,000 per week, a level last seen as the current economic downturn was formally underway in early 2008. As mentioned in earlier writings, there has been some flattening out in activity, where a certain layer of layoffs has tended to run its course. Layoffs should start to rise again in the next couple of months. On the offsetting hiring side, the Conference Board’s seasonally-adjusted January help-wanted advertising (newspapers) was unchanged month-to-month at 10, while the seasonally-adjusted help-wanted advertising (online) declined. The online index is too new to read much into, where the seasonally-adjusted data most certainly are skewed by limited historical data, and where the unadjusted numbers are not made available for analysis.

The February purchasing managers surveys showed gains in both the manufacturing (53.3 in January, 56.1 in February) and nonmanufacturing (44.6 in January, 48.6 in February) employment indices, although, as diffusion indices, a reading below 50.0 shows February services employment still to be in contraction). Poor-quality seasonal factors remain at play with these surveys.

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