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Is weather affecting economic indicators?

There is no doubt this winter has been one of the most difficult I have experienced as a road warrior traveler. Canceled flights and events, bad roads and grouchy people have been the rule rather than the exception; however, that being said, the seminars, institutes and speeches to groups of lifelong learners have been very encouraging. One major question people ask is whether the “blah” economic indicators, domestically and globally, are the result of bad weather. Let’s examine some of the lead and lag economic indicators to ascertain any apparent trends.

The unemployment rate that is reported on the nightly news has been encouraging, down 1.2% from January 2013. The U-6 unemployment rate, which includes discouraged workers and those employed part time for economic reasons, is even more encouraging, down 1.7% over the period. Despite this positive news, labor force participation rate is approximately 63%, the lowest since the late 1970s. This rate is lowest for people with less than a high school diploma, at 44.8% participation. The issue in the employment sector for both agriculture and other industries is misalignment. There are jobs available; however, there is a lack of people with job skills to fill the jobs. This will continue to be a struggle until the education system and incentives for adult education are changed.

Yes, difficult winter weather has depressed retail sales in the U.S., which has had a global impact, causing a slowdown in Chinese exports. However, there are signs the U.S. economy is wobbling along. The metric that bears watching is housing starts, which affects one in seven jobs in America. A strong metric is 1.1 million housing starts annually. In the fall of 2013, this metric was achieved, only to fall back to the low 900,000s. Higher mortgage interest rates, high levels of student debt, and stagnant wage increases have suppressed housing starts on single-family homes, in favor of more construction of multi-unit apartment buildings.

The leading economic index (LEI) and the purchasing manager index (PMI) are still moving in a positive direction, but moderating from one year ago. In China and much of Europe, the PMI is less than 50, which indicates a slowing economy in major economic sectors of the world.

One key metric to watch in the U.S. and abroad is copper prices which in recent months have been decreasing substantially. Copper is used in many products and is down nearly 35¢ per pound year-over-year.

The bottom line is it is more than the weather that is affecting economic metrics. A close watch of these indicators in 2014 will be critical to determine the direction of the domestic and global economies. The central banks in the U.S. and abroad are the 800 pound gorilla that can impact economic direction, prosperity, and wealth.

TAGS: Management
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