Bad Economic News? Blame It on the Weather!
Have you noticed it’s always the weather?
Tucked away in virtually every story reporting negative economic news, you will find some reference to the weather. It was too hot. It was too cold. It was too wet. It was too dry. To hear the mainstream media tell it, Mother Nature is the single most important driver of the US economy.
Yesterday, the Census Bureau and Department of Housing and Urban Development released data revealing new building permits and housing starts both unexpectedly dropped in April. Residential housing starts fell 2.6%, dropping to a seasonally adjusted annual rate of 1.17 million units. The forecast was 1.26 million units. Meanwhile, the number of building permits issued dropped 2.5% to 1.23 million units. Bloomberg reported that the slowdown in home construction could drag down economic growth in Q2, “lessening any economic rebound after weakness in the previous period.”
So, what accounts for this unexpected sluggishness in home construction? Could it be stagnating wages? Could it be people can’t find good jobs? Could it be Americans are already buried under piles of debt and can’t afford to buy new homes?
Raymond James Financial chief economist Scott Brown told Bloomberg warmer weather earlier in 2017 “may have pulled some activity forward. So we’ve got to take these numbers with a grain of salt. It’s only one month.”
Of course, is is plausible that weather could impact construction. So, maybe we should look at the retail bloodbath. Most analysts blames Amazon, but you will also find Mother Nature lurking. In a Fox Business report on slumping sales at TJMaxx, Marshalls, and HomeGoods, CEO Ernie Herman said “Weather was by far the biggest issue.”
It’s also an issue in Australia, judging by this headline from The West Australian. “Wet Weather Weighs on Myer’s Quarterly Sales.”
Weather is also at least partially to blame for the tepid GDP growth in the first quarter of this year, according to DS Economics CEO Diane Swonk.
“They just can’t get the first quarter right. It’s the wacky weather, delayed tax returns and residual seasonality.”
You can also almost always blame any rise in unemployment on the weather. Reports on weakness in the jobs market last March “was likely weather related,” a Goldman Sachs economist told CNBC.
Media pundits, economic analysts, and government officials always want to spin things in a positive light. Mother Nature makes a good scapegoat when things go wrong. After all, there is always some kind of weather. And it undoubtedly plays some role in the economy. Weather always offers a plausible excuse.
But weather can’t be the reason for everything. In fact, it’s just a throwaway line when analysts don’t want to face the tough questions. Why acknowledge bad monetary policy, or stupid government actions, or a generally weak economy when you can just blame rain, snow, heat, cold, or drought?
Weather is generally the subject of polite chitchat meant to steer conversations away from controversial subjects. This works out fine at cocktail parties, but it’s probably not a good tactic when it comes to making decisions that can impact your wealth.
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