Goldman Muses On Snowfall; Elaborates On -100,000 Preliminary NFP Estimate

Tyler Durden's picture

When Goldman Sachs writes extended treatises on the impact of snowfall and makes regression analyses of NESIS snowfall scores with payroll impacts, you know Goldman economists i) take their cure from Larry Summers' public caveats, ii) have an extended sense of humor, and iii) have way too much free time on their hands. We share the following GS essay on the second derivative impact of snowfall on the economy, but here is the punchline: "Our models suggest a small decline in payrolls without incorporating the special impact of the snowstorms, or the boost from temporary Census hiring.  Adding approximately 30,000 Census hires suggests unchanged or slightly positive payrolls; subtracting the snowstorm effects suggests a payroll number in the -50,000 to -100,000 range. Our forecast of a decline of 100,000 payroll jobs assumes an impact at the higher end of this range.  Despite this, we are inclined to think the risk remains on the side of a still bigger impact from the snowstorm itself, for two reasons:  1) the larger effects observed in as-first-reported data suggest that lags in reporting itself could be part of a snowstorm’s effect, 2) both the high-impact January 1996 snowstorm and the February 2010 storm hit slightly earlier in the month than others, and this difference in timing might be important in terms of the impact on new hires added to payrolls in the survey week." Since Larry Summers, who one may venture has a pretty good advance look at the NFP #, has warned snowfall will not be "additive" to the NFP per se, any substantial downside surprise will merely be attributed to the vagaries of mother nature, which has put global warming on hold for the time being.

From Goldman Sachs:

The Snowstorms' Impact on February Payrolls (Tilton)

February was an unusually wintry month in the eastern United States, with three significant snowstorms, two of which ranked among the highest-impact storms of the last half-century.  Financial markets are focused on how this may affect the upcoming economic numbers, particularly Friday’s payroll report.

Teasing out the impact of snowstorms on the employment news is a complex endeavor, because no two storms are the same in timing or magnitude.  Both extensive snow and colder-than-usual weather can delay hiring enough to have substantial impact on payrolls, more than a hundred thousand jobs on a few occasions.   Our forecast of a decline of 100,000 payroll jobs assumes the February snowstorms will delay at least this many net hires.  Assuming a return to more normal weather, March payrolls should post a substantial rebound. 

February was an unusually wintry month in the eastern United States.  Three significant snowstorms affected a large part of the East Coast population, with the main snow periods on February 4-7, 9-11, and 25-26. The first two of these each ranked among the 25 highest-impact Northeastern snowstorms of the last half-century, according to the National Oceanic and Atmospheric Administration (NOAA).

Weather has the potential to affect a wide variety of economic variables, including retail sales, housing activity, and even industrial production, as we have shown in prior research (see “What’s With the Weather?”, GS US Economics Analyst 07/02, January 12, 2007.)  However, the main focus of financial markets in the near term is Friday’s employment report—the nonfarm payroll number in particular.  Numerous journalists and economists have offered up estimates of the likely impact of the storms.  In the comment that follows, we explain the basis for a snowstorm effect on payrolls and gauge how large it might be this time.

In theory, the main impact of a snowstorm should be a delay in hiring (and possibly firing) activity.  Suppose business shuts down during a period (call it month 1) when payrolls would normally be expanding, and this shutdown delays some hiring into month 2.  If employment would otherwise have been on some steady underlying trend, the effect of the snowstorm will be to push payroll growth below that trend in month 1, with a sharp rebound above trend growth likely in month 2 as employers complete unfinished hiring from the month before.

A quick back-of-the envelope calculation illustrates that the impact could in theory amount to several hundred thousand jobs.  In recent expansions the typical February non-seasonally adjusted net job gain has been around 700,000-800,000 jobs; monthly gross job gains are probably around three times this amount (although the exact number is unclear as the data are only available quarterly).  If a major snowstorm shut down half of United States businesses’ hiring and firing activity for half of the payroll period (i.e roughly two weeks), then the impact would presumably be ½ x ½ x 700-800k, or 175,000-200,000.  If for any reason the hiring process was more susceptible to disruption or delays than firing, then the impact could be as much as three times as large.  Of course, the assumption of a total shutdown in hiring for half the country seems too extreme, but these calculations give a sense of the potential upper bound of impact.

Of course, bad weather might also keep existing employees from making it to work.  This would cause a reduction in hours worked and, for employees paid hourly, a reduction in earnings as well.  Some employees conceivably might not work at all during the payroll period.  However, the absence of these workers should not have any impact on the payroll number reported by the Labor Department.  As we understand it, all individuals listed on company payrolls are counted as employed regardless of how many hours (even zero) they worked during the payroll period.  So, difficulty in commuting or inability to work due to the weather should not have a direct impact on the payroll count.

Therefore, to gauge the impact of the storms on employment we need to focus on how much of an impact they have on net hiring.  The most straightforward way to go about this is simply to look at what happened after major snowstorms in the past.  Not including February’s storms, the NOAA reports eight “major” snowstorms within the past two decades.  (See for a list.)  As luck would have it, most occurred during or just before the payroll survey week (the week containing the 12th day of the month), and therefore might have had an impact on payrolls.  We exclude two storms that occurred shortly after the payroll survey week; in each case, there were at least three weeks to go before the next payroll survey, so it seems likely that employers would have had time to make up most delays by that point.

The remaining six episodes happen to include the three highest-impact snow events as calculated by the NOAA’s Northeast Snowfall Impact Scale (NESIS): the “storm of the century” in March 1993, and the severe storms of January 1996 and February 2003.  The NESIS is a population-weighted metric of snowfall designed to “give an indication of a storm’s societal impacts,” so it is a very useful metric for our purposes.

As a rough first estimate of the impact of a storm, we simply take the change in payrolls during the month of the storm versus the average change over the previous three months.  We can then plot this payroll impact versus the NESIS score of the storm to gauge the relationship between storm intensity and employment impact.  In the exhibit below, the points plot the storms and their respective impact; the dotted line is the regression line through these points.  The storms range from “major” storms with a NESIS scale of 4-6 to the 13.2 figure of the March 1993 storm.  The deviation of payrolls from their prior three-month trend (we use as-first-reported changes here) ranges from about +75,000 to -325,000. 

Exhibit 1: Major Snowstorms and Payroll Deviations from Trend


The shaded area indicates the likely NESIS score of the combined storms on February 4-7 and February 9-11.  The preliminary scores of these storms are 4.3 and 3.9 respectively, or 8.2 together.  However, the construction of the NESIS scale is nonlinear; if the underlying data from the two storms were processed together the result could be somewhat higher (we have no way of doing the calculation ourselves).  One might also—but probably less plausibly—argue the joint score should be lower than the sum given the brief respite for cleanup between them.  The dotted regression line between the points suggests an impact of 120,000-200,000 on February payrolls.  Note, however, that the three major storms all had an apparent impact at or above the high side of this range, suggesting the potential for an even larger hit in February.

To cross-check this result, we added a historical “dummy variable” for snowstorms to a basic payroll forecasting model including other weather-related variables, estimated over the past two decades.  The dummy variable is significant (with a t-statistic of 2.8) and the fit of the overall model is reasonable, with a standard error of about 100,000.  Two interesting results emerge.  First, including a variable for snowstorms does not meaningfully diminish the impact of temperature variations on payroll growth; these remain highly significant in all formulations.  (For those unfamiliar with our prior work on the topic, warmer-than-usual winter temperatures provide a boost to seasonally adjusted payrolls, so a month-to-month change in temperatures that exceeds normal seasonal changes tends to temporarily increase payroll growth.  The corresponding relationship holds for cooler than normal temperatures.)  

Second, some experimentation shows that essentially all of the explanatory power of the snowstorm variable comes from the January 1996 episode.  When using as-first-reported payroll data, a simple dummy variable for this snowstorm by itself provides more explanatory variable than an indicator incorporating all six episodes.  Other indicators corroborate the outsized impact of the 1996 storm; for example, the number of people who missed work for weather-related reasons that month was nearly three times as large as in any other month in the past quarter-century.  The payroll impact of this episode is (slightly) less of an outlier in fully revised rather than as-first-reported data, suggesting that lags in reporting might themselves have been an issue.

Exhibit 2 below incorporates the knowledge from our model, assessing the snowstorm impact on payrolls with fully revised data, after removing the estimated impact of temperature changes.  The logic here is that snowstorms sometimes—but not always, and not this February—come along with much colder than usual weather, which can intensify their impact on employment.  The pattern, shown by the solid diamonds, is now quite striking—a tightly clustered group of points around a line that suggests a substantially smaller impact from the snow itself, perhaps 50,000 to 100,000 on the payroll report.

Exhibit 2: Snowstorm Impact on Revised Payrolls, Excluding Temperature Effects


So, what does this mean for our payroll forecast?  Our models suggest a small decline in payrolls without incorporating the special impact of the snowstorms, or the boost from temporary Census hiring.  (Our standard models do include the effects of temperature changes, which actually should help offset rather than intensify the snowstorm impact.  Since it was substantially colder than usual in the weeks before the January payroll survey, and roughly normal in the weeks up to the February payroll survey, we think January payrolls probably already incorporated a negative weather effect—albeit from temperature rather than snow—which otherwise would have seen a positive “payback” in February.)  Adding approximately 30,000 Census hires suggests unchanged or slightly positive payrolls; subtracting the snowstorm effects suggests a payroll number in the -50,000 to -100,000 range. 

Our forecast of a decline of 100,000 payroll jobs assumes an impact at the higher end of this range.  Despite this, we are inclined to think the risk remains on the side of a still bigger impact from the snowstorm itself, for two reasons:  1) the larger effects observed in as-first-reported data suggest that lags in reporting itself could be part of a snowstorm’s effect, 2) both the high-impact January 1996 snowstorm and the February 2010 storm hit slightly earlier in the month than others, and this difference in timing might be important in terms of the impact on new hires added to payrolls in the survey week.

Wednesday’s ADP Employment Report may provide a useful clue as to the weather effect on February payrolls.  We normally give it little weight because of its spotty track record in forecasting real-time payroll changes.  However, a simple model incorporating temperature effects and the ADP variable suggests that the ADP data are affected by unseasonal variation in temperature, so it’s not a stretch to think they would be affected by other forms of inclement weather.  If the storm did have an exceptionally large impact on hiring, the ADP report should at least hint in that direction.

Andrew Tilton

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Nihilarian's picture

Assuming a return to more normal weather, March payrolls should post a substantial rebound. 

Barring rain, of course...

suteibu's picture

These guys can't seem to catch a break but they sure can spin.

deadhead's picture

April showers bring NFP dours......

OBRon's picture

Or fog in the vicinity of 2 Massachusetts Ave.

hedgeless_horseman's picture

When will Exhibit 2 be available as a ZeroHedge t-shirt?

The caption could say, "I'm with stupid."

Or better, yet. 

"My country swapped interest rates with Goldman Sachs and all I got was this lousy chart."

Assetman's picture

Alternatively, another caption:

"I know all this is statistical BS, but it helps me make my research quota for the month."

bingaling's picture

Did they also include in that number how many people were kicked off the books when congress failed to extend benefits for the unemployed . 15000 in Indiana alone from what I read were taken off the books as a result . We will probably see an "unexpected decrease in the Gov't unemployment due to that manure .

geopol's picture
Goldman Says Matt Taibbi, Zero Hedge, Louise Story, And Janet Tavakoli Have Become Risks To Its Business


SV's picture

And the light shineth in darkness; and the darkness comprehended it not.

Anonymouse's picture

HAL: I think you know what the problem is just as well as I do.
Dave Bowman: What are you talking about, HAL?
HAL: This mission is too important for me to allow you to jeopardize it.
Dave Bowman: I don't know what you're talking about, HAL.
HAL: I know that you and Frank were planning to disconnect me, and I'm afraid that's something I cannot allow to happen.
Dave Bowman: Where the hell'd you get that idea, HAL?
HAL: Dave, although you took very thorough precautions in the pod against my hearing you, I could see your lips move.
Dave Bowman: Alright, HAL. I'll go in through the emergency airlock.
HAL: Without your space helmet, Dave, you're going to find that rather difficult.
Dave Bowman: HAL, I won't argue with you anymore. Open the doors.
HAL: Dave, this conversation can serve no purpose anymore. Goodbye.

tip e. canoe's picture

Dave Bowman: You see, something's going to happen. You must leave. 
Heywood Floyd: What? What's going to happen? 
Dave Bowman: Something wonderful. 
Heywood Floyd: What? 
Dave Bowman: I understand how you feel. You see, it's all very clear to me now. The whole thing. It's wonderful.

Cognitive Dissonance's picture

Considering the absurdity of the snowstorm discussion in the face of patently manufactured unemployment numbers produced by the Bureau That Makes Up Employment Statistics, I endeavor to add to the discussion with my own twist and unique view.

How many angels can dance on the head of a safety pin? Could you fit more angels if they had not eaten breakfast before they danced? Are there obese angels in heaven and how does this affect the calculation? If you were to use only (smaller) females angels rather than the standard 52% female/48% male angel mix found in heaven, how many more dancing angels could you add? If a heavenly snowstorm hit heaven just before the angels were to appear on the head of the safety pin, what statistical formula would you use to factor in the no shows, assuming a statistically significant number of angels do not use snow tires?

deadhead's picture


the shark has been jumped soooooo many times that we are now in the land of constant guffawing and heart stopping laughter.


these attempts at further green shoot spinning are actually becoming embarrassing..... 

SDRII's picture

So now we have the answer as to whythe big struggle to not shut down GMAC. A new rebates war to sell all the leftover from the pent up demand. germany registrations down 30% or so y/y. Manufacturing recovery my as$. As they say, when all you have is a hammer....

Wynn's picture
Oh the weather outside is frightful, 
But the fire is so delightful,
And since we've no place to go,
Let It Snow! Let It Snow! Let It Snow!
Anonymouse's picture

I love the idea of regressing 6 data points, and even going to the point of evaluating the t-test.  Did these guys take stats 101? 

And based on their exhaustive analysis, a small snow storm would have a positive effect on NFP.

They really are the smartest guys on the street.

tip e. canoe's picture

the sanitation guys must have made mad o/t this last weekend plowing the streets.

good for them, they did an excellent job.


Anonymous's picture

"the vagaries of mother nature, which has put global warming on hold for the time being."

Oh FFS, you guys too? Just because there is snow doesn't mean it is abnormally cold -- in fact it snows the most when it is just below freezing...which is why increased major snowfall storms were always a prediction of global warming. Hey look, January and February were the warmest months in the global satellite record! On hold indeed.

SmalleyD's picture

Or it would rain if it actually were warmer.

Anonymous's picture

My kid made 100 bucks shoveling drive-ways, so make the NFP -99,999.

tip e. canoe's picture

these are not the payrolls you're looking for

Anonymous's picture

TD and all the climate change denialists:

Warming of the atmosphere may actually be playing a part in the seemingly more intense and frequent nature of winter storms this year in the U.S. and across the northern hemisphere, in as much as atmospheric warmth is likely increasing the moisture content in the air, which has through the vagaries of normal weather variation been clashing with cold air systems. If you would all think beyond the length of your nose and pull your heads of your asses (two movements I suggest should not be performed simultaneously) you would understand that weather and climate are not the same thing.

Anonymous's picture

Go study the issue some more, grasshopper.
Hint: don't start with a conclusion and work to fit the facts to the theory this time.

Anonymous's picture

Go study the issue some more, grasshopper.
Hint: don't start with a conclusion and work to fit the facts to the theory this time.

Anonymous's picture

One single volcanic eruption can put more CO2 & CO into the atmosphere than the whole of mankind since the caveman discovered fire. See: Krakatoa and Pinatubo.

Go shill for Al Gore and his credit-selling cronies somewhere else.

Bill DeBurgh's picture

One single volcanic eruption can spew more CO2 and CO into the atmosphere than the whole of mankind has since he discovered fire. How do you warmist wackos explain that fact away? Reference: Krakatoa, Pinatubo, etc.

Go shill for Al Gore and his credit-trading billionaire buddies somewhere else. The readers of this board have the ability of critical thought and do not just follow the profit-seeking alarmist pied pipers. 

Anonymous's picture

Please give it up - no one wants to buy your KoolAid here, Louie...

Anonymous's picture

Is this thing on?

seventree's picture

You will find no support here, Anon # 250950, even if your arguments were more civil. ZH true believers would rather get their facts from (and shill for) petrolobbyists and their very successful disinformation campaigns.

Apocalypse Now's picture

You are clearly a Goldman Crony, trying to sell people hot air.  We don't want your toxic CDS and your toxic climate carbon exchange credits.  CO2 is good for the environment, the only reason your ilk wants CO2 declared a pollutant is to then have control over all animals and human beings that give off CO2.  Soot, mercury, and other pollutants including heavy metals are real pollutants that need to be governed.  This is nothing more than an excuse to create a framework for global governance.

If you are not a crony just trying to push your agenda, you may just be ignorant.  If that is the case, I highly suggest you read Perpetual Peace by Kant and also the following article which will connect the dots and show you the big picture.

One of the best articles I have read in a long time on the big picture and the transition.  I highly recommend it:

Crashing Towards a New Social Order:



Anonymous's picture

Classic set up for another pump and dump. These guys have large holdings and need to unload to the patsy stupid enough to buy in now. Guess who's left holding the bag?

Start the spinning now of what could be a very nasty NFP report. Keep the market going up so these guys can sell, sell, sell.

Just another screw job waiting to happen for those uninformed, or better yet, those with their head in the sand.

Trade it well!

Postal's picture

This isn't the snowstorm you're looking for. This snowstorm is free to go.

Anonymous's picture

Putting the HAARP to good use I see.

GlassHammer's picture

The Nino Causes Great Depression.


The Nino to be brought to justice by the SEC.

Anonymous's picture

I really think this is a clever ploy and most are missing it. I'm expecting an upside surprise in employment numbers. Summers is pulling the "double reverse fake out". When the numbers come out positive, there is going to be surprise and euphoria, and he will be perfectly placed to add another layer of padding on to his personal retirement fund. --Boris

BlackBeard's picture

It's a really sad state of affairs when snow becomes the primary excuse for economic underperformance.... that's like the 3 to 4th time this week someone has used snow...

Stevm30's picture

Arlington County, where I live, spent $5 million on snow removal in the last 2 months.  Their budget was $1 million.  Much of that money went to paying salaries and overtime of people who otherwise would not be working.  Isn't this the type of "stimulus" that gives big government liberals wet dreams?  Why would employment go DOWN if municipalities are spending MORE money?  How does Larry (and Obama) reconcile the two?

jmc8888's picture

Um, there's no such thing as big gov't liberals.  That's the propaganda you're hearing reside in you.


Their's imperalist control of gov't.

Their's gov't by the people.

Rhetorically, which one do you think we have? That's right, imperailst control.

I understand your frustration, but 'big gov't' is like saying Fat Albert had an excercise problem.  No, he was FAT.  If he wasn't fat, he could exercise.  Well if we didn't have imperialist control, we'd have gov't of, by, and for the people. 

But I do agree there were benefits to real people, to the Mr. Plow's of the world. 

Wet dreams? Sorry, liberals haven't had a champion since JFK.  Obama was a ruse, he's governing like a right wing republican, other than a few crumbs here or there. Cap and trade, his current health care bill, he basically stole that from the republican playbook.  Had bush presented these things, he could of pushed them through as republican ideals.  But since it's obama, it's big gov't liberalism as said by the uninformed.


Well Larry and Obama are monetarists, not democrat or republican.  Therefore it makes sense to monetarists who are trying to keep their monetary system from crashing.  (which also further hampers your 'big gov't liberal' claim)


Other than what republicans have done, we've had smaller and smaller gov't every year for the last four decades.  Less road work, less infrastructure, less education, less sicence, less space program, less strategic planning, less pension, less welfare, less social safety nets, less of everything.....except.





and of course the tax cuts didn't help either (helping to push that asset bubble even higher, and not sucking the inflationary aspects out of the economy with higher taxes on all the bubble forming activities)


So to answer your question, no, this isn't what gives anyone a wet dream.  You might want to reconcile the inaccuracy of your feelings, as you probably hold other half-truth biases about dems.  Which you are entitled to be wrong about, it just doesn't help anyone to further the conversation.


Liberals like building things.  Schools, roads, bridges, mag-lev, space program, cars/boats/machine tools, and setting up the game so it isn't so rigged.


To not like these things is un-american.  I cannot believe that only dems like these things.  However, some repubs sure don't.  Most simply believe that only private business can do these things.  Of course they're quite wrong as history can prove, but these style of republicans, don't know their history - or are very selective at it.


But you're right stevm30, there was an employment bump up not down based on that aspect, but again it's basically amounts to nothing in our economy (even if their job allows us to perform our jobs at say 80-90 percent efficiency instead of 0-10 percent had they not plowed the they are ULTRA important, but actual additions to our economy are quite small).

So if minus Mr. Plows of the USA we still lost 100k, it's self-evident that overall their impact is quite small.  Besides not everywhere has a snow plow.  I've never seen one in my entire life (in person), thus the name Mr. Plow because unless it's Simpsons or TV/movie I've never seen one. 

So all in all you could say that without the Mr. Plow's, the numbers might be worse.  Overall though, the numbers are rigged so their interpretations even if separetely are combined with better metrics, are still suspect.  Trying to make heads or tails of this really is grasping at straws. 

But overall numbers can go down.  Think of it this way.  If tomorrow, every car company in America, and all its suppliers went bankrupt and closed shop.  Well it wouldn't matter if 'Fake Jobs inc.' started up in 50 states and employed 50-100k people total, because the loss of the other would be much bigger.  This economy is a whole lot worse than even the most bearish person you've ever seen on TV talk about it.  Thus people in all sectors across our collapsing monetary system are losing jobs.  Even if 'the recovery' took hold, it wouldn't be, because 90 percent of the economy, the real economy, would still be in a deep depression.  That's the fact.  We're only trying to pump up a medium sized slice of our economy, Wall Street.  We've thrown tens of trillions at the problem, and yet in the clearest display of how trickle down economics never worked, it's barely keeping Wall street alive, even with the ficticious rules. 

Meaning, the rest of the economy is in far worse shape.  It doesn't matter if recovery is here today (RECOVERY WILL NEVER HAPPEN IN THIS SYSTEM), for millions of workers and tens of thousands of business owners, they're on their last weeks/months of their job, and any upturn (which won't come anyway) would not be enough to change their situation. 

So couple that with less credit flowing around, and jobs are being cut, and will continue to be cut. That momentum won't stop because a few debt pushers played the shell game enough to show a few ficticious profits.

The jobs simply aren't going to come back.  If anything, we have too much employment for what we do.  (of course we need more -but to do what? push pencils at the office?)

But of course we have more do to now than we had in the 1930's to do.  So there are enough jobs to go around.  Just no private business will hire them.  Obama and any republican won't use gov't to do it.   All the fake debts are going to be cancelled eventually.  You'd think the bankers would like to get some honest debt on their books. But nope, they don't.  Which again proves WHY you have gov't.  Because instead of creating jobs, bankers will damn up the trickle down, and say put their money into Brazillian Real gov't bond/bill and not only get a 27 percent increase versus the dollar currency appreciation, but also get 8.75 percent interest. 

To a banker, that's all he needs to hear....and thus no REAL work begins.  This is bs.  This is why you have gov't.  Because right now the private sector is in even BIGGER shambles than our bankrupt gov't.

Stevm30's picture

Wow - you lost me at "their" - "their" what?  And at "Rhetorically" - just putting a big word into your post doesn't make you convincing... the word has to be part of an IDEA.

My advice to you - work on developing actual ideas that can stand up to scrutiny...

Of course I might be buying the rhetoric!

seventree's picture

jmc, thanks for a well expressed and thoughtful comment. Even if you did use a lot of hard words like "Rhetorically" and "economics." Not only big words but a lot of them -- whole paragraphs full - whew. Of course if you want more respect you should streamline your writing style to something like "Obama socialist bad." That'll get the +1000 attaboys.

Anonymous's picture

most states in midwest unemployment benefits are filed on phone or online

I am a Man I am Forty's picture

Wow!  It all can be traced back to man made global warming.  More snow because more moisture in the air due to more warming (I realize we have to ignore temperature in this scenario but so be it).  Which is now to blame for our economic problems.  I will quote church lady "How conveeeenient".

Tom123456's picture

ucvhost is a leading web site hosting service provider that is known to provide reliable and affordable hosting packages to customers. The company believes in providing absolute and superior control to the customer as well as complete security and flexibility through its many packages. windows vps Moreover, the company provides technical support as well as customer service 24x7, in order to enable its customers to easily upgrade their software, install it or even solve their problems. ucvhost offers the following different packages to its customers.