Peter Schiff: Weather Or Not?

Tyler Durden's picture

Submitted by Peter Schiff of Euro Pacific Capital,

Everyone agrees that the winter just now winding down (hopefully) has been brutal for most Americans. And while it's easy to conclude that the Polar Vortex has been responsible for an excess of school shutdowns and ice related traffic snarls, it's much harder to conclude that it's responsible for the economic vortex that appears to have swallowed the American economy over the past three months. But this hasn't stopped economists, Fed officials, and media analysts from making this unequivocal assertion. In reality the weather is not what's ailing us. It's just the latest straw being grasped at by those who believe that the phony recovery engineered by the Fed is real and lasting. The April thaw is not far off. Unfortunately the economy is likely to stay frozen for some time to come.   

Over the past few weeks, I have seen just about every weak piece of economic news being blamed on the weather. First it was lackluster retail sales that were chalked up to consumers being unable or unwilling to make it to the mall. (This managed to ignore the fact that online sales were similarly weak - which would be unexpected for a nation of snowed in consumers). Then came the weak auto sales that were ascribed to similarly holed up potential car buyers. However, this ignores that while GM and Chrysler sales were way down, sales for luxury cars like BMW, Mercedes and Maserati, surged to record high levels (more on that later). No one offered a reason why wealthier motorists were able to brave the cold. A number of other data points, such as lower GDP, productivity, ISM and factory orders were also ascribed to the elements.

Analysts also blamed the weather for weak housing sales and mortgage applications, which both hit multi-year lows. The idea being that hibernating buyers could not get to real estate open houses or to the bank to process loans. This idea ignores the fact that the weakest home sales over the last few months have come from the states west of the Rockies, where temperatures have been above average.

Of course the biggest weakness ascribed to the snow and ice has been the very disappointing employment reports over the last few months. Analysts faced a very difficult task in squaring these reports, which showed fewer than 187,000 new jobs created in December and January combined, with the accepted narrative that the recovery was firmly underway and that the economy was no longer dependent on the Fed's monetary support.

For these desperate economists the weather was a godsend. Mark Zandi had virtually guaranteed that job creation was being deferred by the weather and that hiring would come roaring back once the mercury started rising. The weather has become such a handy and versatile tool for economic apologists that we may expect that financial news stations will start featuring meteorologists more heavily than financial analysts. Move over Jim Cramer, hello Al Roker.

The weather continued to be horrible in February and as a result, there were wide expectations that today's February jobs report would be similarly bleak. But yesterday's release detailed a slightly better than expected 175,000 new jobs, thereby convincing economists that the economy was so strong that it is overcoming the drag created by the weather. This lays aside the fact that 175,000 jobs should not be causing any optimism. After years of sub-par job growth, I believe a recovering economy would be expected to create more than 300,000 jobs per month in order to make a real dent in underemployment. Those levels, once routine in past decades, seem untouchable today. But weather-related pessimism had caused economist to ratchet down their predictions to just 150,000 jobs in February. Based on that, today's numbers were seen as a win.

But economists are ignoring the likelihood that the weather was never a major factor. Take the cold out of the equation and you would be left with a mediocre February number following two consecutive monthly disasters. This does not change the downward trajectory. In fact, the number may be revised lower in future months, as has been the norm in the years since the economic crisis began.

Drilling deeper into the report will provide little reason for optimism. The labor force participation rate stayed at a generational low and the unemployment rate edged up. On the other hand, the long-term unemployed (those out of work for more than 27 weeks) increased by 203,000 to 3.8 million. Furthermore, over half of the jobs created were low-paying or part-time jobs in education, health care, leisure and hospitality, government, and temporary services. Higher paying information jobs declined by another 16,000 following last month's 8,000 loss, and manufacturing added a scant 6,000 jobs.

The report also contained data that shows how older workers are coming out of, or postponing retirement. This trend is likely caused by inadequate savings rates, low interest rates, and increases in the cost of living that are rising faster than official CPI numbers. Not only does this point to falling living standards, but the jobs being taken by these older workers would normally be filled by younger, less skilled workers, who are left unemployed, buried beneath a pile of student debt and living in their parent's basements.

In truth, economic activity persists in good weather and bad. Winter is largely predictable. It comes around once a year, basically on schedule. Consumers are used to the patterns and know how to deal with them. But don't tell this to today's economists.

A much more plausible explanation to me is that the economy has been weak recently because it is weak fundamentally. The data deterioration corresponds not just to unseasonably low temperatures but also to the diminishment of monthly QE from the Federal Reserve. If you recall the highly anticipated "taper" finally began in mid- December. From my perspective the Quantitative Easing has become the sunshine that drives our phony economy. Diminish that sunshine and the economic winter spreads.

But the sad fact is that QE can push up prices in stocks and real estate, but can do very little to affect positive change in the real economy. That's why I believe that BMW's are selling like hotcakes even as Chevies sit on the lot. Our current policies help the wealthy at the expense of everybody else. Unfortunately, I don't think the economy will improve as long as the QE keeps us locked into a failing model. What's worse, once the weather warms and the economy does not, look for Janet Yellen to first taper the taper, then to reverse the process completely.

So be very wary of the rationalizations that come from economists. I believe they are being used to hide the truth. I just can't wait to see the excuses they come up with once the flowers start blooming in April. They will be doozies.

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One And Only's picture

Is Peter Schiff still one of the top holders of bitcoin?

DoChenRollingBearing's picture

While I may be talking Schiff´s book here, gold would do nicely now if we are screwed.  Some physical CA$H would not hurt either.

DoChenRollingBearing's picture

And by happy coincidence (well, maybe not), I just snuck a "Bitcoin and Gold" topic for discussion over at

I have seen lots of pro-and-con debate here at ZH re BTC, most of you know I love gold and like BTC (at least for now, and as far as I can understand it), so I wanted to see what the BTC people think of gold!

I am a newb over there, so I really have no idea of how gold is viewed.

(I did slip in two sneaky references to FOFOA, smile,,,)



If you get to quickly enough, my topic made their "News".

max2205's picture

Just call it SPY 2500....I cant wait to see the actual high PE print on amzn nflx pcln biib cmg'll be a DOOZIE

TideFighter's picture

If that damn Obamnado quit ripping up everything...Typhoon Nancy...Hurricane Harry....Holder Vortex... 

dryam's picture

Can't tell if you are being sarcastic.  He's always said bitcoin was a temporary mania that would never survive the test of time.

Spitzer's picture

He's been taking flack for being anti bitcoin you dumb fool...


Schiff is the man.

One And Only's picture

What are you his boyfriend?

It was a joke...haha...get it?

dryam's picture

Jokes are only funny when they are funny.

blabam's picture

I tend to agree with you.

DocinPA's picture

He's made me a pile of money through EuroPacific.

TeMpTeK's picture

"The weather is the last refuge of the scoundrels"


TeamDepends's picture

The economy is likely to stay frozen for some time?  Well, you'll be happy to know that global warming is here and.....

philipat's picture

SEASONAL adjustments take into account the fact that there is a winter every year!!

logicalman's picture

Idea of infinite growth.....

Meet Finite Planet.

And the winner is......

I'll let you figure that out for yourself.

Has to happen sooner or later.


tickhound's picture

No no no... That's too far ahead. Foresight, preservation, sustainability, sensitivity... These words don't work for a mindset hell-BENT on reminding you the goal is 'grow'... In numbers and of course, consumption. Waste is fine if profitable.

Look, these bitchez don't want to admit that the world would be a 'better' place if resources were allocated on behalf of EARTHLiNGS. NWO stuff. 500 mil. CABAL they say. In some respect it's true. It's not some notion.

The question is... Is technology wrestled in a direction toward abundance? Or does it remain in the hands of scarcity...

Jam Akin's picture

Of course in classic dialectic fashion "sustainability" has been hijacked by the globalists to justify more central authority to take whatever they fancy. Thesis: Growth Antithsis: Sustainability Synthesis: Global control....

ebworthen's picture

The only weather affecting this economy is the Kondratieff Winter.

Its Only Rock N Roll's picture

the SS Fat America is about to sink to the bottom of the ocean

Sufiy's picture

Peter Schiff and GATA's Bill Murthy: The Real Value of Gold 

 It is time to listen and remind ourselves about the real value of Gold and what is coming next with all geopolitical games unfolding at the crucial levels for US Dollar and Gold markets. China is the major subject of conversation here again and Russia is already talking about the asymmetrical retaliation to the imposed by the West sanctions around the Ukraine situation. Gold manipulation can not go foreverwith China buying the record amount of Gold officially and who knows what are the real numbers in its state-level military plan to accumulate Gold for the De-Dollarisation reset?
  Peter Schiff's question about China buying more Gold companies could be answered very soon if the rumours about CITIC being involved in talks with Barrick Gold about Pascua Lama will be confirmed. This huge mine is located on the border of Argentina and Chile, it is in the very advance development stage and China  will be just the right partner for Barrick over there.

BrigstockBoy's picture

The media must find a tether
For the data blame the weather
The recovery is vapor
In spite of the "taper"
The shills should hang together

B2u's picture

We aren't done yet...we can blame tornadoes in the Spring

mvsjcl's picture

An over-abundance of sunshine in summer.

michaelsuede's picture

You can't ram gold down a transmission wire.  If you could, gold would be the defacto currency today.  However, it's OK to mock bitcoin.  Bitcoin doesn't care.  It's like mocking TCP/IP or HTML.  It's something only ignorant people do.


Graph's picture

Peter, Peter, pumpkin eater.

The guy who claims that problem is ONLY the goverment, preventing, say,  Jaimie to be even more "I am richer than you".

Borderline sycopathic, as he walks amongst desperate crowd of youngsters- generation that is to be royaly fucked,  with his gospel: "Yes, I do have hudred(s) of millons but hey, I am a job creator for all of you". Blaaaah...

kurt's picture

Isn't he Red Sheilds baby boy? "Don't worry Peepee, soon you won't have to be a mouthpiece anymore and you can stay at the Estate for the rest of your life."

whidbey-2's picture

I thought something was wrong with the economics we were using, it is really weather and spending habits which is a part of psychology as I recall. Maybe politics ?