Is A Bad NFP Print Days Away - Goldman Says Warm Weather Added 70,000-100,000 Jobs; Now It's Payback Time

Tyler Durden's picture

Three months ago, this site was the first to discuss the impact of abnormally high temperatures on "better than expected" economic data, which the mainstream media in its perpetual permabullish bias attributed to economic "growth", and not even to $1.3 trillion in ECB liquidity, which today even the ECB's Constancio admitted was nothing but QE: "The purpose of the European Central Bank's two three-year longer-term refinancing operations was to address banks' short-term funding issues and "nothing else." "The sole aim of the LTRO was to cater to the funding stress of euro area banks in general," Constancio said at a colloquium on macro-prudential regulation here. "It never crossed our minds that we were solving the sovereign debt crisis" with these measures. Hence QE, albeit masked by worthless collateral exchange to make the naive Germans believe the ECB was not outright printing money. It was. Now that the 'economy', and by that we mean the stock market of course, is finally turning over, the topic of the weather will start being far more prominently featured, as there will have to be a validation to unleash QE at either the April or the June FOMC meeting (something which the Chairman hinted at on Monday, and which Bill Gross has been saying for months). Why blame it on the weather of course. It is in this context that we show the latest Goldman Sachs economic outlook piece from Zach Pandl who now states that "unseasonably warm temperatures have lifted the level of nonfarm payrolls by 70,000-100,000 as of February." Call it erroneous seasonal adjustments (as we have for the past two months), call it a trigger happy BLS, or just call it people leaving their home more than if there was 6 feet of snow outside, the point is that now up to 100,000 jobs will have to be "given back." Which in turn means that next Friday's NFP forecast of +213K may just end up being as low as 113K, with the print coming just in time for the Chairman to commence warming up the printers, and soon enough to where more QE will give the president the sufficient bounce in stocks he needs to mask the debt ceiling breach in September.

How does Goldman get to its estimate? Why by using something called "state-level panel regressions." Obviously.

The advantage of the panel approach is that by using the cross sectional information as well as variation over time, we will have a much richer dataset and hopefully more precise coefficient estimates. We created two versions of the model: one in which we controlled only for state-specific factors (e.g. faster or slower trend growth) and another in which we controlled for both state- and time-specific effects (e.g. the state of the business cycle and average weather across the nation).


Encouragingly, the coefficient estimates are very similar to the national results: a one standard deviation shock to the HDD variable implies around 30,000 additional payrolls. The main difference with the national regression is that the statistical significance is much stronger (with t-statistics for the contemporaneous HDD variable around seven instead of three). The estimated equations imply a weather impact on the level of payroll employment of about 70,000-100,000 as of February.

In other words, everyone got confused by the weather and assumed it was a symptom of a healthy economy. It wasn't. And now... it's payback time.

The “payback” from this weather related boost could be a drag on payroll employment growth in March and April.

What else does Goldman find?

As a crosscheck to these results, we also tested whether the states in which warm temperatures matter most have also been the states with accelerating job growth in recent months. First, we re-estimated the state-level panel regressions with the states grouped into the nine official Census Divisions (with divisional and period fixed effects). Second, we compared the estimated coefficients of the weather effect by Census Division to changes in employment growth in recent months.


As expected, changes in temperatures have much different effects across regions. Weather has the biggest impact on the “West North Central” region, which includes Minnesota, North and South Dakota, and Kansas. Changes in the weather, at least as measured by the HDD index, have a minimal impact on the Pacific region (Alaska, California, Oregon and Washington). As shown in the chart below, the regions with the largest (most negative) weather effect coefficients have also generally seen faster payroll employment growth recently (the acceleration in payroll growth is measured as the monthly average change in December and January compared to the average over the previous three months).


The state level evidence therefore seems reasonably clear that unseasonably warm weather lifted employment growth over the past few months. However, changes in temperatures cannot account for all (or even most) of the acceleration in job growth. Using our highest estimate of the weather effect, average monthly payroll growth over the last three months ex-weather would have been about 210,000 instead of the reported 245,000. This lower figure still represents a significant acceleration from a three-month average growth rate of 157,000 in November.

What does this mean? Well for one thing, that the market is now about 200 points higher than where it should be if global warming was not a factor. Because as a reminder here is what January and February NFP prints were:

  • February: 227K, Expectations 210K (source) + 17K Beat
  • January: 243K, Expectations 225K (source) + 18K Beat
  • December: 200K, Expectations 150,000 (source) + 50K Beat

In other words, combined the NFP beats of the winter, excluding the favorable impact of the weather, would have been a series of meets, if not outright misses. Whether or not that would have resulted in a lower market is unknown: after all it may have simply made the market soar even more on greater QE demands and expectations. Frankly who cares. It is all centrally planned now.

However, now the time has come for the payback. Especially since Goldman says so. And remember that Goldman, along with all the other banks, demands QE. However for that to happen, not only will the economy have to slow down drastically, but stocks to drop materially.

Next Friday's NFP miss will be just the first part of the plan. As for the second one, why we are sure that Brian Sack has something up his sleeve as usual.

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Moneyswirth's picture

I'm sure the BLS is scurrying around desperately trying to figure out how to get Obamao re-elected.  





maxmad's picture

Rumor is they are going to try and count all the Illegals in the NFP.., That includes O


Take the "L" out of "BLS" and that is what we will get. 

Manthong's picture

They should just have Rahm rustle up a  hundred K or so of those dead Chicago voters and put them to work populating the labor rolls.

Madrid2020's picture

The BLS will continue manipulating data until Dec. 2012.Bet on it.

xtop23's picture

Time to short the USD soon.

Got PM's?

Beam Me Up Scotty's picture

Every time I buy an ounce I'm shorting the USD!!

Cursive's picture

What does this mean? Well for one thing, that the market is now about 200 points higher than where it should be if global warming was not a factor.

This would be a great case study for a high school or college economics course.  Forget killing the lawyers, kill all of the technocrats.

xtop23's picture

Bernanke probably already has just such a class in the works for the FED propaganda tour

Cursive's picture


I doubt Bernanke would point out the lunacy of building complex models that produce unreliable data and reinforce the negative feedback loop of central planning.  Remember, he's a technocrat, a group of people who think that everything can be solved with the right Excel spreadsheet.

xtop23's picture


 At least at the high school level, it's unlikely any of the students in attendance would understand much more than his introduction and spend the remainder of the lecture giggling at his vibrato.

 Most of the college students are still being heavily indoctrinated in Keynesian econ and would, more than likely, take him at his word.

 Besides, they're too wrapped up in devising ways to pay off massive educational debt with cashier jobs at Subway.

 I hear ya though. 

 When all you have is a hammer, everything looks like a nail.

Wm the Shrubber's picture

The Bureau of Lies and Stupidity will surely compensate for weather anomolies with additional birth/death adjustments and/or any number of other modeling contructs to give the Street a happy number.  Agreed that we need to roll over to get to QE3, but I believe we will get a "never coulda seen that coming" shock to the system that TPTB can disclaim any responsibility for.

chump666's picture

Asia markets selling again cept Aus ASX200 infected by HFT bizarreness.

F*ck Goldman, I'd be worried more about the ass of the market falling out then NFP.  About to crack open, all over the place.

Xibalba's picture

Can we melt the ice caps for oil and get on with The End already?  

LouisDega's picture

First to report Bruce almighty Nolan Bitchezzz

Christoph830's picture

The market will only drop significantly if Bernanke does not announce QE at the April FOMC meeting.
One more thing: I think we need to re-assess this notion that the market needs to tank after a bad jobs number for Bernanke to print more. March NFP could print at 250K and the guy would still say "this isn't sufficient.". I think Ben will print regardless but that his announcement of QE will coincide with some sort of Iranian attack so that Iran will be the scapegoat for higher oil prices and not the Fed...

Iam_Silverman's picture

"The market will only drop significantly if Bernanke does not announce QE at the April FOMC meeting"

WRONG!.  The PM market will take off when he announces unstealth QE to the world.

Oh, sorry, you were talking about the other market, weren't you?

chunga's picture

Funny weather.

Green shoots sprout pink slips.

SilverCertificate's picture

Question: If Bernanke is going to unleash QE X in April, why is gold, oil, heavy equipment, etc breaking down? I would think the market would anticipate such an event by taking commoditiy stocks higher.

I think commodities are telling us Bernanke will disappoint... 

Christoph830's picture

That stuff is down because data out of China has been very weak. Do 't worry though, China will commence massive QE shortly

SilverCertificate's picture

That is media spin. If Bernanke was going to announce QE within the next couple of weeks, that stuff should be going higher regardless of China, India, etc... I understand the logic, but I don't buy into it...

SDRII's picture

how about commodities are subject to the same blunt force as equities. You think it is an accident that Sarkozy and o are coordinating a problems. Are the doe inventory numbers that different from the non farms. Copper is up 11 percent this year. Shanghai inventory through the roof and off exchange worse. Markets need leadership and what better summer meme the destitute driver taking their gss savings to home depot to replace the kitchen in the pending foreclosure. 

lolmao500's picture

Here we go folks... NORTH KOREA HAS STARTED FUELING THE MISSILE they want to launch...

Source : Tokyo Shimbun

N. Korea begins fuelling rocket

North Korea has begun fuelling a rocket for a launch that the West considers a missile test, a Japanese newspaper reported Thursday, citing a source "close to the government" in Pyongyang.

ss123's picture

It looks like Beechcraft will be going BK and laying off people shortly. Should be good for the employment numbers.

Yes_Questions's picture



The emperor squid senses payback?

kito's picture

Ha, bad job numbers? Haven't you overheard, obama is being reelected!

Spastica Rex's picture

Hiya, Kito!

I don't understand why B.O. is important; won't any stooge do?

Sam Clemons's picture

Without a doubt, but his attributes provide a lot of room for emotion based dividers in the populace.

Freebird's picture

We need the "Golden Bullet"...

Copyright 2012 - Freebird Inc.

UP Forester's picture

Silver Bullets are easier to load up on.

bugs_'s picture

On the other hand the numbers could show continued improvement.

Could the warm weather have stopped QE3 too?   

nathan1234's picture

When will this Goldman shit stop!!

God help us remove this shit from our midst


ss123's picture

God will help remove the shit when He is done having Goldman do His work.

meetired's picture

Just FYI to you lightweights;

when the pain makes you want to puke, and you suck down the C2H5, Sachs is laughing his ass off, indulges in his favorite scotch that night, and forgets to go to work the next day.

Gives you 15 minutes to exit clear.  Cracks me up, after I puke, or before, whatever.

Lady Heather...UNCLE's picture

...if its a good number, BULLISH (economy recovering)  If its a bad number MORE BULLISH  QE3. Lets be honest, Banana ben knows the game finishes badly so lets get it on quickly so we can have a reset. He wants QE3 asap...bad numbers will be very stock bullish. Didn't banana-man just the other day talk about more accommodative stance if jobs intractable (some structural vs cyclical gibberish involved as well). Aklso Bill Grosshas his portfolio positioned. Make no mistake, do not be short going into the number. I am long PM's (physical for wealth preservation) and leveraged for some trading interest.  Good luck all


Spastica Rex's picture

Does Bernanke care if Obama is re-elected?

Christoph830's picture

No. Obama is just a puppet. Bernanke works for the puppet masters.

AssFire's picture

Very Important....
This is from a retired Police officer with the Texas Highway Patrol...........

"If you know veterans and gun owners, please pass this on to them. Be
very cautious about what you say and to whom. "
I am passing this along...there are comments from two other people I have
also been asked if we keep guns in the house. The nurse just kinda slipped it
in along with all the other regular questions. I told her I refused to
answer because it was against the law to ask.

Everyone, whether you have guns or not, should give a neutral answer so they

have no idea who does and who doesn't.

My doctor asked me if I had guns in my house and also if any were loaded.
I of course, answered yes to both questions.
Then he asked why I kept a loaded gun close to my bed. I answered that my
son,who is a certified gun instructor and also works for Homeland Security,

advised me that an unloaded, locked up gun is no protection against criminal attack.
The Government now requires these questions be asked of people on Medicare,
and probably everyone else.

Just passing this along for your information:
I had to visit a doctor other than my regular doctor when my doctor was
on vacation. One of the questions on the form I had to fill out was: Do you
have any guns in your house?? My answer was None of your damn business!! So it
is out there... It is either an insurance issue or government intervention. Either way,
it is out there and the second the government gets into your medical records
(As they want to under Obamacare) it will become a major issue and will ultimately
result in lock and load!!
Please pass this on to all the other retired guys and gun owners...Thanks
From a Vietnam Vet and retired Police Officer:
I had a doctors appointment at the local VA clinic yesterday and found
out something very interesting that I would like to pass along.
While going through triage before seeing the doctor, I was asked at the
end of the exam, three questions:
1. Did I feel stressed?
2. Did I feel threatened?
3. Did I feel like doing harm to someone?
The nurse then informed me, that if I had answered yes to any of the questions,

I would have lost my concealed carry permit as it would have gone into my
medical records and the VA would have reported it to Homeland Security.

Looks like they are going after the vets first. Other gun people like
retired law enforcement will probably be next. Then when they go after the
civilians, what argument will they have?
Be forewarned and be aware. The Obama administration has gone on record
asconsidering veterans and gun owners potential terrorists. Whether you are
a  gun owner veteran or not, YOU'VE BEEN WARNED!!!!!
If you know veterans and gun owners, please pass this on to them. Be very

cautious about what you say and to whom.

Food for Thought; Never trust a dog to guard your food.

Moe Howard's picture

They were asking at the VA if you had nightmares, then they asked if they were related to military service.

I said yes, and yes, then volunteered the nightmares were about VA healthcare.

 I guess everybody said yes, because they stopped asking.

q99x2's picture

Maybe they no longer need Obama. And maybe they no longer need the stock market to be as high as it is since they are merely playing with themselves. Maybe they need the market a lot lower to get controlling interest in public companies before the final shake down.

They've already installed technocrats in sovereign nations overrode the bill of rights...I don't think they need Obama. A Romney, A Hillary, or any other globalist would do just fine for them. I mean to me it doesn't make much sense to go through all the hassle for someone like an Obama. Things are coming to light about Obama and he may be much more of a liability than an asset.

Lady Heather...UNCLE's picture

...Obama has alot of skeletons in his gay closet


q99x2's picture

Look out Dick Bove just made the public comment that Banks are in the best shape that they have been in in over three decades.

RmcAZ's picture

Anyone who thinks there is going to be a bad NFP before the election is an idiot... it's obvious that it is rigged.

Overflow-admin's picture

"if global warming was not a factor"

Tyler, please correct with "if climate variability (the noise in which many see signs of global warming) was not a factor".


In terms of "global average temp", which is not a very appropriate instrument because of, as I said, high variability, the world is still on average 0.5°C BELOW the 1998 peak! 

P.S. HADCRUT3 and GISTEMP are offset/adjusted because of their patent and proven data bias. RSS is far more reliable because temp is measured by satellites.
P.P.S. Don't trust metoffice (UK) for providing figures, they obfuscate information (see the page layout, how the 2 charts are conveniently cut from 1998 to present? This is a scandal )

Moe Howard's picture

I think it was a joke, however, you never really know what religon someone has until they tell you.

citta vritti's picture

forget warm weather. blame it on the bossa nova

rajonmestra's picture

Well I do hope it's time for the economics to be back on its feet again. And I do hope that the 'next' president would do something that would really help the country. HP printhead