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Is It The Weather, Stupid? David Rosenberg On What "April In January" Means For Seasonal Adjustments

Tyler Durden's picture





 

Remember last year when the tiniest snowfall was reason for everyone and their grandmother to miss every possible estimate, always blaming it on the weather? Or rainfall in the spring? Or warm weather during the summer? Oddly enough one never hears about the opposite: the beneficial, and one-time, impact to trendline due to countertrend weather, such as the fact that we just had April weather in January. Granted, nobody in the programmed MSM will touch this topic, which is why we go to the most trustworthy filter of real economic data - David Rosenberg.

From Gluskin Sheff

Data Skew

...Be careful in assessing the seasonally adjusted data when January weather feels like April. It was four to five degrees warmer than usual and the third fewest snowflakes to hit the ground in the past 50 years. On top of that, let's not lose sight of what real GDP did in Q4 — considerably below consensus view from last summer and sub-1% at an annual rate once inventories are stripped out. The only variable preventing real GDP from stagnating completely was the fact the price deflator collapsed to just 0.4% at an annual rate. If it had averaged to what it was in the previous three quarters, real GDP growth would have come in close to a 0.7% annual rate. Strip out the inventory build-up and real sales would have contracted at a 1.3% annual rate and recession would be dripping off everybody's tongue right now.

The data have been bizarre to say the least. Auto sales are up 11% from a year ago and yet miles driven have declined 1%. So people are buying more cars but using them less. Consumer credit in December soared $19 billion and yet the total consumer expenditures shrunk $2 billion. So people are borrowing more but spending less. Speaking of shrunk, I think 1 need a shrink. And here we have housing turnover supposedly rising 4% from the year ago level, yet home prices have managed to deflate 3%. U.S. exports are up 10% over the past year while European imports have barely risen as recessionary pressure mounted.

Despite the reported two million-plus jobs "created" over the past year, Federal government income tax revenues are down 1.5% (thanks to Zero Hedge for that little tidbit). Call it a wageless job recovery, I suppose. The equity market is on fire even with only 60% of companies beating their EPS estimates for Q4 and a mere 55% surpassing top line forecasts. Go try and figure these things out, because I have a headache just thinking about it.

To be sure, January's jobs data may have ended up being decent even without the weather effect, but keep in mind that the number of jobs is still 5.6 million lower today than at the end of 2007, so we are still climbing our way out of a very deep hole four years later. Note that this is now month 48 in which employment has been below the pre-recession peak (exceeding the post-2001 stretch of malaise and making this the longest time period since the Depression in the 1930s) and payrolls have not managed to make a new high. That says something.

So many other indicators as well, such as manufacturing shipments, industrial production, real incomes, real retail sales, housing starts and home sales — all these macro indicators, remarkably, are still below where they were before the last recession began. That should help put things into a certain context— the economy is still healing four years after the initial detonation.

One final note. Not only are gasoline prices on the rise, therefore putting a cloud over the consumer spending outlook, but also keep in mind that Congress is still in a stalemate regarding the extended payroll tax and unemployment insurance benefits that expire at the end of this month. Estimates we have seen suggest that this will result in at least a 0.7 of a percentage point drag on overall GDP growth in 2012, if this withdrawal of fiscal stimulus is actually allowed to happen.

I keep hearing about the 8.3% unemployment rate and how it is at its lowest level since February 2009 and how it is playing out so well for President Obama's re-election chances. Nobody seems to know that the U6 measure is still north of 15%, which includes both unemployment and underemployment.

The fact of the matter is that discouraged workers are dropping out of the labour force like flies, and so what is key is the 'employment rate' or the employment¬to-population ratio — you can drop out of the labour force for a whole host of reasons, but you only drop out of the population base if you die or leave the country. You don't have to survey people as to whether they are actively searching for work — the population count is not subject to opinions. And the employment rate at 58.5% has not budged for three months and remains very close to the depressed lows for the cycle

 


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Thu, 02/09/2012 - 17:52 | Link to Comment oogs66
oogs66's picture

Much better written than the one about the weather from last Friday - but same point - the adjustments are all messed up

Fri, 02/10/2012 - 06:58 | Link to Comment CPL
CPL's picture

It means no corn, barley or wheat from Eastern canada this summer, or translated.  8% of total world production.

 

Gas is going up.

All food staples are going up.

Construction materials going up.

Beer is prices are going up.

 

However.

 

Means a hot summer and spring.

 

Cheaper strawberries

Cheaper weed

 

So margarita's and blunts are going to have to do this coming year as as staple for North America.

Thu, 02/09/2012 - 17:52 | Link to Comment fonzannoon
fonzannoon's picture

CNBC must shock this guys balls when they bring him out there because he always sounds a lot more positive on TV.

Thu, 02/09/2012 - 18:59 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

 

When CNBC has him on, his paid job is to attract investors to Gluskin Scheff. 

When his newsletter comes out, he is trying to help investors already at Guskin Scheff.

"which is why we go to the most trustworthy filter of real economic data - David Rosenberg."

He is, without peer, that.

Thu, 02/09/2012 - 19:14 | Link to Comment PhilB
PhilB's picture

Just like CNBC rolls out perrenial bears and bulls at bottmos and heights of mkts, ZH should hold itself to a higher standard than David Rosenberg. Does anyone remember how he called for a 99% chance for US to be in a recession in 2H2011? 99%!

I really wish ZH would just point out the problems in a more responsible way and not FLASH us these nondiscriminating Bears. As i point out, there is plenty of bad news and problems in the world you can inform you readers about rather than to go out and look for David Rosenberg cause you find it convenient.

Shame.

Thu, 02/09/2012 - 19:25 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

It's not about trading.

It's not about calls.

None of us will be alive all that much longer so none of that matters.

He's just an observer.  Not a prophet.

Thu, 02/09/2012 - 19:22 | Link to Comment PhilB
PhilB's picture

<>

Thu, 02/09/2012 - 17:59 | Link to Comment adr
adr's picture

You know that saying, "The truth shall set you free". Nope it is now, "The truth will make you insane"

The new saying is, "Delusional hope will set you free".

Thu, 02/09/2012 - 17:59 | Link to Comment tiger7905
tiger7905's picture

Video from contest that sums up US Federal Debt Crisis perfectly...

 

http://goldandsilverlinings.com/?p=1874

 

 

Thu, 02/09/2012 - 18:02 | Link to Comment Manthong
Manthong's picture

Pretty soon a lot of peeps going to know they been punked.

Thu, 02/09/2012 - 18:12 | Link to Comment Borodog
Borodog's picture

I still haven't seen anyone comment on my theory that the uncertainty over the payroll tax cut extension pulled wages forward to the end of December which then showed up in paychecks in January. It makes sense to me, but I'd like to hear someone explain why it didn't happen.

 

Thu, 02/09/2012 - 22:20 | Link to Comment disabledvet
disabledvet's picture

my theory is that Arf the Wonder-poo peed on the screen door instead of the fire hydrant thus layin the groundwork for one of the greatest stock market "recoveries from death" ever...if not THE greatest. Thanks Arf!

Thu, 02/09/2012 - 18:24 | Link to Comment SheepDog-One
SheepDog-One's picture

4 degrees warmer? WOW BUY BUY BUY!

Thu, 02/09/2012 - 18:28 | Link to Comment g3h
g3h's picture

That's why Dow needs 4000 points highers from the Oct low.

Thu, 02/09/2012 - 22:26 | Link to Comment disabledvet
disabledvet's picture

DAMN SKIPPY! Not only does this save a fortune in both heating maintenance bills for EVERYONE...it also "pays it forward" by increasing productivity for employees and potentially creating a much longer growing season than is ordinary and far lower natural gas prices than should be (something immediately accretive to the bottom line of ALL businesses.) The fact that this truly bizarro weather has got even warmer in February says May can come three months early. Shall see of course...there will be consequences if this is maintained since there is no snow melt and the drought concerns could be a big problem. Great for the trucking business tho. Water ain't cheap to move...and if you need it that's how you're gonna get it.

Fri, 02/10/2012 - 00:44 | Link to Comment AgShaman
AgShaman's picture

Iffin' that's what you wanna do....the CME has a market for you already set up to "bet" on the weather.

Disclaimer: The Rothschilds have moved out of gold....dey' is in da weather business now.

They will be controlling the weather patterns from here on out....so that the "Casino" can bring you a managed trading platform.

The heir to the House of Red Shield has been making rounds for a couple years now. You know....that "Climate Change" thingy that the creator of the 'Interwebs' sold you on.

Eventually....you'll be profiled....and your 'carbon footprint' will be categorized and cataloged....soze they can finger out what they need to charge you in your breathing and living tax

Thu, 02/09/2012 - 18:25 | Link to Comment g3h
g3h's picture

Good job, Tyler.  Rosenberg not only quoted your last, one and only insightful report about job creation and income tax collection, apparently he reads ZH daily.

Thu, 02/09/2012 - 18:36 | Link to Comment tony bonn
tony bonn's picture

"...and recession would be dripping off everybody's tongue right now."

when you hear the r word, you will know that the plutocrats have given obama his walking papers....

Thu, 02/09/2012 - 18:40 | Link to Comment Styles9002
Styles9002's picture

I always laugh when I listen to On the Economy with Mike 'Mr Potato Head' McKee. If he isn't the worst on-air personality in terms of style and delivery, he is giving it a run for the money. With respect to content, he only looks at the headline figure and never mentions anything about the revisions. And to think some people listen and don't realize that he doesn't know his ass from his elbow. At least Sara Eisen is easy on the eyes. 

Thu, 02/09/2012 - 19:04 | Link to Comment DannyTX
DannyTX's picture

David Rosenberg and Charles Biderman have both made sense of this truly broken market today.

http://trimtabs.com/global/news_video.htm

 

Thu, 02/09/2012 - 20:42 | Link to Comment ddtrader
ddtrader's picture

A long time ago, an old bank vice chairman told me this about companies using weather as an excuse for poor performance:  "Weather affects everyone, I don't want to hear about its effect when I am making a credit decision.  If I hear about weather the credit is dead."  Useless weather excuses are just that - excuses.  

Thu, 02/09/2012 - 22:19 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

It's the ecology, stupid.

Fri, 02/10/2012 - 01:15 | Link to Comment Clowns to the l...
Clowns to the left_ jokers to the right's picture

The jobs data is a crock o' crap and the weather excuse is a bigger crock o' crap. The spike in the number of non-seasonally adjusted UE claims is basically due to seasonal layoffs that happen every year. There will be another less dramatic spike in July. It happens annually, along with the huge adjustments.

Remember the 243K jobs added? Compare the seasonally adjusted to the non-seasonally adjusted numbers and they disappear and reappear late last year. Look at Dec '11 compared to Jan '12 in the non-seasonally adjusted numbers. Oops. There are actually 2+ million fewer jobs. However, if you add the non-seasonally numbers from Nov, Dec and January and do the same for the seasonally adjusted numbers then compare them, they're magically within 1% of each other. Yet the seasonally adjusted numbers say "Yay!", while the non-seasonally adjusted numbers say "Oops.".

http://www.bls.gov/news.release/empsit.t17.htm

Before long, seasonal hiring will kick in and the NSA numbers will start being adjusted up. By the end of the year, everything will level out and both numbers will be within a couple percentage points of each other.

8.3% unemployment rate? That's a crock to begin with but even the crock is seasonally adjusted and the non-seasonally adjusted UE rate is 8.8%.

The only numbers that really matter are labor force level, not in labor force and labor force participation. The reason why the labor releases you hear on the news are usually UE rate or claims numbers is because even people that don't pay much attention have heard them for years and they associate a certain level with things getting worse or things getting better.

Fri, 02/10/2012 - 02:49 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

doubleDoom, straight up, please

and one for my lil fren, here, too...

here's toya, rosie!

Fri, 02/10/2012 - 10:16 | Link to Comment battlestargalactica
battlestargalactica's picture

For it is such a long time since my better days.
I say my prayers nightly this will pass away.
The color of the sky is grey as I can see through the blinds.
Lift my head from the pillow and then fall again
with a shiver in my bones just thinking about the weather.

-10,000 Maniacs
Like the Weather

Sat, 03/17/2012 - 10:09 | Link to Comment cnhedge
Do NOT follow this link or you will be banned from the site!