In Upwardly Distorting The Economy, Has "Global Warming" Become Obama's Best Friend?

Tyler Durden's picture

Back in early February, Zero Hedge was among the first to suggest that abnormally warm temperatures and a record hot winter, were among the primary causes for various employment trackers to indicate a better than expected trendline (even as many other components of the economy were declining), in "Is It The Weather, Stupid? David Rosenberg On What "April In January" Means For Seasonal Adjustments." It is rather logical: after all the market is the first to forgive companies that excuse poor performance, or economies that report a data miss due to "inclement" weather. So why should the direction of exculpation only be valid when it serves to justify underperformance? Naturally, the permabullish bias of the media and the commentariat will ignore this critical variable, and attribute "strength" to other factors, when instead all that abnormally warm weather has done is to pull demand forward - whether it is for construction and repair, for part-time jobs, or for retail (and even so retail numbers had been abysmal until the just released expectations meet). Ironically, while everyone else continues to ignore this glaringly obvious observation, it is Bank of America, who as already noted before are desperate to validate a QE as soon as possible (even if their stock has factored in not only the NEW QE, but the NEW QE HD), that expounds on the topic of the impact of record warm weather. In fact, not only that, but BofA makes sense of the fact why GDP growth continues to be in the mid 1% range while various other indicators are representative of much higher growth. The culprit? Global Warming.

Of course we jest, at least with that term, but wouldn't it be very ironic if it was truly unseasonally hot weather that was benefitting the biggest critic of greenhouse gas emissions? Unfortunately, while central banks can believe that have normalized mean reversion and the business cycle, weather always will get back to the mean with a vengeance. Which simply means that the past 3 months of strength will be "cash for clunkered" quite soon, as all the soaked up extra demand disappears in coming months.

To wit:

In one respect, we agree with the perma-bulls: the weather helps explain why Q1 GDP is weak despite solid monthly indicators (Chart 3). Our GDP model is tracking just 2.0% growth in the quarter. Yet, most of the important monthly indicators are consistent with higher GDP growth. For example, aggregate hours worked have grown at a 3.9% annual rate over the last three months. Add in a percentage point for productivity gains, and it suggests nearly 5.0% GDP growth. Why the disconnect? Blame it on the weather: GDP is hurt by lower energy consumption, while the rest of the economy (and most monthly indicators) benefit from lower energy costs and milder weather.

Full note from BAC:

Bulls, Bears and winter naps

  • Review: As expected, the February data continue to come in above consensus expectations.
  • Hot topic: Mild winter weather lowers energy consumption, but boosts almost every other sector of the economy.
  • Preview: Housing starts are likely to increase, but we expect existing and new home sales to edge lower.

Review: A hot economy

February was a good month for the US economy (Table 1). In the past week, retail sales, jobless claims and regional manufacturing indexes confirmed the strength already reported for employment and motor vehicle sales. As we have noted before, a variety of tailwinds continue to support growth, but should fade over the course of the spring.

Hot topic: Weathering heights

This improvement in part reflects an incredibly mild winter. Average temperatures for December, January and February were the fourth highest since national data started being kept in 1890. According to the National Oceanic and Atmospheric Administration (NOAA), there have been 45 high-impact snowstorms that affected the Northeast since 1956, including five last winter, but none this winter. While the weather has small effects on the economy most of the year, weather has big economic impacts in the winter.

Recently, perma-bull economists [ZH: !!!] have been pushing a revisionist view of the impact of a mild winter on the economy. They point out that warm temperatures mean less spending on energy, lowering overall consumption and GDP growth. As Chart 1 shows, there is some truth to this argument: in the past three months overall consumer spending has been flat in real terms, but excluding energy spending has grown at a 1.7% annual rate. Is a mild winter causing artificial weakness in the economy? And, as such will the spring bring even stronger

We strongly doubt it and we would turn the perma-bull argument on its head. While warm weather hurts energy consumption (and small sectors like the ski industry) mild winter weather stimulates most of the economy. What is striking about Chart 1 is how weak growth has been even outside of energy consumption. Households saved a lot on their energy bills this winter—with a fall in both price and quantity—and despite this windfall, non-energy consumption was weak. In our view, this confirms that consumers remain quite cautious.

A long winter’s nap

One way to gauge the broad impact of winter on the economy is to look at the seasonal fluctuations in employment. At the outset it is useful to net out the retail sector, which is dominated by hiring and firing for the holiday season. Obviously, this is not because winter weather makes it easier to shop, but because of the timing of Christmas. Indeed, like most sectors, unusually bad weather dampens the normal seasonal-surge in holiday shopping.

The rest of the economy tends to take a winter nap. As Chart 2 shows, the normal seasonal pattern for non-retail employment is about a 2.5% drop from October to January, followed by a sharp recovery in the spring and early summer. The biggest job losers in the winter are construction (down 12% from October to February), leisure and hospitality (down 4.2%) and mining and logging (down 4%). However, dividing the labor market into 15 major groups, every sector experiences a drop over the winter, with a typical decline of about 2%. Abstracting from the holiday blitz, even retail employment drops 2% in the October-to-February period.

While seasonal factors illustrate the powerful negative impact of normal winter weather, it is much harder to quantify the impact of unusual winter weather. The easiest sector to quantify is the housing market. Regression models suggest both warm weather and light precipitation have a statistically significant positive impact on housing starts. In particular, we found the mild winter has boosted starts by 5 to 10 pp per month, with the biggest impact in January. We also find smaller impacts for home sales, construction and motor vehicle sales.

Looking ahead, weather is not particularly important in the spring. Hence, even if the weather remains mild, as some forecasters predict, the official seasonally adjusted data will likely drop back to pre-winter levels.

Weather whiplash

In one respect, we agree with the perma-bulls: the weather helps explain why Q1 GDP is weak despite solid monthly indicators (Chart 3). Our GDP model is tracking just 2.0% growth in the quarter. Yet, most of the important monthly indicators are consistent with higher GDP growth. For example, aggregate hours worked have grown at a 3.9% annual rate over the last three months. Add in a percentage point for productivity gains, and it suggests nearly 5.0% GDP growth. Why the disconnect? Blame it on the weather: GDP is hurt by lower energy consumption, while the rest of the economy (and most monthly indicators) benefit from lower energy costs and milder weather.

It is likely that the markets will get the weather story wrong on the way in and on the way out. How so? In the near term, the markets seem to be over-reacting to the better February data, seeing an improving trend rather than a temporary blip. Going forward, the markets will likely expect more of the same, only to be disappointed by a second quarter payback. We are particularly skeptical about the idea that the housing market is starting to turn in earnest.

The weather has likely played a role in pushing 10-year yields out of their recent trading range of 1.80 to 2.10% (Chart 4). Some of the low rates reflected a misguided view that the Fed would move straight from Operation Twist to QE3 even with okay growth in the economy. As our discussion above suggests, it is also likely that the markets have not factored in the weather properly.

That’s all for now, I’m headed over to Bryant Park to catch some rays.

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SheepDog-One's picture

AH yes, so 'global warming' is good now, because looking at the aggregate of all totaly fake 'economic data', we can say its because of the weather.

LOL, huge whatever.

Silver Bug's picture

But I thought Global Warming could be nothing but evil?! You can't have your cake and eat it too Obama Bin Laden.

Fedaykinx's picture

you know who else "tracked flair?"


that's right.

Hard1's picture

Is it too cold to search for a job or am I just lazy?

GetZeeGold's picture



Why get a job when you can just sell tax credits?


We're gonna make a fortune on this global warming crap!


If you really want to make a difference, you can buy our apocalypse tax credits. They're a little pricey but buying them will give you a warm feeling inside while saving a living planet that really was never in danger of dieing.


Use the keyword Muppets for your 10% discount.

Michael's picture

The Sun is this year at solar max for the current 11 year sun cycle. That's why we had a mild winter. Don't count on mild winters going forward for the next 7 years as the solar max is really quite anemic.

I thank God every day for the extended deep solar minimun that started back in 2006, so many of the stupid earthlings will freeze to death in the coming years. And because it stopped the world carbon tax too. Now the NWO fucks want a global minimum tax to make up for it, fuckers.

Flakmeister's picture

Do you always just make shit up?

Here is the Solar Data...

Tell me how you reconcile what you said with figures 4 and 5???


Flakmeister's picture

You loose any credibility you might have had by mentioning WUWT...

By the way, the link I provided is the solar data.... moron....

Michael's picture

Senator James Inhofe reamed Mr Rachel Maddow a new asshole in this interview telling the world about the scam;

Flakmeister's picture

Inhofe should stick to reading the Bible, he should brush up on his Isaiah...

Isaiah 24:4-6. The earth dries up and withers, the world languished and withers, the exalted of the earth languish. The earth lies under its inhabitants; for they have transgressed the laws, violated the statutes, and broken the everlasting covenant. Therefore a curse consumes the earth; its people must bear their guilt.


Flakmeister's picture

Like this moment when Inhofe said

“I was actually on your side of this issue when I was chairing that committee and I first heard about this. I thought it must be true until I found out what it cost.”


Quoting Joe Romm:

The journalist Michael Kinsley famously said, “A gaffe is when a politician tells the truth.”


withnmeans's picture

Wow, looks like the Fed and their muppet banks are still keeping the Markets propped up, just enough to make it all look good. Watch out Fed, Europe is still looking to get their GOLD back, they are going broke and they want some GOLD to fall back on. Not to mention there is underlying tensions building between the Euro countries.

Dr. Engali's picture

It's good until it's bad. Right now as long as it helps Obummer it is good.

SheepDog-One's picture

Obummer lastest CBS poll 41%....oops....even with all the 'GOOD NEWS' and the media 'We're feeling better about things now'...the coma patient still lies motionless on the table. 

TruthInSunshine's picture

I don't have time to read what might be worthy articles. Where can I find the new, more nutritionally fortified iPadHD? I'm hungry as hell, and I don't qualify for SNAP, bitchez.

Element's picture

You can still get iPad2 on the cheap ... not as tasty or filling though, and no dental floss dispenser on the old one.

surf0766's picture

Interesting in PA. the 41% approval rating for the governor is viewed as bad but B.O. 41% is viewed as good ..

Xibalba's picture

Global Summer to be followed by Nuclear Winter. 

Clint Liquor's picture

Global Summer followed by Krondratieff Winter.


Fixed it for you.'s picture
Autumn changed into Winter ... Winter changed into Spring ... Spring changed back into Autumn and Autumn gave Winter and Spring a miss and went straight on into Summer ... Until one day ...
alexwest's picture

only idiot pays attention to what B(l)S says in monthly reports.


evolutionx's picture

The End is near


For many years it has been absolutely crystal clear to some of us (sadly a very small minority) that many major sovereign nations are bankrupt as well as the world financial system. Banks are only surviving because they, with the blessing of governments, are allowed to value trillions of dollars of toxic and worthless assets at full value. And on top of that there are more than $1 quadrillion outstanding in derivatives. These are outside the banks’ balance sheets and there are virtually no reserves against them.



jrpuffnstuff's picture

It's been in the 80s in Chicago in March.  He must be right.  He and Tony Rezko have a weather machine in da' back yard!

dexter_morgan's picture

Obummer was in Chicago today at the Palmer House.....hmmm, maybe he had them fire up that weather changy thingy someone mentions below so his visit would be more pleasant.............

jrpuffnstuff's picture

That's highly likely indeed.   Only problem is Rezko's still locked up in the MCC and Big O couldn't find the instructions.  Michelle turned the thing up too damn high when visiting a few days back.  Daley likes it though... I saw him riding his bike in only his skivies this morning on the lake front trail.   GO GO CHICAGO!

alexwest's picture

as far as economy concerns .. here's real ahrd core facts

# California tax collecions plunged 10% feb y/y

# Ceridian diesel usage
The year-over-year growth in the PCI since May of 2011 has been wobbling slightly above zero. In December 2011, the year-over-year growth turned decidedly negative at -0.8 percent with January 2012 even worse at -2.2 percent; February year-over-year was only slightly negative at -0.2 percent.

, so all 3 recent months down y/y

# GROSS taxes , 12month sum.. grows just barely, 1% y/y (according daily treasury statement)

you decide

Cult_of_Reason's picture

Not global warming Tyler, but Western hemisphere warming.

The Eastern hemisphere had record cold temperatures this year.

Global warming is a myth, fabricated by the left, fantasy to justify taxpayer funding of crony B.S. like Solyndra.

LawsofPhysics's picture

Ah yes, and we can continue to burn all fossil fuels, not only at the current flux, but we can in fact increase the flux exponentially forever.   Yes, it's only the left is reasponsible for all this.  The economy would be booming otherwise, its just that simple, carry on troll.  Your banking overlords are glad to see you still believe the left/right bullshit.  Carry on.


Cult_of_Reason's picture

You can burn what ever you want (even your own greenhouse methane gas when you fart), but the scientific evidence (that was not seasonally adjusted by the BLS or UN appointed corrupt scientists) is clear, there is no man caused global warming.

There is a normal (has been for millions of years) variation of solar cyclical activity that causes fluctuations of the temperatures on our planet Earth (Sun's diameter is about 100 times that of the Earth, so it has an impact), but "burning of fossil fuels" is not the cause of such fluctuations.

Actually, there were many periods when the Earth was much warmer than it is nowadays. These temperature fluctuations took place well before any significant effect of anthropogenic atmospheric CO2. (if CO2 is indeed the cause of global warming [as the left claims], then global temperatures should mirror the rise in CO2.)

For example:

750 B.C. to 200 B.C. cool period

Egyptians records show a cool climatic period from about 750 to 450 B.C. and the Romans wrote that the Tiber River froze and snow remained on the ground for long periods.

The Roman warm period (200 B.C. to 600 A.D.)

After 100 B.C., Romans wrote of grapes and olives growing farther north in Italy than had been previously possible and of little snow or ice

The Dark Ages cool period (440 A.D. to 900 A.D.)

In 540 A.D. the sun appeared dimmed for more than a year, temperatures dropped in Ireland, Great Britain, Siberia, North and South America, fruit didn’t ripen, and snow fell in the summer in southern Europe. In 800 A.D., the Black Sea froze and in 829 A.D. the Nile River froze.

The Medieval Warm Period (900 A.D. to 1300 A.D.)

About 900–1300 AD when global temperatures were somewhat warmer than at present. Its effects were particularly evident in Europe where grain crops flourished, alpine tree lines rose, many new cities arose, and the population more than doubled. The Vikings took advantage of the global warming to colonize Greenland, and wine grapes were grown as far north as England where growing grapes is now not feasible (too cold). The Vikings colonized southern Greenland in 985 AD during the Medieval Warm Period when milder climates allowed favorable open-ocean conditions for navigation and fishing.

The Little Ice Age (1300 A.D. to the 20th century)

At the end of the Medieval Warm Period, ~1230 AD, temperatures dropped ~4°C (~7° F) in ~20 years and the cold period that followed is known as the Little Ice Age.

Winters during the Little Ice Age were bitterly cold in many parts of the world. Advance of glaciers in the Swiss Alps in the mid–17th century gradually encroached on farms and buried entire villages. The Thames River and canals and rivers of the Netherlands frequently froze over during the winter. New York Harbor froze in the winter of 1780 and people could walk from Manhattan to Staten Island. Sea ice surrounding Iceland extended for miles in every direction, closing many harbors. The population of Iceland decreased by half and the Viking colonies in Greenland died out in the 1400s because they could no longer grow enough food there.

Flakmeister's picture

All regional and not global....

You got to do better than this cut and paste to convince anyone but other fools...

Hey the prediction was made in 1896, and the proof came in 1969....

Cult_of_Reason's picture

Re: "All regional and not global...."

Actually, the periods were global (well established facts and confirmed by oxygen isotope ratio studies of thousands of ice core samples taken from all seven continents).

You are obviously don’t know basic history of this planet (a fifth grader level), and I cannot convince an ignorant one.

Unfortunately, you are not the only one. The majority of Washington boneheads (that tax us and spend our money) and the irresponsible/ignorant ones that elect the boneheads do not know basic history of this planet too.

But it is never too late to learn something.



Flakmeister's picture

Oh, please provide evidence of your claim that the MWP was warmer globally than currently?

And please refute the 2011 paper described here

BTW, we do agree that GW is occuring at ~0.16 K per decade?

I'll be back in a while...

Dr. Engali's picture

This should get under LetThemEatRand's skin. Not only is global warming good business for those people close to the money ,it's also good for his beloved big government.

SheepDog-One's picture

I told him this morning to put his money where his mouth is and sell everything, shut down his computer, and go live in a teepee, set the example.

Element's picture

Maybe they can harrp it back to growf ... and keep it there?


the greater moderation bitchez

sabra1's picture

this, this, this is an obamanation!

Tsar Pointless's picture

Mid-70s here in Pittsburgh. For the fourth day in a row. Gonna be near or at 80 a few times over the next five days.

Never - ever - have I seen anything remotely like this in my life. does keep getting hotter and hotter here every year, and instances such as these are becoming more and more frequest. Last year, we were in the 90s in April/May. We're becoming the northern-most southern city in Amerikkka, in more ways than just weather.

No sirree Bob. This is not the global warming for which you are looking.

Tom Servo's picture

So, your observations on weather in Pittsburgh is enough for consensus.  Al Gore would be proud.

Correlation does not equal causation kids!

Squishi's picture

crazy fundamentalist love global warming(aggrandizement)... doesnt matter the religion... they all unite on this matter. 


Tsar Pointless's picture

Oh my goodness, no! You've done gone and brought SCIENCE into this matter.

We don't take kindly to science in these parts. The North Pole has shifted? Bah! Next, you'll be trying to convince me that the Earth is round. You silly liberal!

DES MOINES – During a presidential campaign stop at a small diner south of Des Moines, Congresswoman Bachmann explained to customers there that she believes the earth is actually flat, and that a liberal conspiracy is to blame for covering up this fact.

icanhasbailout's picture

Not one "hide the decline" reference? Someone's slipping!

RollinsArline3's picture

my roomate's mom makes $83/hr on the computer. She has been fired from work for 9 months but last month her pay check was $18339 just working on the computer for a few hours. Read more on this web site .....

Clint Liquor's picture

It must be hard on your room-mate's mom's ass to get fucked on a computer all day. She must be a skank because even the ugly whores around here get $100 an hour.

JOYFUL's picture

Finally, M$B unmasked. No wonder [s]he doesn't bother posting much anymore...18 grand a month I'd slack off too!

Maldives Huh?

Zymurguy's picture

I'm convinced that my cousin (PhD Pysics) who worked for the defense dept. to develop weather altering weapon systems paved the way for our govt. to manipulate the weather and they are intentionally warming areas of the globe to "nudge" public opinion.  It's frightening stuff to think about.