January 12, 2010

Too Cold to Work?

By Amanda Parsons - ALM Specialist

Last week’s employment report seemed to show little change with the unemployment rate remaining at 10.0%. The underlying details show a different picture. The labor force fell by an astonishing 661,000 people. One theory is these people have simply become discouraged due to the job market and have given up looking for work for now. The unemployment rate would be higher if these persons were still counted in the labor force.

Nonfarm payrolls dropped an unexpected 85,000. As you may have noticed, it's colder outside than it
usually is this time of year. Record low temperatures across the country may be partially responsible
for the drop in payrolls. As you can see in the chart below, the number of people not at work due to bad
weather jumped in December to 241,000. This is the highest of any December since 1977.

Unemployment indicators are lagging indicators, meaning they don’t necessarily predict which direction the economy is heading. All we can tell for sure is that the employment situation did not improve in December. Before we can get our hopes up for a sustained economic recovery, we’d like to see a sustained positive change in the employment report.

This Week      Release                                                        Expected        Previous
Thursday         Advanced Retail Sales (Dec)                         0.5%                1.3%
                        Retail Sales ex Autos and Gas                       0.2%                0.6%
                        Initial Jobless Claims                                     435k                434k
Friday              Consumer Price Index (Dec YoY)                 2.8%                1.8%
                        CPI ex Food and Energy                               1.8%                1.7%