However, it’s a mistake to blame every recent weak economic print on the weather. While December’s weak jobs report can be partially blamed on the cold, January’s report looked less impacted by outside factors. It’s telling that the one segment of the labor market that did record a meaningful increase in January was construction, an industry that by its nature has to be done outside. In a similar vein, January’s softness in retail spending appears more a function of anemic income growth than icy pavements; a view reinforced by the hit online sales took in January.
The bottom line: There are other reasons for the weak economic data beyond just the weather, including a still soft labor market and anemic real wage growth. Both of these factors are having a predictable impact on consumers, who got through 2013 largely on the back of a wealth effect and a declining savings rate.
That said, for now the Fed appears to be unmoved by the spate of soft data. All available evidence indicates that the Fed still believes the economy has enough momentum to justify tapering. Apparently, it will take more than a cold winter to deter the Fed from exiting quantitative easing later this year. Still, the Fed’s outlook may change if the recent weakness continues into the spring.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.