I'm never going to forgive Punxsutawney Phil for the last six weeks of wintry weather, but the economy will.
The past five years have been a Groundhog Day recovery. Every day, we wake up hoping that this will be the day that the economy finally picks up. And every day, we wake up to
hear Sonny and Cher playing find out that it hasn't. Jobs growth just keeps chugging along at 2 percent pretty much no matter what.
Except when it's cold outside—maybe. Job growth stalled below even this good-but-not-good-enough level in December and January when we were finding out what a burst of arctic air feels like. Instead of the 180,000 jobs a month we've gotten used to during the recovery, we got an average of 94,000. It was even more jarring, because it had, once again, looked like the economy was maybe, possibly speeding up right before the polar vortexes hit.
So the question is whether this slower growth was just the unseasonably cold winter hurting the economy for now or something bigger hurting it for longer.
Well, the February jobs report tells us that the slowdown probably happened because the weather outside was frightful. The economy added 175,000 jobs in February, and 25,000 more than we originally thought in December and January. Unemployment did edge up to 6.7 percent, but that was partly for the good reason that more people were looking for jobs, and weren't giving up. Now, people didn't shop or go out quite as much because of the cold, but that will change when the weather does. And it's already starting to. In other words, the economy is pretty much the same now as it's been ever since the recovery began.
There's one last lesson here: Don't overreact to a couple months worth of data. The numbers are noisy, and any speedup or slowdown is probably neither. Take the "acceleration" that supposedly happened at the end of last year. It likely only existed in the original estimates, and, as a consequence, in our minds. But that data has subsequently been revised down, so that surge disappeared—which, as Tim Duy points out, makes our "slowdown" less of one than just steady growth.
And it's actually steadier than we realize if we use better seasonal adjustments. Here's a confession: the jobs number you hear isn't actually the number of jobs the economy added or lost. It's how many jobs the economy added or lost compared to what we'd expect for this time of year. As I've explained before, Lehmangeddon threw these adjustments off, because the models they use assumed that a really cold winter, not a once-in-three-generations financial crisis, was causing all the job losses. So the models started overcompensating after that, adding too many jobs in the winter and too few in the summer. But now that's gone on long enough that they're overcompensating in the other direction—though not quite as much—taking away too many jobs from the winter.
We can fix this just by using more data to make the adjustments. Jonathan Wright has done this at the Brookings Institution, and found that the economy probably added 211,000, and not 175,000, jobs in February. There is no slowdown. It's just a statistical mirage.
So don't forget your booties, because it's cold out there today. But once it starts warming up tomorrow, the recovery will go back to the way it was yesterday—and every day before that since it began. Groundhog Day isn't over yet.