Our new ‘policy makers’: Weather & Energy

I find paragraphs such as these fantastic:

From Ezra Klein´s wonkbook:

But the May jobs report shouldn’t figure to heavily into your thinking. For one thing, some of the bad news in recent months is payback for the good news in the beginning of the year. “Our best guess is that warm weather added 100,000 to the level of payrolls cumulatively through February, and that this unwound over the last three months,” wrote Zach Pandl and Jan Hatzius of Goldman Sachs. “In March though May, payroll growth averaged 96k per month. Thus, excluding the weather payback effects, the underlying pace of job growth was likely around 120-130k during this period.”

Macroeconomic Advisers was similarly cautious in their reading of the latest numbers. “We don’t view the deceleration in employment over the past couple of months as the leading edge of a more pronounced and general weakness as it follows several months of stronger growth; some of the deceleration likely reflects payback from weather effects that boosted employment last winter,” they wrote. And while they see substantial risks for the economy over the next few months, they think “the negative effects from these developments are offset, in part, by sharp reductions in energy prices that are boosting growth of real disposable personal income and adding support to our forecast for real consumer spending.”

In addition to ‘Feed-back’ effects we´ll also have to consider ‘Pay-back’ effects. It´s just wonderful to see what a crisis can bring out!

Instead, the following paragraph taken from a recent Scott Sumner post is what journalists and commentators should be flaunting about, not ‘weather paybacks’:

Monetary policy is all about shaping expectations of NGDP growth over the next two years.  Nothing else really matters.  Everything else should be subservient to that goal.  Until we start thinking of policy in those terms will be stuck in an Alice in Wonderland world where low rates might be easy money, or tight money.  Where an enlarged monetary base might be easy money, or the belated response to a tight money policy that drove NGDP so far down that nominal rates fell to zero.

One thought on “Our new ‘policy makers’: Weather & Energy

  1. Is there an e-mail I can use to send you a chart?

    If you want to talk about weather driving policy, I have a really good one.

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