I am recently back from a week of working from our office in the United States. Apart from being a massive fan of all things American - burgers, baseball and firearms - the trip was a useful opportunity to speak to US companies as to how they viewed the US economy as a whole.
It hasn't all been good news in recent months. The economy entered 2014 in fine fettle; strong jobs growth was pushing retail sales onwards, consumer confidence was growing as house prices increased regional wealth effects and overall output was good enough to see the Federal Reserve decide that December was the month that they could start to reduce the amount of quantitative easing that they were pumping into the economy on a month by month basis.
Then the weather came.
The United States and Great Britain are two countries separated by a common language or so the quote goes. I would challenge that we are united by a common desire to chat about the weather. The 'polar vortex' - Americans are great at naming things - hit, chilling the densely populated and industrially significant North and North East to temperatures normally reserved for scientific experiments and Siberian labour camps.
Industry shutdown, the construction sector could not operate in places where the ground was frozen like concrete and output slipped. From an economist's point of view this posed an interesting question. Was the weather weakening output and underlying strength would be seen as soon as the snow thawed? Or were deeper structural issues being masked by the weather?
The snow, freezing winds and general disruption unfortunately did not last a few days but instead hung around for most of January and February. To all intents and purposes, therefore we had to take every piece of economic news from the US from those months with a pinch of salt.
March offered some relief - apart from the 7 inches of snow I woke up to on my first morning in Washington DC - and so with it comes a clearer picture of the US economy. We will receive a lot of this data next week, none more important than the monthly payrolls number on Friday afternoon. Previous payrolls releases have disappointed against the recent trend of around 175,000 jobs being added to the US economy on a monthly basis - roughly the same size as the population of Wigan.
To really bounce back we need to see a strong figure of above 220,000 jobs added and, for US bulls, the recent news is encouraging. Initial jobless claims, people claiming unemployment insurance for the first time, fell to the lowest level since the end of November with the 4 week average - useful in blending out extraneous kinks in the data - at its lowest level since September of last year. The correlation between these numbers and the payrolls release due next Friday is strong and we are looking for over 220,000 jobs to be added in the month of March - higher than the market's view of 190,000.
Alongside this data we will get details of wage increases, which have been recently expanding, and surveys from the manufacturing and services sector for the month of March. Was it the weather or was it weakness?
We'll know at the end of next week.Suggest a correction