Diane Swonk, Chief Economist
Mar. 4, 2010 – 8:15 a.m. CT
Inclement Weather Keeps Unemployment Claims Elevated and Chain Stores Suppressed
Jobless claims fell last week to 469,000 - off 20,000 from the elevated levels of the week prior. Claims were worst in the Northeast, where heavy winter snowstorms continued to disrupt economic activity, suggesting that weather continued to play a role in elevating claims.
Tomorrow's employment data will also be clouded by poor weather conditions. Losses in construction employment are expected to be particularly large. The one bright spot could be manufacturing employment - production is on the rise and manufacturers already have cut so much there is literally nowhere to go but up.
Separately, retailers began reporting their chain store sales for the month of February. Most retailers complained about weather disruptions. In general, discounters and retailers like Macy's, which offered large discounts during the month, did better even in the face of poor winter weather.
Finally, productivity growth was revised up and employment costs revised down in the fourth quarter. This suggests that profits will continue to rise as a share of the economy, and profits will continue to surprise on the upside, given the mediocrity of the recovery.
The Bottom Line: The recovery lost momentum in the first quarter, just when we should be seeing momentum build, and labor markets paid the price. The recovery persists, however, especially for profits. This economy will feel better to Wall Street than Main Street in the year ahead.
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