If there's one nagging factor that continues to hobble hopes for a sustained healthy global economy and equity markets, it's the lack of legs on the massive U.S. consumer sector. That's why evidence of a recovery in the U.S. jobs market - critical to a revival in confidence and spending - has become a near-obsession with investors.
After two years mired in jobless doldrums, many market watchers are convinced that February will be the month the U.S. job market finally returns to growth. This week's sharp decline in the weekly new unemployment claims added to that conviction.
"It seems reasonable to assume that the U.S. economy is on the cusp of consistent net job creation," wrote TD Securities economics strategist Millan Mulraine.
But there's a twist to this labour-recovery story market watchers hadn't anticipated: Snow.
SNOW JOBS = NO JOBS?
The U.S. Northeast was battered by two major winter storms in the past week, all but shutting down the populous New York-Washington corridor. In the process, argues National Bank Financial (NBF), it may well have shut down the February job numbers, too.
The bank noted that the storms came in the week the U.S. Labour Department is using as its reference period for its February employment data. With many businesses and government offices grinding to a halt, the storms likely have stifled hiring and even triggered short-term layoffs at the exact time the head count is being taken. There's a precedent for this, NBF said.
"Bank in January, 1996, when a blizzard shut down the eastern coast of the United States, roughly 200,000 jobs were reported lost on the month," wrote NBF chief economist and strategist Stéfane Marion. That was in sharp contrast to the average monthly job gains of about 150,000 prior to the blizzard month, he said.
The U.S. labour market made up for its storm-related losses the next month, adding a whopping 600,000 jobs. But by March, 1996, it had reverted back to its pre-storm trend.
AN INVESTOR WHITEOUT?
Based on the 1996 experience, NBF predicted that this week's "Snowmageddon" will result in the U.S. reporting a loss of about 200,000 jobs for February - far worse than the 20,000 lost in January.
That should mean the jobs market will crank out a substantial gain in March. But it won't be clear how much of that gain reflects improving employment conditions, and how much is merely making up for storm-related losses.
The result? Market watchers' view of the labour market will be blurred by blizzard effects at least out to early May, when the April numbers are out. That lack of visibility may make it difficult for the stock market to gain any traction until the snow has melted.
David Parkinson