Many analysts and officials at the Federal Reserve have been blaming cold weather in December and January for economic weakness. Freezing cold has become the standard excuse for weak retail sales, high unemployment claims and a variety of other reports.
If weather was truly causing an economic slowdown, we would expect to see construction activity slow. Construction is one of the most weather-dependent economic activities, because snow and ice could prevent crews from working safely. Cold weather alone could slow construction projects, since certain activities like pouring concrete cannot be done below certain temperatures.
This week, we learned that construction spending rose in January, surprising economists who had expected to see a decline. The latest report also revised the data for December and showed that construction spending rose 1.5 percent that month, much higher than the initially reported gain of 0.1 percent.
Robust construction spending shows that weather might not be the driving force behind the weak data. It is possible retail sales are down, for example, because incomes are not growing fast enough to allow for gains in consumer spending.
The economy might also be establishing a new and lower level of activity. The U.S. economy has been able to grow at a relatively rapid pace for many years, but government spending might finally be crowding out private investment.
Government safety net programs that can offer benefits equivalent to jobs that pay $10 an hour or more might be incentivizing some Americans to leave the workforce.
Fewer productive assets and fewer workers will result in slower economic growth. Rather than reflecting the weather, weak data may simply be showing what happens after five years of economic policies designed to decrease economic growth.
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