- by Joel Naroff

“The weather outside has been frightful and the impact on the economy not delightful. Since people had nowhere to go, job growth was slow, was slow, was slow.”

Okay, maybe those were not the words to Let It Snow but in a nutshell, the lyrics describe the impact of the blizzards and ice storms on the labor market. Yet despite Mother Nature’s wrath, most other indicators of economic activity were quite solid and that indicates the economy is ready to shift gears.

It still is all about jobs and the January employment report was really strange. On the one hand, there was a modest 50,000 new positions added by the private sector. The financially stressed state and local governments continue to reduce their workforces so the total gain was a minimal 36,000 new jobs. But the headline number doesn’t tell the whole story. This report was clearly a snow job. Two sectors, construction and messengers and couriers, posted declines totaling 77,000. It’s tough to dig when the ground is snow covered and frozen while riding a bike in impassable cities was out of the question.

Despite the terrible weather, the vehicles, computers and machinery and electronics industries added lots of workers. Retailers, facing renewed consumer interest, hired solidly while health care, wholesalers and professional and business services all padded their payrolls. Essentially, if you exclude those few areas where conditions made it difficult to operate, job growth held up quite nicely.

But while economists look at employment, real people watch the unemployment rate. The rate fell to 9.0 percent, the lowest since April 2009 and down from 9.8 percent just two months ago. Declining new claims for unemployment insurance make it clear that the rate should continue its downward trajectory. That will bolster consumer confidence and maybe households will start believing the recession actually is over. And once they come to that conclusion, consumer spending should pick up.

There was other good news in January and early February that point to growth starting to accelerate. The Institute for Supply Management’s reading of both manufacturing and services jumped as the recovery broadened. New orders for just about everything are surging and backlogs are building. That bodes well for future production and hiring.

As we know, no good news comes without a caveat. In this case, it is the rising cost of energy and its impact on household’s spendable income. Gasoline prices have risen thirty cents in three months and higher costs are on the horizon. It is possible that energy prices will increase so much that all the extra income generated by the reduction in Social Security taxes will be burned up by the added expenses. But this is not 2008 when gasoline first broke the $4.00 barrier. Then, we were already in recession. Now the economy is accelerating and while rising energy prices may slow the already too sluggish recovery it is not likely to kill it.

It is clear that the economy has issues. Not only are energy prices up but food costs are rising and interest rates are going up as well. But we seem to have turned the corner and even if first quarter growth is restrained by bad weather, activity should pick up as we go through the spring and by summer, this expansion could be ready to roar.