Extreme Cold to Deal Blow to Economy

January 6, 2014 by Douglas A. McIntyre

139716013Hurricanes, floods, heat waves and snow storms. Any can be powerful enough or widespread enough to actually chip a piece of U.S. GDP improvement in a given quarter. With two-thirds of the nation wracked with record low temperatures over the past week, this is one of those instances.

Some car companies have recently blamed the cold in December for unexpectedly lackluster sales. Some retailers have made similar comments about the holidays. Cold weather kept people out of stores and malls. And the frigid days of the final month of 2013 were not really frigid, at least not compared to what will happen in dozens of states that will post sub-zero temperatures, which will trigger record lows.

Some economists support the theory that people who do not buy goods and services because of bad weather one week will buy them the next. However, there is plenty of evidence that consumers do not move their activity from one period to an adjacent one. And, in another case of the harm weather can do, employers who delay hiring keep job seekers out of work longer than they might have been. Whatever wages are lost in the process can never be replaced.

Additionally, add the effect of weather, in the current case record lows, to the costs of people to warm their homes. That figure may not seem like much, but higher home energy consumption costs spread across millions of households for two or three weeks represents more than a few dollars. These dollars, once gone, are not likely to flow into the consumer economy, despite what they do for energy companies.

Past weather disasters have crippled economic expansion, not just in the United States but in many other nations where such measurements are made. Among the most recent of these that involved a deep freeze occurred in the United Kingdom early last year.

On another note, “artificial” weather problems brought on by man-made problems, such as the horrible air pollution in China, have had effects as well. These may turn out to be long-term and intractable in the People’s Republic.

The cold across the United States will hurt the economy. What cannot be measured beforehand is how much.

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