Will Global Warming Do in Mitt Romney?
On a hot summer day in DC it's hard to avoid such thoughts as global warming. Actually, the story is not that tens of millions of people across the country will suddenly realise that the rising temperature of the planet is real and reject a candidate who says that he will ignore it. The story is a bit more complicated.
Governor Romney has made it clear that he intends to focus his campaign on the economy. He will point to the weakness of the economy and place the blame on President Obama. He argues that his background in business makes him better able to manage the economy.
Romney is betting that the economy will appear weak as election day rolls around, lending support to his argument. Several recent economic reports seem to support this view, most notably the weak job numbers for April and May. If the five remaining job reports are equally weak, President Obama will have a hard time making the case that the economy is on a sound path.
This is where global warming comes in. One reason that Obama and the Democrats had been optimistic about their election prospects were a number of relatively strong economic reports for the winter months. The economy generated more than 250,000 jobs a month in the period from November through February. While even this rate is not much cause for celebration in an economy that is down ten million jobs, it was the best three-month performance since the recovery began.
Unfortunately, this pace did not reflect the underlying strength of the economy. It was driven in large part by unusually good weather in these months. Ordinarily, snow and cold weather in the Midwest and Northeast would shut construction sites and prevent projects from getting started until spring.
That didn't happen this winter, since there were major snowstorms and no stretches of sub-zero weather. Bad weather also discourages people from looking for houses and cars and doing other types of shopping. As a result, house and car sales were stronger than would have been the case in a normal winter. Also, stores and restaurants saw more business in the winter months than would ordinarily be the case, leading them to hire more workers.
Global warming vs Romney
But the boost to the economy from the weather in the winter goes the opposite way in the spring. If construction projects were able to operate through the winter, then they will not be hiring people in the spring. Similarly, if people bought houses and cars in the relatively warm winter months, then they will not go out and buy another house or car in the spring. In effect, the spring data will look weak because the winter data were strong.
That is largely what we are seeing in the weak reports that the government has issued in the past couple of months. In effect, the stronger than trend growth in the winter was borrowed from the spring, making its growth weaker than trend.
What does this mean as we get to the summer and autumn? Well, the growth path will return to its trend. That's not a great story, but rather than seeing job growth along the lines of a 73,000 average boost for the past two months, we are more likely to see job growth at close to its 170,000 average increase of the past six months.
Some of the most recent data are consistent with this sort of job growth. For example, the weekly pace of jobless claims has been around 380,000. This is up from the rate of 360,000 in the winter, but still lower than at any prior point in the recovery. This increase in jobless claims is certainly consistent with a drop in the pace of employment growth from 250,000 to 170,000.
The recent housing data has also been consistent with a modest improvement in the economy in the months ahead. The May data on existing home sales (which reflect contracts signed on houses in March and April) was 9.5 per cent above its year-ago levels. Building permits for single family homes in May were at their highest level since an uptick at the start of 2010, due to the first-time homebuyers' tax credit. Prices also appear to be on the rise.
There are enough other blips of data to suggest that the economy will likely be bouncing back from its spring slowdown. It won't be earth-shaking growth, but it won't be quite the limping economy that the April and May data implied.
This means that if Romney is banking his election on being able to point to Obama's weak economy, he is likely to be out of luck. There would be some real poetic justice in this story insofar as Romney's error stemmed from a failure to recognise the economic impact of a winter that was artificially heated by global warming.