Let’s hope that a return to warmer weather will melt much of the blizzard’s snowfall by midweek, but the effects of this storm are sure to be with us for a long time.
That’s because from Wall Street to Washington, analysts and politicians will have little trouble finding Nemo in the economic numbers for months to come. One can almost hear White House spokesman Jay Carney invoking the storm after a bad employment or GDP number down the road.
But don’t be fooled by those who blame a bad economy on a storm named after a cartoon clownfish. The economy was already stalling ahead of the snow and looks to continue to be headed into reverse.
It’s a familiar pattern in our post-crisis economy, one that we have seen for the past three years in a row.
You know the drill: Optimism and a nice surge after New Year’s, only to be followed by a springtime swoon. Little wonder Fed Chairman Ben Bernanke abandoned his talk of “green shoots” long ago.
Indeed, one indictment of the anemic recovery from the financial crisis is that it is so fragile that almost any exogenous event — even a snowstorm in the middle of winter — can be cited as a cause of contraction. Two years ago, man-made events like the Arab Spring were frequently invoked by President Obama as a reason the tepid economy was entering another rough patch.
This year, conditions are lining up for a replay, perhaps even something more severe, coming on the heels of a surprise 0.1 percent decline in US gross domestic product in the final quarter of last year. That brought GDP growth last year to just 1.5 percent, a number, as Art Cashin of UBS notes, that has presaged a recession going all the way back to 1948.
It was a terrible performance, especially in light of year-end factors that should have boosted growth while borrowing from 2013 gains.
Long before the Weather Channel even christened the blizzard Nemo, the 2013 economy was digging out of a hole dug in the final weeks of 2012. That’s when the widely telegraphed expiration of the Bush tax cuts incentivized billionaires and mere millionaires across the land to push all sorts of income — from dividends to salaries and bonuses — into 2012 to avoid the 2013 tax man.
This resulted in an 8 percent surge in personal income last quarter, even as the overall economy shrunk. Without that income boost, a solid first-quarter GDP could very well prove elusive. If so, the “Nemo excuse” will become a familiar refrain.
In the short run, Nemo will take the rap for a slowing economy — but for how long? Eventually, convenient excuses won’t be able to hide the intrinsic weakness in the US economy.