– Until recently, the usual thinking among macroeconomists has been that short-term weather fluctuations don’t matter much for economic activity. Construction hiring may be stronger than usual in a March when the weather is unseasonably mild, but there will be payback in April and May. If heavy rains discourage people from shopping in August, they will just spend more in September.
But recent economic research, bolstered by an exceptionally strong El Niño – a complex global climactic event marked by exceptionally warm Pacific Ocean water off the coast of Ecuador and Peru – has prompted a rethink of this view.
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Extreme weather certainly throws a ringer into key short-term macroeconomic statistics. It can add or subtract 100,000 jobs to monthly US employment, the single most-watched economic statistic in the world, and generally thought to be one of the most accurate. The impact of El Niño-related weather events like the one this year (known more precisely as “El Niño Southern Oscillation” events) can be especially large because of their global reach.
Recent research from the International Monetary Fund suggests that countries such as Australia, India, Indonesia, Japan, and South Africa suffer adversely in El Niño years (often due to droughts), whereas some regions, including the United States, Canada, and Europe, can benefit. California, for example, which has been experiencing years of severe drought, is finally getting rain. Generally, but not always, El Niño events tend to be inflationary, in part because low crop yields lead to higher prices.
After two crazy winters in Boston, where I live, it would be hard to convince people that weather doesn’t matter. Last year, the city experienced the largest snow accumulationon record. Eventually, there was no longer any place to put it: four-lane highways narrowed to two lanes, and two-lane roads to one. Roofs collapsed and “ice dams” building up from gutters caused severe flooding. Public transport closed, and many people couldn’t get to their jobs. It was a slow-motion natural catastrophe that lasted for months.
The US as a whole did not have a winter as extreme as New England’s in the first part of 2015, and the effects of the weather on the country’s overall economy were subdued. True, New York City had some significant snowfalls; but no one would have paid much attention had the mayor been more competent in getting the streets plowed. Eastern Canada suffered much more, with severe winter weather playing a role (along with lower commodity prices) in the country’s mini-recession in the first half of the year.
This year’s winter is the polar opposite of last year’s. It was 68º Fahrenheit (20º Celsius) at Boston’s Logan Airport the day before Christmas, and the first speck of snow didn’t come until just before New Year’s Day. Trees and plants, sensing spring, started to blossom; birds were just as confused.
Last winter Boston was something of an anomaly. This year, thanks in part to El Niño, weird weather is the new normal. From Russia to Switzerland, temperatures have been elevated by 4-5º Celsius, and the weather patterns look set to remain highly unusual in 2016.
The effect on developing countries is of particular concern, because many are already reeling from the negative impact of China’s slowdown on commodity prices, and because drought conditions could lead to severe crop shortfalls. The last severe El Niño, in 1997-1998, which some called the “El Niño of the Century,” represented a huge setback for many developing countries.
The economic effects of El Niño events are almost as complex as the underlying weather phenomenon itself and therefore are difficult to predict. When we look back on 2016, however, it is quite possible that El Niño will be regarded as one of the major drivers of economic performance in many key countries, with Zimbabwe and South Africa facing drought and food crises, and Indonesia struggling with forest fires. In the American Midwest, there has lately been massive flooding.
There is a long history of weather having a profound impact on civil strife as well. Economist Emily Oster has argued that the biggest spikes in witch burnings in the Middle Ages, in which hundreds of thousands (mostly women) were killed, came during periods of economic deprivation and apparently weather-related food shortages. Some have traced the roots of the civil war in Syria to droughts that led to severe crop failure and forced a mass inflow of farmers to the cities.
On a more mundane level (but highly consequential economically), the warm weather in the US may very well cloud the job numbers the Federal Reserve uses in deciding when to raise interest rates. It is true that employment data are already seasonally adjusted to allow for normal weather differences in temperate zones; construction is always higher during spring than winter. But standard seasonal adjustments do not account for major weather deviations.
Overall, the evidence from past El Niños suggests that the current massive one is likely to leave a significant footprint on global growth, helping support economic recovery in the US and Europe, while putting even more pressure on already weak emerging markets. It is not yet global warming, but it is already a very significant event economically – and perhaps just a taste of what is to come.
(Rogoff/Project Syndicate)
I have to agree with the article that the weather does impact the amount of jobs taken away and being created at a given time. If there is heavy snowfall, people cannot get to work, things cannot be build because of snowfall and etc. If there is rain, that causes flooding and again people have trouble getting to work and also working outdoors becomes nearly impossible. Summer weather would most likely result in the addition of jobs and more projects be completed. It is crazy how weather has an impact on one of the most studied statistics in the world, employment. This statistic can and in the future will be linked to the future global effect of what we know as "global warming." With stronger hurricanes, and weaker winters, I think that we will see a dramatic increase in water coverage around the world, such as floods etc. disabling people from the ability to work. We will see diseases emerge and spread faster, because usually during winter time it is when all the bacteria and viruses die due to cold, but if that cold is taken away from us, we must be ware of what the future holds for us. We are the ones responsible for the warming of the climate, and when the worst happens, we should not blame anyone but ourselves.
ReplyDeleteCan Karako
While economists may argue that short-term weather changes don't impact economic activity, the weather patterns we have been seeing lately are not seemingly short-lived. As someone who lives on the east coast, I have always been accustomed to seeing immense amounts of snow every winter, and have taken part in activities such as snow-tubing, skiing, and so on each year. When the winters fail to live up to typical expectations, people are out of work in these particular industries, and the economy tends to function differently. Flooding is becoming an issue as well, because the lack of snow brings a lot of rain instead. And yes, while this may not matter if the weather change is short-lived, it will matter if it is long-term.
ReplyDeleteThe weather for the past year and a half has been entirely different than anything I had grown up in. I was born and raised in Maine. I am used to snowy winters and lukewarm summers. Now, I am experiencing warmer winters and hot summers. This is very different than Maine's typical weather. It changes how people spend their days. It affects businesses. While some business may boom from the changes, such as water parks and ice cream shops in the middle of a hot summer day, other places that would typically have steady business each day have been suffering. Further, droughts have been hitting hard up north. It's beginning to severely impact Maine's agriculture, one of their top industries in the summer. If weather continues to change like this, industries are going to be heavily affected, and the economy will suffer. We need to seek change before it's too late.
Climate change has a huge impact on jobs and our economy. I personally work at a restoration company where the majority of the work is done outside. Therefore, when it is raining I cannot go to work and lose out on a day’s worth of pay. Prior to reading this article I was unaware of how big of an impact climate change has on the number of jobs and economy. It really makes sense though. Many industries like the agriculture and construction industries work outside, and are therefore directly affected by the weather. For example, if there is a drought than the agricultural industry will be hurt, and there is a good chance that drought was brought upon by climate change caused by us. We are the reason for climate change, and will need to make changes to improve our future.
ReplyDeleteRobert Martin
The weather is often seen as a short term economic factor- if it's raining today, the car wash won't be open and won't make a profit. What happens when it rains for 3 weeks without cease? The weather is not so short-term. Severe flooding for a few weeks can ruin months worth of crops, and the effect is inflationary prices that consumers are not expecting. It's interesting that the other notes the outbreaks in Syria and with burnings to weather-related economic hardship. In times of drought, flood, intense heat, humidity, the human mind goes into a somewhat survival mode. It sure doesn't help how unpredictable the weather is and we can not accurately forecast and manipulate monetary policy to adjust for climate change. El Nino is a weather phenomenon and while many argue it is completely normal and naturally occurring, it is logical to suggest growing emissions and pollution rates may be an influence on the dramatic nature of the recent, powerful effects of El Nino. It is more important than ever, not just for the environment, but for the economy and society, globally, to implement green business practices.
ReplyDeleteThe weather and our environment are critical to our production of food, ability to work and build, and to our livelihood in general. However, many people continue to take the position that climate change is not really occurring or that it does not affect us immediately. However, an even climate change that seems insignificant has begun to alter the water temperature and ocean currents, which greatly affects marine life. Fish make a vital contribution to the survival and health of the world’s population, which includes other animals and people. Marine fisheries provide nutrition and livelihoods for millions of people who live in coastal communities. Not only does climate change affect marine life but overfishing and fisheries are depleting many of the ocean’s inhabitants. Those who depend on fishing for their livelihoods and for their own food are threatened by climate change and overfishing. This has a huge impact on our economy.
ReplyDeleteThe change in weather affects the economy in other ways as well. El Niño in particular causes huge setbacks for developing countries because of drought conditions and flooding. This leads to a shortage of crops and drives the price of food up. Weather also has an impact on the job numbers the Federal Reserve uses to determine how high to raise interest rates. Drastic weather changes are not accounted for in the seasonal adjustments for employment data either. Our employment data may be completely different after dealing with severe changes in the weather.
Weather patterns are a crucial determinant on economic growth and decline. The article is correct when stating that it has a direct impact on the job market as well as consumer activity. During the winter, I work at a very small ski resort in northern Jersey. This past winter was the worst impact to our profit in our mountain’s history. Because of the warm temperatures, we opened very late and closed very early in the season. We were forced to buy nine new snow machines which were each somewhere around 500,000 to a million dollars. Because of the warm weather and lack of snowfall, less customers came to ski. Overall, we made less than half of what we normally make in profits.
ReplyDeleteWeather impacts every industry, not just the winter sports. The clothing industry could be another example. At this point last year and the years before, people would be shopping for jeans and sweatshirts and boots. But with the constant 85 degree weather, no one is in that mindset. Clothing lines have to push back the release of certain styles and trends and this can throw them off completely. I would imagine that holiday shopping will start a little later this year too. Temperatures most certainly affect shopping patterns.
Weather plays an important role in economic growth. For example, El Niño events. El Niño events will create bigger impact in world because El Niño events can reach the whole world. Some countries will occur drought condition or flooding condition when El Niño events come out, which will cause the shortfalls of crops and then increase the prices of food. This will lead to setbacks for developing countries. In addition, extreme weather will impact people's life. For example, heavy snowfalls. Snow disaster will lead to the collapse of roofs. Public transport will be closed. Furthermore, many people will not get to their jobs. These factors will cause the decline for economy.
ReplyDeleteIt is for reasons such as those stated in the article, like the fact that GDP can benefit from more weather-ridden years than others, that economists have a continual job on their hands. More and more complex formulas must be derived to try to provide the strongest datasets for the worlds' consumers. As information becomes increasingly accessible it is ever more vital that businesses receive the most accurate forecasts from their analysts, and this is a job for no one that couldn't be called an economist.
ReplyDeleteWith weather continuing to change, scientists discovering ways that humanity is damaging its habitat and political agendas holding back efforts of humanitarian efforts it is more important than ever that the superpowers of the world take a closer look at the planet Earth as a whole. Instead of each government worrying for just them self they must work in tandem to defeat negative effects of extreme weather. For instance, in order to reduce the amount of farmers made to move to urban areas when crops are not sufficient income, subsidies, new technology and conversations must be had to solve the problems created.
It is clear to see the connection between weather patterns and the economy. We also can easily see the big role it plays in economic growth or even decline. Unusual weather patterns such as having a 20 degree celsius day before christmas, as stated in the text, has major economic influence because it has the power to ultimately chnage economic outcomes for different countries. The global clımactic event, El Nino, can effect countries from Africa to America, with drought or floods, which , in rural areas, ruin crop and create food shortage. In many developping countries, agriculture is a major source of income and due to the unexpected climate change, it is easier than ever to effect a nations whole economic growth. Unexpected climate patterns not only affect the produce itself but the workers and jobs. I know that where I am from, Turkey, our summers are getting hotter every year. It is almost impossible for construction workers to work due to weather conditions. We have experienced 40-42 degrees celsius in my city which is about 104 F and as you can imagine, not much could be done at that temperature. Due to major climactic events such as El Nino, and other unexpected weather patterns, the economy of both developed and developing countries are effected tremendously and in the end both suffer economically.
ReplyDeleteWeird weather may be the new normal but it does not mean that it’s going unnoticed. As the weather continues to grow in unpredictability, so are people’s concerns. Although the author was talking about winter when he mentions “slow-motion natural catastrophe,” I feel like this is a great description on the climate problem across the entire planet. The economic effects caused by weather are hard to predict, but are felt by people all over the world. Food and jobs globally are dependent on the weather and it has even been responsible for wars. I agree with many scientists who have said that climate change is due to human activity, so we can only blame ourselves. As we wait for the massive effects of another El Nino event, we can only hope that we can find a way to lessen the destruction caused by human activity and consumption.
ReplyDeleteAfter reading this text, it has proven to me once again the importance of green ecomomy. We hopefully all know by now the causes behind such climactic events as El Nino. Mankind has been through many catastrophes but none of them can have as big of an impact as climate change.
ReplyDeleteAs mentioned in the text, weather patterns can greatly affect the economies of many countries. The weather patterns are becoming more unpredictable each year due to climate change. Even though many major corporations who have an extrordinary influence on the climate chose to ignore this topic or even deny it, I think that we all can see the significance of weather events from our everyday lives to the economic development of countries. Therefore, the notion of global growth is under threat by the unpredictability of our weather. The production goes down, the prices go up and there is a shortage of supply. This of course, does not sound like the ideal economic growth for any country. Even though developed countries in America and Europe have the power to sustain themselves, the economic decline of the less developed countries is something to be worried about. Hopefully, one day the people will stop worrying about themselves, and think of how they can positively improve our environment.
It is unfortunate that weather does indeed affect the economy whether it’s in a negative or positive impact, more so negatively. There are countless ways in which weather change can affect out economy. In my opinion, some may be lost in productivity, spikes in sale, incite innovation, dealing with damage, and even wary attitudes. Significant storms preclude many workers from being able to report to their jobs and that can create significant declines in revenue for the duration of the inclement weather, or even a much longer period of time. Companies can be inspired to innovate in preparation for future occurrences, due to extreme weather change. I can relate when I say that extreme weather tends to incite fear amongst the general population. Common behaviors in response to dangerous forecasts perhaps include filling up gas tanks and stocking up on essential items such as nonperishable food, water, flashlights and batteries, etc. in the event that power outages ensue. As I’ve mentioned before, dealing damage is an affect from weather change. During the winter, it can cost a lot of money for snow removal, rehabilitation, and even simply repair efforts. Bottom line is that the economy is vastly changing and as weather changes so will the economy, and every lives of people round the globe. Some of these effects are positive, for instance innovation and creation of new jobs. In a few words to sum up my thoughts; whether you get excited for a big storm or hibernate until it’s over, whether you get the day off or get called in for extra hours, the economy will likely feel the impact. Its only a matter of whether it’s a good or bad one.
ReplyDeleteThis post brings to bear some further issues related to the last reading on green economy. That is, it highlights some of the extreme and negative consequences that failure to adopt green economic measures can have not just on the environment, but on the world economy as well. Although, as seen in the article disruptive weather patterns can have a positive effect on GDP, I would still imagine that these weather patterns would have a net negative effect — especially when taking in to consideration economies that rely heavily on agriculture.
ReplyDeleteThe results of erratic weather patterns clearly can be both negative and positive. With that said, I'd imagine that more consistency in weather patterns would allow various markets to take appropriate steps to maximize or mitigate the implications of weather on the economy. This provides all the more reason, assuming climate change is at least in part causally responsible for erratic weather, for nations around the world to become serious about proposals related to green economy.
The environment and the economy are forever tied together, often adversely affecting each other. When it comes to economic impacts as a result of environmental occurrences, they are largely out of our control. However, it is important to understand the effects of environmental occurrences in relation to the worlds' economy, and how those outcomes can be prepared for.
ReplyDeleteStatistics show that the hottest year on record was 2015. What was the hottest year on record before that, you ask? 2014. Quite an alarming statistic, and not a good one at that. Global temperatures are rising as a result of global warming, and many places are struggling economically as a result. The 2016 El Nino could potentially delay the development of emerging third world countries (as it has done in the past), affecting agriculture but more importantly, affecting economic growth. It is important that third world countries are allowed to emerge, because that emergence will positively influence the global effort to end pollution. Yes, industrial advancements might have an adverse effect, increasing global greenhouse gas emissions. However, the development of such countries would allow them to join the global coalition towards developing sustainable and renewable energy sources. With a weak economic structure, continually weakened by natural disasters, countries will not have the time, money, or energy to make such developments possible.
The only way to combat the negative outcomes of such weather is to analyze the weather patterns and prepare yourself against it. If you can expect natural disasters to occur sometime in the future, it is possible to try and compensate for the impending possibility of loss. A country might, for example, try to increase construction production in the summer months if they are expecting an unusually harsh winter. A country expecting sever weather hazards as a result of El Nino, might choose to increase agricultural production in the months prior to the expected disaster. This way, the economic boom in the present will compensate for the impending economic plunge as a result of a future environmental disaster.