Newspaper article THE JOURNAL RECORD

Forecasting the Economic Winds of El Nino

Newspaper article THE JOURNAL RECORD

Forecasting the Economic Winds of El Nino

Article excerpt

WASHINGTON -- Between El Nino and taxes, nothing is certain these days, making it difficult for economists -- and Federal Reserve officials -- to decide whether the U.S. economy is growing so fast that it will spur inflation.

Unusually warm weather related to El Nino disrupted normal hiring patterns and threw off the government's seasonal adjustments enough to show job growth stalled in March, analysts said. At the same time, early tax refunds surged this year, putting more money in consumers' pockets and boosting spending.

And while that makes it tough to figure out just how strong the economy really is, builders say their experience is at odds with the government's report of a drop last month of 88,000 construction jobs. "Absolutely we're still hiring," said Tim Eller, president and chief executive officer of Centex Homes of Dallas. "There's a shortage of construction workers everywhere we build. If there was a drop in hiring it's because the workers weren't there, or because of the El Nino effect" on the seasonal adjustments. That complicates the Fed's inflation watch. While almost all economists say growth will exceed 3 percent at an annual rate in the first quarter, there's great disagreement about what will happen next. "Much of the economic activity merely has been shifted forward in time, rather than representing a net addition to total output," said James Glassman, senior domestic economist at Chase Securities in New York. He's predicting growth will slow in the second quarter to about half the pace of the first three months of the year. Economists across town at Bankers Trust New York see second quarter growth coming in near 3 percent. That's above the pace the Fed normally considers inflationary. "With jobs plentiful, wages rising, confidence high, interest rates low, and the equity markets blasting away at new records, the stage is set for vigorous economic growth going forward," said John Williams, chief economist at Bankers Trust in New York. …

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