February 7th, 2011 1:50 PM by Nick Rapplean
Ah, the weather. In theory, it was largely to blame for the fact that far fewer of the unemployed in America put on their jackets and sought employment recently. Thus, our economy only produced 36,000 new jobs last month.
Further, when the people doing the unemployment phone survey called folks and asked if they were employed, more of those who said, “No,” also said they weren’t actually looking for a job at the moment. (Thus, by the logic of this survey, they don’t count. They got snowed out, it seems—or maybe they were already just plain discouraged.)
Meanwhile, the weather has been used to help explain weak housing starts and declining construction spending. The weather can even (perhaps) be blamed, in part, for a good thing—the 42,000 decline in the number of applications for unemployment (to 415,000) in the week ending January 29.
Maybe we can no longer deny it: Economic reports are now slightly less reliable than weather reports.
What cannot be denied is this: Difficult weather has driven the entire world into a terrible food shortage problem. I mentioned last week that Egypt imports 60% of the wheat it consumes. In all, it imports about 40% of its total food needs and, where that was paid for in the past largely by the income from the oil it produced (that is, for oil the country didn’t itself need), geologists are now talking about “peak oil” in Egypt, a term indicating that the country’s oil consumption just surpassed its oil production. Egypt is now a net importer of oil, too. And it no longer has oil money to cover the difference in the cost of the food it must import to feed its hungry population.
The same is true—though the oil component differs from country to country—throughout a great deal of the Middle East. Plainly, food costs are rising (and yes, part of this phenomenon can be attributed to the weather). The people can no longer afford to feed themselves well. They are angry. It isn’t just a laudable idealistic urge toward democracy that is motivating the protestors into the streets of many of the Middle East’s nations.
An official report: “Global food prices rose for the seventh month in a row to a historic record in January, the United Nations said Thursday. The U.N.'s Food and Agriculture Organization's Food Price Index—a commodity basket that tracks monthly changes in food prices around the world—surged 3.4% from December, the highest since FAO started measuring food prices in 1990….. ‘The new figures clearly show that the upward pressure on world food prices is not abating,’ said Abdolreza Abbassian, an FAO economist and grains expert. ‘These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food,’ he added.”
One of the most obvious concerns here—especially when we also consider how metals and other commodities have been gaining in price—is inflation. Food prices in Egypt have already climbed by 21% this year. The rate of inflation has been rising nearly everywhere. Oddly, much of the investment world remains blind to this. U.S. Treasury secretary Geithner recently commented that inflation is “not high on the list of concerns” of his staff. Increasingly, though, it should be very high on my list and yours, as interest rates continue their gradual and steady march north.
Watch for rates to climb this week by another small bunch of basis points. And so it is likely to go until someone trips the panic wire and 4%-4.25% mortgages quickly fade into the distant corners of our memories. As Bob Dylan wrote years ago, “You don't need a weatherman to know which way the wind blows.”