Clearing the Fog: The Predictive Power of Weather for Employment Reports and their Asset Price Responses
- American Economic Review: Insights (Forthcoming)
This paper exploits vast granular data – with over one million county-month observations – to estimate a dynamic panel data model of weather’s
local employment effects. The fitted county model is then aggregated and used to generate in-sample and recursive-window out-of-sample
(“nowcast”) estimates of the weather effect on national monthly employment. These nowcasts, which use only employment and weather data available prior to a given employment report, are significantly predictive not only of the surprise component of employment reports but also Treasury bond returns on the days of employment reports.
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