Jobless rate nudges down to 5.5%
Canada posted another surprisingly strong month of job gains in a labour market that is on track for one of its best years on record.
The economy added 53,700 jobs last month, Statistics Canada said Friday in Ottawa, following a gain of 81,100 in August. Canada has now added 358,100 since December, the most in the first nine months of a year since 2002.
Canada’s labour market seems to have been vaccinated against the global economic flu going aroundAvery Shenfeld, chief economist at CIBC World Markets
The strong print will only reaffirm Bank of Canada expectations that the economy has developed a certain amount of resilience to trade headwinds and global economic uncertainties, giving it ammunition to buck the global trend of lower interest rates.
“Canada’s labour market seems to have been vaccinated against the global economic flu going around,” Avery Shenfeld, chief economist at CIBC World Markets Inc., said in a note to investors.
The rise in employment dropped the unemployment rate to 5.5 per cent, from 5.7 per cent in August, near the lowest in the past four decades.
Economists were anticipating just 7,500 jobs in September, with the unemployment rate unchanged. Canada’s dollar jumped after the report, rising 0.5 per cent to C$1.3227 against its U.S. counterpart at 8:33 a.m. Toronto time. Yields on government two-year bonds increased 9 basis points to 1.63 per cent.
The underlying details of the report were not as strong as the headline number. While the gains were all full-time, they were entirely public-sector positions and self-employed. Private sector jobs dropped by 21,000, with continued weakness in goods-producing industries.
On the plus side, not only is employment growing, but so are wages. Hourly pay was up 4.3 per cent in September from a year earlier, accelerating from a 3.7 per cent pace in August. The last few months have seen the strongest year-over-year increases in a decade
- Total hours worked in September were up 1.3 per cent from a year earlier, from a pace of 1.2 per cent in August
- The economy added 70,000 full-time jobs in September, with part-time employment down 16,300. Canada has added almost 300,000 new full-time jobs this year
- One difference in the September report from recent trends is that most of the job gains reflected largely lower unemployment levels rather than rising labor force participation. The number of unemployed Canadians fell by 46,900 in September, while the labor force increased by just 6,800.
- September’s gains were led by the health care sector, which produced 30,000 jobs; the information sector led lossesBloomberg.com
Industrial earnings take center stage in third quarter
NEW YORK (Reuters) – Profit reports from big manufacturers and other industrial firms arriving this week will provide investors with a crucial corporate gauge of the U.S. economy’s health and the fallout from trade tensions between Washington and Beijing.
Third-quarter industrial sector earnings follow a closely watched survey earlier this month that showed U.S. manufacturing activity tumbled to a more than 10-year low in September. Industrial companies also are among those most at risk from the lingering trade dispute between the United States and China.
“This third quarter earnings season is going to be really important for industrials,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
“The industrial sector is really going to be watched closely for signs the overall economy is really slipping, and slipping enough to matter to stocks,” Carlson said.
While the industrial sector .SPLRCI represents slightly less than 10% of the overall S&P 500 .SPX stock index, it can provide an outsized perspective on the economy. It includes major multi-national manufacturers as well as transportation companies whose results offer a barometer of economic activity.
The industrial stock sector has climbed over 19% this year, slightly ahead of the 18.5% gain for the overall S&P 500 .SPX. But while the broader market has hit all-time highs this year, the industrial sector has yet to breach its record peak from early 2018 and currently trades about 5% below it.
Industrial results start pouring in this week, including from diversified manufacturers Honeywell International Inc (HON.N) and Textron Inc (TXT.N), railroads Union Pacific Corp (UNP.N) and CSX Corp (CSX.O), and United Airlines Holdings Inc (UAL.O).
Third-quarter earnings overall for industrial companies are expected to rise by just 0.7% from a year earlier, according to IBES data from Refinitiv. That would represent a better performance than for the full S&P 500 .SPX, for which earnings are expected to fall by 3.2%.
Profit declines are expected for the tech .SPLRCT, energy .SPNY and materials .SPLRCM sectors, while companies overall are facing tough comparisons with results from a year ago, when they benefited from a big corporate tax cut.
‘TOUGH TO BE AN INDUSTRIAL COMPANY RIGHT NOW’
Investors will also be keenly watching for financial forecasts for the fourth quarter and next year. Earnings in 2020 in the industrials sector are forecast to jump 16.2%, while the overall S&P 500 is seen rising 11.1%, according to Refinitiv.
Expectations for a sharp increase in overall earnings next year rests in part on the economy avoiding a recession, said Omar Aguilar, chief investment officer of equities and multi-asset strategies at Charles Schwab Investment Management in San Francisco.
For industrial companies, Aguilar said, a critical factor is whether they ramp up capital spending, which could depend on U.S.-China trade tensions yielding a clearer picture of the business environment.
“The majority of these companies stopped their capital expenditures as a result of uncertainties because of the U.S.-China negotiations,” Aguilar said. A rebound in capital spending could help restore earnings growth, he added.
U.S. and Chinese officials culminated talks in Washington last week with U.S. President Donald Trump outlining the first phase of a deal to end their trade war, including suspending a threatened tariff hike.
But officials on both sides said much more work was still needed to reach a final comprehensive agreement, and Trump left tariffs on hundreds of billions of dollars of Chinese products in place.
Carol Schleif, deputy chief investment officer with Abbot Downing in Minneapolis, said that Friday’s developments show some movement in the U.S.-China trade tensions, but uncertainty remains for companies.
As the industrial companies hold their quarterly conference calls, Schleif said she will be listening for commentary about the impact that has already been felt from the trade war, including whether companies have pulled shipments in to get ahead of tariffs, or if have they deferred capital spending or employment.
“Companies are being forced to reassess their supply chains, and that takes time. To the extent companies are making progress on diversifying that, it might lead to a muddy couple of quarters,” Schleif said. “You have a lot of pieces at play that make it tough to be an industrial company right now.”
UK can afford to spend more on economy
LONDON (Reuters) – Britain has a strong fiscal position and, with borrowing costs at a record low, it can afford to spend more to help its economy grow, the government said on Monday.
Rules for the budget will be reviewed and will keep control on public debt, the government said in a briefing note accompanying the Queen’s Speech to parliament, echoing comments made previously by finance minister Sajid Javid.
A national infrastructure strategy will be published in the autumn with a view to closing the gap in productivity between London and other parts of the country and addressing the challenge of climate change, the briefing note said.
Earlier on Monday, Javid said he planned to deliver Britain’s first post-Brexit budget statement on Nov. 6, less than a week after the country’s deadline for leaving the European Union, if it exits with a deal.
Writing by William Schomberg, editing by Andy bruce
A little more sun is shining on a cloudy U.S. economy
Is the sun peaking through the clouds that have been gathering over the U.S. economy? It sure seems so.
Interest rates have fallen and fueled a rebound in auto and home sales. The unemployment rate has skidded to a 50-year low of 3.5%. A key measure of how Americans fell about their own financial health rose to a three-month high. And to cap it off, news of at least a tentative trade deal between U.S. and China announced Friday have pushed stock markets close to record highs again.
More good news could come this week from the sum of retail sales in September. Economists polled by MarketWatch predict sales rose a steady 0.3% during the month.
Consumer spending has the biggest influence of all on how fast the U.S. economy grows and retail sales are a big part of that. Sales of new cars and trucks were strong in September, likely more than offsetting a decline in gas-station receipts tied to lower fuel prices.
Robust car sales tell us a lot about the economy. Buyers only make big purchases when they are confident about their job security and their ability to make their monthly payments.
The evidence suggests that Americans are still fairly optimistic even though the economy is not as strong now as it was in the spring. Consumer sentiment, for example, rebounded in early October, reflecting an expectation that the strong labor market will continue to boost their incomes.
What could be a big help is the first step in broader trade deal between the U.S. and China.
President Trump on Friday announced a “substantial phase-one agreement” after a fresh round of talks aimed at ending a trade war between the world’s two largest economies that has choked global growth and damaged both countries. Manufacturers globally have been particularly hard hit.
“The tightening of trade terms around the globe and the uncertainty surrounding trade negotiations are the main reasons for the spreading malaise,” economist at Northern Trust wrote.
The spat has also dampened U.S. business investment — another key driver of economic growth — and kept a lid on the stock market. The recent rally has been fueled largely by hopes of a deal.
Yet even a partial deal or warmer relations with China probably won’t be enough to reignite U.S. and global economic growth, at least not anytime soon. After so many abrupt turns in trade talks, Wall Street is sure to take a wait-and-see attitude once the initial euphoria wears off.
“It is difficult to take that much comfort from the latest signs of progress given that we’ve had plenty of apparent truces in recent months end abruptly in a sudden further escalation in trade tensions,” pointed out senior economist Michael Pearce of Capital Economics.
U.S. stocks notched significant gains Friday, though they closed off session highs, after news that the U.S. and China had reached an agreement to ease trade tensions that includes the elimination of at least some planned tariffs.
The Dow Jones Industrial Average
rose 319.92 points, or 1.2%, to 26,816.59, the S&P 500 index
advanced 32.14 points, or 1.1%, to 2,970.27, while Nasdaq Composite Index
gained 106.26 points, or 1.3%, to 8,057.04.
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