Today’s release of the December employment report showed positive job growth, although below some forecasts. At the same time, the unemployment rate fell below 4% for the first time since the pandemic began. So don’t be disappointed by the jobs number—the labor market is strong, and today’s report is good news for the economy.
Cecilia Rouse, Chair of the White House Council of Economic Advisers, reminds us that the three-month average job gain in the economy is 365,000 per month, and today’s report revised job growth upwards for October and November. Rouse also noted that the low unemployment rate came a higher employment-to-population ratio, not from people leaving the labor force. Both of those numbers indicate a healthy labor market.
Expectations had been high for December job growth. Earlier this week, the payroll processing firm ADP estimated December’s private job growth at 807,000, the biggest jump since May 2021. Dow Jones had predicted growth of 375,000, and other analysts also expected big numbers.
But today’s Bureau of Labor Statistics (BLS) report came in much lower—an increase of 199,000 nonfarm jobs for December. Because ADP and other estimates of job growth were significantly higher, many media outlets are calling today’s number “disappointing.”
Experts know monthly employment numbers can be volatile. I served as Executive Director of the Congressional Joint Economic Committee, where we held monthly hearings when the BLS report was released. We often would have to scramble to make sense of two issues in the data—volatile month-to-month changes and seeming discrepancies between the job creation numbers and the unemployment rate.
Many people don’t realize the jobs number and the unemployment rate come from two different surveys—jobs from surveying employers, and unemployment from surveying households. It isn’t surprising that those two sources can vary from month to month. Economists prefer to use rolling three-month averages to smooth out this volatility.
Additionally, the definition of “employment” varies somewhat between the employer and household surveys. BLS has an excellent discussion of the two surveys on its website. But for those of you who don’t necessarily enjoy reading statistical definitions, let’s just say that many factors (a broader definition of employment in the household survey, new business startups or closures, workers on furlough, survey sampling error, and others) can create differences between the two surveys.
BLS provides a useful chart adjusting the household survey numbers using the narrower jobs survey definition. It shows both that the household and employer surveys track closely over time, and that applying the narrower definition to household data brings the two surveys into very close alignment.
So don’t get too depressed about the “disappointing” job creation numbers. But today’s numbers do reflect some worries we need to address.
First, the December survey was conducted before the Omicron variant had really taken hold. If the variant has major impacts on employment, we should see those in the January survey data.
Second, Black and Hispanic unemployment remains higher than for whites, and Black unemployment actually ticked up in December. The Economic Policy Institute’s Elise Gould (a fantastic resource for understanding these numbers and other labor force trends) notes that Black workers are “the only group trending in the wrong direction.”
And even with the strong economy under President Biden, in the face of a continuing pandemic, we are still 3.6 million jobs below our pre-pandemic high. That’s why Congress needs to pass the Build Back Better act and other job creating efforts, especially as Omicron threatens to disrupt the economy.
Bottom line? Don’t be too “disappointed” by today’s report. Job growth and the overall labor market remain surprisingly strong in the face of the continuing pandemic. But our recovery isn’t complete. We need active government policies to continue recovering, avoid economic threats from the pandemic, and provide greater equity and economic security for working families.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
