Jay Bryson of Wells Fargo says economy will slow but not crumble
Jay Bryson, acting chief economist, Wells Fargo
What the U.S. economy lacks in drama, it more than makes up for in consistency as it moves into a record-setting 12th year of steady if unspectacular growth.
“The economy is growing pretty well,” said economist Jay Bryson, the winner of the Forecaster of the Month contest for January. “The expansion has more room to run.”
Notice that he’s not saying it’s the best economy since sliced bread. Nor does he think it’s ready for the scrap heap. The economy is OK.
True, it’s slowing down a bit with age, but it’s not showing any signs of a recession, said Bryson, who is acting chief economist for Wells Fargo Economics Group.
No big imbalances
“The way you get recessions is to have an exogenous shock (which is impossible to forecast) or big imbalances in the economy,” he said. Fortunately, the kind of imbalances that caused the last two recessions (in tech stocks and housing) just aren’t apparent, he says, at least “nothing that would cause a recession in the next 12 months.”
As for exogenous shocks, the most likely candidate right now is the coronavirus that’s caused more than 1,000 deaths in China from Covid-19 (the respiratory disease that’s caused by what they are now calling the SARS-CoV-2 virus).
Bryson doesn’t think the impact on the U.S. economy will be major. Right now, it doesn’t look like “we’ll have 100,000s of deaths here.”
He’s assuming that the epidemic is mostly contained to China and that China’s self-quarantine doesn’t last months. If China’s factories are closed longer, then the disruptions will begin to have major repercussions for U.S. companies that rely on the supply chain that snakes through China.
2.1% growth
For 2020, he’s calling for growth of around 2.1%, a steady unemployment rate, 2% inflation, and job growth averaging about 135,000 per month. That’s not too shabby.
Most likely, the Federal Reserve will keep rates on hold (70% chance) this year. He puts the odds of a rate cut at about 25%. “There’s a very high bar for rate hikes,” Bryson said.
Bryson said Wells Fargo’s forecasts are a team effort. Azhar Iqbal is the econometrician who runs the basic models. Senior economists Mark Vitner, Sam Bullard, Tim Quinlan, and Sarah House play key roles in tweaking the forecasts. “There is a lot of art involved in this,” Bryson said.
Wells Fargo’s forecast
Number as reported*
ISM manufacturing index
48.8%
47.2%
Nonfarm payrolls
150,000
145,000
Trade deficit
-$43.3 billion
-$43.1 billion
Retail sales
0.3%
0.3%
Industrial production
-0.3%
-0.3%
Consumer price index
0.2%
0.2%
Housing starts
1.392 million
1.608 million
Durable goods orders
0.9%
2.4%
Consumer confidence index
129.8
131.6
New home sales
745,000
694,000
GDP
2.3%
2.1%
*Subject to revision
In the January contest, Bryson’s team had the most accurate forecasts among 45 forecasting teams on four of the 11 indicators we track: retail sales, the consumer price index, industrial production and the trade deficit. They were among the 10 most accurate on four other forecasts: the consumer confidence index, nonfarm payrolls, housing starts and durable goods orders.
The runners-up in the January contest were Andrew Hollenhorst of Citigroup, Mike Thomas of Met Capital, Peter Morici of the University of Maryland, and Brian Wesbury and Bob Stein of First Trust Advisors.
The MarketWatch median consensus published in our Economic Calendar includes the predictions of the 15 forecasters who have earned the most points in our contest over the past 12 months, plus the forecast of the most recent winner of the monthly contest.
The forecasters in our survey are: Jim O’Sullivan of TD Securities, Christophe Barraud of Market Securities, Ryan Sweet of Moody’s Analytics, Andrew Hollenhorst of Citigroup, Seth Carpenter’s team at UBS, Ian Shepherdson of Pantheon Macro, Richard Moody of Regions Financial, Stephen Stanley of Amherst Pierpont Securities, Lou Crandall of Wrightson ICAP, Michelle Girard’s team at NatWest Markets, Jan Hatzius’s team at Goldman Sachs, Chris Low of FHN Financial, Lewis Alexander’s team at Nomura Securities, Michelle Meyer’s team at Bank of America, Peter Morici of the University of Maryland, and Jay Bryson’s team at Wells Fargo.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
