On the eve of the 2020 election, a U.S. economy that was walloped by a global health crisis in March is recovering, though it’s a ways from regaining full strength.
Trillions of dollars in fiscal support from lawmakers and ultra-low interest rates from Federal Reserve policy makers played a big role in its rejuvenation in past months. While some sectors, such as housing and retail, are flexing plenty of muscle, the number of Americans returning to work is moderating and some companies have announced new job cuts.
Moreover, a rising number of coronavirus cases remains a risk as the nation awaits widespread availability of a vaccine.
As Americans head to their local voting locations Tuesday following millions of mail-in ballots, the following charts sketch out the varying states of progress — from the employment and real-estate markets to consumer and business spending — since the worst of the pandemic.
The Snapback
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Record household spending, led by purchases of merchandise, and the biggest jump in business spending on equipment combined to propel the world’s largest economy in the third quarter to its fastest pace in records to the 1940s.
Even with such a robust growth rate, the size of the economy remains down from its peak at the end of last year. The government’s report last week also showed incomes remain elevated, giving households the wherewithal to continue spending, while still-lean business and housing inventories have the potential of bolstering manufacturing and construction.
Consumer Firepower
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The value of retail sales is firmly above its pre-pandemic level as Americans shifted their spending away from services, such as meals out and travel. Instead, they flocked to auto dealerships, home-improvement centers and online retailers.
Income growth, even excluding payments from the federal government, has outpaced spending. It’s too early yet to tell whether holiday spending in November and December will give the economy an even bigger push through year end.
Housing’s Heartbeat
Booming
Record-low mortgage rates have generated best U.S. residential market in 14 years
Sources: National Association of Realtors, Commerce Department
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Record-low mortgage rates and Americans’ desire for bigger houses — particularly in the suburbs as the virus forced millions to work from home — ignited a housing boom this year in one of the surprise bright spots in the pandemic economy.
In September, existing properties were on the market for 21 days on average, an all-time low. Such soaring demand has pushed prices to a record high as inventory plunged, foreshadowing stronger residential construction through at least early 2021.
Mustering Manufacturing
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Manufacturing output rebounded quickly after the lockdowns, though the pace of improvement in recent months has leveled off and the Fed’s gauge of factory production remains shy of its pre-pandemic level.
The good news is that consumer demand, particularly for motor vehicles, and stronger business investment have left inventories extremely lean, signaling manufacturing will continue to pick up. Moreover, the latest regional Fed surveys show more factories are reporting stronger orders.
At the same time, the global economy is merely limping along, representing a challenging environment for U.S. producers hoping for stronger export growth.
Business Investment
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Pent-up demand hasn’t been confined to just the consumer sector. Business investment in equipment such as communications gear, machinery and computers, registered a notable pickup in the third quarter. By September, the value of core capital goods shipments, as well as orders, hit a six-year high.
The outlook, however, is much less certain. Preservation of capital has moved onto the front-burner within corporate America because of the pandemic. Furthermore, plant utilization figures underscore lingering slack capacity that call into question the need for large investment outlays going forward.
Labor Market Fallout
Scarred
Despite midyear upswing, payrolls are 10.7 million, or 7%, short of pre-pandemic peak
Source: Bureau of Labor Statistics
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Arguably the most scarred part of the economy is the labor market, where deep holes remain.
Employment plunged more than 22 million in March and April, at the height of the pandemic and amid government shut downs of the economy. Over the next five months, it recovered a little more than half those jobs.
Even in sectors such as construction and retail trade, where demand has bounced back sharply, payrolls are growing — but they’re still down from their pre-pandemic peak. For the travel, leisure and food services businesses, where government restrictions remain largely in place, the job market is suffering the most.
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.
