A child mask-clad due to the Covid-19 coronavirus pandemic, is reflected in a mirror at a street in … [+] Gaza city,on October 8, 2020. (Photo by Majdi Fathi/NurPhoto via Getty Images)
NurPhoto via Getty Images
The upbeat October employment report is likely showing the labor market through the rear view mirror.
The weekly state employment numbers, too, as reported in the mainstream business media, only tell half the story. The entire story includes an additional 9+ million people on CARES Act supplements; a program that is growing as state eligibility is exhausted, but a program that expires as the year’s end.
High frequency data also confirm that the easy economic gains are now behind us.
Hopeful Employment Data
The October employment report looked pretty good, at least a first blush, with the headline Establishment Survey (Payroll Survey) showing a net gain of +638K. Better yet, because federal Census Bureau workers had finished and were let go, private sector employment actually rose +906K. Those sectors that had been hardest hit led the way: Leisure/Hospitality +271K, Retail +104K. In addition, the labor force grew by +768K with the Labor Force Participation Rate and the Employment/Population ratio both showing gains. This usually happens when those who have recently dropped out of the labor force (i.e. have stopped looking) find jobs – a good sign.
The sister Household Survey, from which the unemployment rate is derived, showed net new jobs of +2.24 million, and the U3 unemployment rate fell to 6.9% in October from 7.9% in September, and 14.7% back in April.
But much of this good news now appears to be in the rear-view mirror. All the analytical data and high frequency data appear to bear this out. Let’s go back to the employment numbers. A deeper look reveals that the percentage of the unemployed that have been unemployed for more than 27 weeks has now risen to 32% of the total unemployed.
This number was just over 9% back in July. As one would expect, the median number of weeks of unemployment has also risen, now at 19+. As seen on the chart below, normal is 9 (the dip to 2 in April occurred because the massive layoffs in April skewed the median number of weeks early in the economic shutdown).
Median Weeks Unemployed
St. Louis Fed
These two data points indicate that long-term unemployment is going to be a big economic issue going forward.
The Weekly Employment Data
On a weekly basis, the Department of Labor puts out data on unemployment, both Initial (New) Claims (ICs), and Continuing Claims (CCs). The latest ICs (week ending October 31st) of +738K are nearly identical to those of the prior week and have hardly budged since August. This means that layoffs from businesses that contribute to the state unemployment benefit system (i.e., nearly all employers) laid off 738K people the week ending October 31st, and that level of layoffs or higher has existed, week-in and week-out, since the end of August. (Prior to that, layoffs were much higher.) Contrast this to the worst week of the Great Recession where the peak was 665K and was short-lived.
These are the state numbers. They are reported by the media as stand-alone, and, as such, they completely mask reality. Some media outlets have also picked up on the CCs data from the state reports, which showed a weekly fall of -535K for the week ending October 24th (CCs are one week lagged). Think about this. If these data are really a sign of a strengthening labor market, then why are we seeing a rise in the duration and median? In fact, the fall in CCs at the state level proves not to be much related to re-employment as much as it is a function of the exhaustion of benefits.
What isn’t being reported is the data from the Pandemic Unemployment Assistance (PUA) program (created by the Cares Act). That program paid benefits to 9.33 million people the week ended October 17th, more than in the combined state programs. The PUA program was created for the self-employed, gig workers, and independent contractors. And this program allows those who have exhausted state benefits to apply for an additional 13 weeks via PUA. The chart shows both state and PUA initial claims. On the right-hand side, you can see that layoffs have been fairly constant at 1.1 million/week for all of October, clearly indicating that little employment progress is occurring. The better-looking numbers in the state programs are completely offset by the rising PUA claims.
Total State & PUA ICs
Universal Value Advisors
And, lo and behold, if one looks at the total of all the programs (state and PUA ICs and CCs), the progress shown is minor and there is speculation that the little progress shown may simply be a function of people dropping out (see chart).
Finally, the Cares Act established the PUA programs and they expire on 12/31. Given the state of politics and the various controversies surrounding the Presidential election, one must ask what happens to incomes if the PUA programs simply end? Nothing But Air!
Total All Unemployment Claims
Universal Value Advisors
High Frequency Data
The above comments are reinforced by the most recent high frequency data:
New and existing home sales appear to have plateaued;
State and local governments laid off -130K in the recently released employment data. This sector employs more than 19 million people. Without a stimulus that sends financial help, and pronto, we can expect more layoffs here;
The Census Bureau’s most recent small business pulse survey shows nearly 30% of the businesses surveyed have declining operating revenues. That number is rising from prior weeks. In addition, more than twice as many are reducing hours as are increasing them, and 1.5 more are cutting jobs than are hiring;
Same store sales (Redbook), restaurant bookings (OpenTable), air travel, and hotel accommodations have all rolled over in October;
ZipRecruiter has indicated that holiday related job postings are down -18.5% from a year earlier;
Challenger, Gray and Christmas says layoffs were the highest for any October since 2008 and are up 60.5% Y/Y.
Conclusion
On top of this, there has been a significant increase in the coronavirus case counts in the U.S. and in Europe, with Europe shutting down in places and certainly headed for a double-dip recession. Politics in the U.S. has, so far, made it impossible to reach consensus on a new (and much needed) fiscal stimulus to head off the brewing economic meltdown. Ditto for the next couple of months. And I haven’t even mentioned the oncoming eviction, foreclosure, and default tsunamis, as the forbearance periods for these also lapse at year’s end.
Given the current state of the economy and the political landscape, it is difficult to believe that the pace of job creation/economic activity will continue over the near-term horizon at the pace of the recent past.
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.
