Fears over a potential recession and plunging stock markets fueled by the coronavirus pandemic could threaten President Trump’s efforts to secure a second term.
As it turns out, the U.S. economy has an impressive track record of predicting the next president, if history is any indication.
The U.S. economy predicted the winner of 16 of the previous 18 elections where a sitting president was up for re-election, according to LPL Financial. You have to reach back to Calvin Coolidge in 1924 to find the last time the economy was wrong regarding the re-election of a president.
“Incredibly, the last 11 times there wasn’t a recession within two years of a re-election, the sitting president won,” Ryan Detrick, senior market strategist at LPL Financial, said in a note. “Compare that to the seven times there was a recession, and the incumbent president didn’t get re-elected five of those times.”
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To be sure, the economy doesn’t appear to be in a recession. In fact, the U.S. economy headed into 2020 on a solid footing, driven by strong jobs growth, robust consumer spending and a firming housing market.
But stocks ended the longest-ever bull market Thursday as disruptions due to the coronavirus have rippled through the global economy. Bear markets and recessions typically go together, but not always. Stocks have dropped 37% on average in bear markets during a recession, while losing 24% when a downturn is avoided, according to Detrick.
Still, warning signs of a U.S. economic slowdown have emerged, raising fears the decade-long economic expansion could be on its last legs.
That has pushed economists to lower their growth estimates for 2020. Oxford Economics plans to cut its U.S. GDP growth outlook for the year to 0.8%, below its previous forecast of 1.3%, citing the stress in financial markets and plunging oil prices.
“The economy is flirting with a recession in the first half of the year,” says Gregory Daco, chief U.S. economist at Oxford Economics.
Before the outbreak, the firm projected a 25% chance that the U.S. economy would suffer a downturn. Now the odds of a recession are closer to 50% because economic activity is expected to contract sharply in the second quarter due to the global supply chain constraints from the virus, Daco says.
U.S. economic activity is poised to gradually rebound in the second half of the year from potential fiscal policy measures from the government, low-interest rates and cheaper gasoline prices. But investors are still anxiously awaiting details from the Trump administration on potential aid for the economy.
“The big question now is how quickly can this be contained?,” Detrick says. “A coordinated fiscal policy effort is one key part to stabilizing things.”
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Trump has touted a strong economy and a booming stock market as a key focus for his reelection campaign. Still, the stock market’s gains since Election Day 2016 have been cut sharply recently, with the S&P 500 up roughly 16% since Nov. 8, 2016. That’s down from nearly 60% from Election Day to when the index hit a record on Feb. 19.
More times than not, an incumbent is granted a second term unless the economy slumps into a recession or the stock market has fallen into a correction or bear market, according to Sam Stovall, chief investment strategist at financial-research company CFRA.
Since World War II, only two presidents have run for reelection during the same year as a recession: Democrats Harry Truman and Jimmy Carter. Truman won, helped by the fact that the economy didn’t fall into a recession until November 1948, the same month as the election.
Carter, meanwhile, lost his re-election bid in November 1980 to Republican Ronald Reagan after the economy slumped into a six-month recession in January.
“Part of the reason the market is going down is that investors were hoping that the president would be decisive, not dismissive,” Stovall says. “With the prospect of a recession and a bear market, this could be the president’s undoing. He might be joining Jimmy Carter as a one-term president.”
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.
