Canada’s economy finished a sizzling summer by adding 90,200 jobs in August, the third consecutive monthly increase that brought the country as close as it has been to recouping historic employment losses last year.
The unemployment rate fell to 7.1 per cent for the month, compared with 7.5 per cent in July, bringing the rate to the lowest level since the onset of the pandemic last year.
Economists had expected that Friday’s report from Statistics Canada would show another gain as restrictions eased in much of the country, giving another reopening bump to the labour market.
Brendon Bernard, an economist with job-posting website Indeed Canada, said the pace of gains is likely to cool with the arrival of fall because there are fewer restrictions to roll back.
The gains in August were concentrated in full-time work and in the hard-hit service sector, led by gains in accommodation and food services as restrictions eased in much of the country.
Employment increased in Ontario, Alberta, Saskatchewan and Nova Scotia in August, with little or no change in all other provinces. British Columbia remained the lone province with employment above pre-pandemic levels.
Statistics Canada said gains in the service sector pushed employment there back to pre-pandemic levels for the first time, although there is still some areas that are lagging. TD senior economist Sri Thanabalasingam wrote in a note that the level of employment in high-touch industries was 10 per cent, or nearly 300,000 jobs off its pre-pandemic mark.
Overall, employment was within 156,000 jobs, or 0.8 per cent, of the level recorded in February 2020 before the onset of the COVID-19 pandemic, which is the closest the country has been to recouping all the jobs lost during the first wave of COVID-19.
Still, there are a few flies in the ointment, said CIBC senior economist Royce Mendes, who noted the participation rate fell in August, which helped push down the unemployment rate.
Statistics Canada said the unemployment rate would have been 9.1 per cent in August, down from 9.5 per cent in July, had it included in calculations Canadians who wanted to work but didn’t search for a job.
“The economy is still a long way from being fully healed,” Mendes wrote in a note.
Bernard said a key area of weakness remains in the ranks of the long-term unemployed, who have been out of work for at least six months and accounted for 27.4 per cent of all unemployed in August.
While their numbers dropped by 29,000 to 394,000 in August, long-term unemployment was still 215,000 above pre-pandemic levels. Statistics Canada said about one-quarter of long-term unemployed last worked in March or April 2020 when the pandemic started.
“While there was a bit of improvement in this regard in August, there’s still a ways to go to getting the number of Canadians who’ve been out of work for extended periods of time, back to lower, more normal levels,” Bernard said.
Also of note in August was that workers with jobs felt more comfortable searching for new opportunities. Statistics Canada reported the job-changing rate was 0.8 per cent in August, back to pre-pandemic levels after dropping to zero after first-wave lockdowns.
“It’s a sign that after over a year of relatively slow job hopping that we finally started to see workers show some confidence and make some changes that they might have held off on over the past year,” said Bernard, who noted that job postings on Indeed have been well above pre-pandemic levels for several months.
“This is a really important trend, not just for the health of the labour market from the job-seeker side, but also from employers.”
But not all those jobs are being filled. Labour supply hasn’t kept pace with the robust demand for workers in high-touch industries, Thanabalasingam said, resulting in staff shortages.
“Career changes, and ongoing health concerns could be possible reasons for the lack of available workers,” he said.
This report by The Canadian Press was first published Sept. 10, 2021.
Slow pace of vaccinations is largest drag on the economy in survey of business leaders – NBC News
Corporate leaders are far less bullish about the economic recovery than they were back in the spring — and they fear that vaccination holdouts could stall or even reverse the progress that has been made.
A new survey by the National Association for Business Economics, or NABE, found a marked pullback in expectations for economic growth and output, especially in the near term. Survey respondents expect real growth in gross domestic product for this year to come in at 5.6 percent at the median — a significant drop from the median 6.7 percent growth expected in May, when the survey was last conducted.
“The erosion of forecasts and confidence has really mirrored what our economists have been saying, because we brought down our Q3 GDP forecast from 7.0 to 5.6 percent,” said Sam Stovall, chief investment strategist at CFRA Research. “We just feel that things don’t look as rosy as they did before.”
Nearly 2 in 5 NABE survey respondents said downside economic risk outweighs upside risk for the year, and just 16 percent said conditions are weighted toward the upside. The figures were reversed in May, when 56 percent ranked upside risk as a higher probability and just 15 percent said saw greater downside risk to the outlook.
The key difference, and the factor that is weighing on hopes for the recovery, is the resurgence of Covid-19 fueled by the highly contagious delta variant of the coronavirus. Everybody who was banking on the pandemic’s receding over the summer has had to modify their expectations in the face of a public health crisis that shows no sign of abating.
“We all believed we were through the pandemic five months ago, and I believe that the variant has caught many people by surprise,” said Joseph Heider, president of Cirrus Wealth Management. “As this lingers on, executives are becoming more concerned and asking, ‘Are we going to have this under control?'”
NABE survey chair Holly Wade, executive director of the NFIB Research Center, said in the survey outlook report, “Panelists point to a variant of the coronavirus, against which the vaccines may be ineffective as the main downside risk.” Nearly two-thirds of respondents identified that as the greatest downside risk to the economy, and 9 percent more cited slowing vaccine uptake as the most worrisome hurdle. A plurality of 44 percent said a faster vaccine rollout is the best chance for higher-than-expected economic gain.
Heider said: “Vaccine resistance is, I think, larger than many people anticipated. I think it’s creating real concerns as to our ability to reach herd immunity. And when we don’t have herd immunity, the unvaccinated are human petri dishes for the virus to mutate.”
Although the virus represents the biggest threat to near-term business recovery, analysts said it is far from the only headwind corporations face. “There’s just many more variables and unknowns than there were six months ago,” said Dick Pfister, CEO of AlphaCore Wealth Advisory.
In addition to the threat of Covid and potential variants, Pfister said, companies and investors are monitoring other unfolding circumstances. The Federal Reserve is edging closer to ending its bond buying, and more policymakers have expressed openness to raising interest rates sooner. The financial peril faced by the heavily indebted Chinese real estate giant Evergrande is making investors nervous, he said, as they try to gauge whether the company’s teetering on the brink of collapse was an isolated incident.
“There’s probably more than just one, and there are some fears from economists that this could be more systematic inside of China,” he said.
A globally connected economy poses other sorts of risks, as well: A cascading series of bottlenecks in the global supply chain affecting semiconductors to energy has triggered much of the growing worry about rapidly increasing prices. The NABE survey found that 17 percent of respondents said supply chain disruptions were having a “significant impact” on business, while 27 percent more cited mild or moderate impacts.
“Inflation expectations have moved up significantly from those in the May 2021 survey,” Wade said. On average, NABE respondents expect inflation to rise by 5.1 percent in the fourth quarter year over year, a jump from an expected 2.8 percent increase in the May survey.
David Wagner, portfolio manager at Aptus Capital Advisors, said the duration and the breadth of global supply disruption have triggered a re-evaluation in corner offices in the U.S. and around the world. In the spring, “it seemed like the supply chain problem was transitory,” but the assumptions were dashed as the summer went on, he said, adding: “Supply chain problems are persisting for much longer than originally expected.
“Now that you’re starting to see some kind of tangible supply chain backlog, I think that’s got more people pessimistic. It caught people by surprise,” Wagner said.
Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said, “Supply concerns are weighing on the mind of the market and economists because it has limited the amount of output we can get from certain industries.”
Along with the supply shortages that are hindering production and driving up costs, the unbalanced labor market continues to constrain growth, as well — but there also are glimpses within those distortions of potential normalization. Although about one-third of survey respondents said they were facing a surfeit of workers, a larger proportion, 44 percent, said they were not experiencing a labor shortage. Respondents predict wage growth of 4 percent for the year, followed by a 3.5 percent increase next year — rates broadly in line with what many economists consider to be indicative of a well-functioning labor market.
“The labor market is not fully recovered — we’re seeing that across other surveys, as well, and even the Fed’s own Beige Book indicates that hiring has been challenging,” Haworth said. “There’s a lot of room for improvement, but it’s really slow going.”
Toronto market rises as energy shares reach 3-month high
Canada‘s main stock index rose on Monday as a rally in oil prices lifted the energy sector to the highest level in nearly three months, while financials gained ground as bond yields rose.
The Toronto Stock Exchange‘s S&P/TSX composite index ended up 60.76 points, or 0.3%, at 20,463.42.
“Energy has rallied pretty nicely” on the jump in oil prices, said Kevin Headland, senior investment strategist at Manulife Investment Management.
The energy sector rose 3.1% to notch its highest closing level since July 5, while crude oil futures settled nearly 2% higher at $75.45 a barrel as investors fretted about tighter supplies.
The heavily weighted financial services sector ended 0.5% higher but information technology lost 1.2%.
The move lower in technology was “a carryover from the U.S., given the jump in 10-year yields today,” Headland said.
The U.S. 10-year yield rose above 1.5% for the first time since June 29 before easing, bolstered by solid economic data and signals the Federal Reserve is shifting toward a more hawkish policy.
Higher yields tend to hurt the shares of companies with high growth prospects because they reduce the value of future cash flows.
The S&P 500, which has a higher technology weighting than the Toronto market, ended lower.
“In the Canadian stock market… we’re playing a little bit of catch-up to U.S. stocks as they outperformed Canadian stocks in the last five sessions,” said Michael White, portfolio manager at Picton Mahoney Asset Management.
The healthcare sector, which includes cannabis producers, ended 2.4% higher. The materials group gained 0.5%.
(Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Dan Grebler)
Fund Managers See Stocks Outperforming Bonds Despite Economy – Bloomberg
Gently, but steadily, economic expectations are coming down. It may be an overreaction to the wave of Covid-19 caused by the delta variant, or it may be a response to incoming data, or it could reflect dampening hopes for an expansive new fiscal policy in the U.S. as the standing of President Biden also dampens. But for whatever reason, hopes for a big new “reflation” or even a post-Covid “reopening” have dwindled.
One thing remains unchanged by this, however. The great majority of investors are still convinced that there is no alternative to stocks. Even with drabber economic growth in prospect, which should help fixed-income more than equities, the overwhelming consensus still calls for stocks to outperform bonds.
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