The US jobs market is on fire, but soaring inflation is making Americans feel less confident about the economy.
One year into Joe Biden’s presidency and the economic news is decidedly mixed. Despite promising numbers in several key areas, inflation is dampening Americans’ view of the economy. We take a look at important economic indicators across the past year.
Jobs market recovery
You can’t blame President Biden for taking a victory lap where the United States jobs market is concerned. When he was sworn in on January 22, 2021, the nation’s unemployment rate was 6.9 percent. It’s currently 3.9 percent.
Last month was the first time since the pandemic struck that the jobless rate dipped below 4 percent as it closed in on its pre-pandemic level of 3.5 percent from February 2020.
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But the economy only created a disappointing 199,000 jobs in December. For the whole of 2021, job growth averaged 537,000 a month. That leaves the US 3.6 million jobs shy of regaining all of the 22 million jobs lost in the opening months of the pandemic back in 2020.
But don’t let that gap fool you. The jobs market is on fire in the US. So much so that American workers haven’t enjoyed this kind of bargaining power for decades.
‘I quit’
To get an idea of just how hot the jobs market is in the US, take a look at how many Americans are telling their bosses, “I quit”.
A record 4.5 million Americans voluntarily quit their jobs in November, signalling that workers feel very confident about their employment prospects. That’s not surprising given job openings on the final day of November were also near a record high.
To lure scarce job seekers, businesses have been boosting pay and sweetening benefits packages. That trend continued in December, with average hourly earnings for all employees on private nonfarm payrolls increasing 4.7 percent from a year ago.
But fatter paycheques, while welcome, are not stretching as far as they did before Biden took office, thanks to surging inflation.
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Inflation
Feel like putting on a pair of leg warmers and doing some jazzercise to Olivia Newton John’s, Physical?
Well, that vibe you’re feeling could be down to the early 1980s-like inflation in the US.
The consumer price index increased 7 percent in December compared with the same period a year ago. That is the sharpest 12-month spike since June 1982.
No one likes rising prices, but this year’s inflation has been especially hard on low-income households. Inflation, especially for essentials such as food, petrol and housing, has consumed a larger share of their financial resources.
So even though the jobs market is recovering nicely, and workers are in a great bargaining position to secure better pay and benefits, mounting price pressures are making American feel less optimistic about the economy.
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Consumer confidence
What do you get when you combine soaring inflation with surging Omicron infections? A dip in consumer confidence.
The latest survey by the University of Michigan suggested consumer sentiment fell in January to its second-lowest level in a decade.
That’s definitely concerning because when consumers don’t feel good about the economy, they tend to be more tight-fisted with money. And consumer spending accounts for some two-thirds of US economic growth.
The University of Michigan survey indicated that three-quarters of Americans think inflation is a bigger problem for the nation right now than jobs. Meanwhile, a third reported being worse off financially compared with a year ago.
That is definitely clouding how Americans feel about Biden’s leadership.
A Quinnipiac University national poll published earlier this month indicated only 34 percent of Americans approve of Biden’s handling of the economy, while 57 percent disapprove.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
