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Nobody seems to know what's going on with the economy – CNN

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3 years ago

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A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

(CNN)If you’re confused by the US economy, which simultaneously shows signs of strength and cause for concern, you’re not alone.

The economy is on the road to recovery from the coronavirus pandemic, reeling from inflation or a source of disappointment on jobs creation, depending on who you’re talking to.
It’s probably all three, and what happens from month to month seems to be something of a surprise. That element of unpredictability might be the most normal possible thing given the shock of the pandemic — the extraordinary government intervention to save the economy is unlike anything anybody alive today has ever seen.
It’s hard to decide how important any single thing is.
Gas prices could hit $5 per gallon!
Housing prices are up double digits!
Wages are up!
The travel industry is reeling!
The holiday shopping season is going to be tough!
The stock market makes no sense!
Let’s look today at jobs.
Government data released Friday showed the US economy gained 210,000 jobs in November and the unemployment rate fell to 4.2%. A low rate traditionally signals full employment, meaning that nearly everyone who wants a job has one.
And yet!
Most stories about the November jobs report described it as “disappointing” in the first sentence, but also proof that the pandemic recovery is moving along.
Read the take from CNN’s Anneken Tappe here.
Why the disappointment? Tappe wrote: “Economists had expected more than double the number of jobs created in November, forecasting a continuation of the buoyant economic recovery over the past two months. Instead, the November jobs gain was more reminiscent of the pre-pandemic economy, when employers added a smaller but steady number of positions, at least on the face of it.”
At the same time, there’s the good news. The jobs report suggests the pandemic recovery is progressing. The country has created more than 6 million jobs this year, and labor force participation increased to 61.8%, the highest level since the pandemic hit.
RELATED: Tracking America’s recovery
Much of the disappointment stems from expectations. The jobs report is based on two surveys — one of businesses with payrolls and one of households about their economic situation — that are conducted by the government mid-month and released by the Bureau of Labor Statistics in tandem on the first Friday of each month.
“Weird jobs numbers,” tweeted Jason Furman, who led the Council of Economic Advisors during the Obama administration.
“Very strong household survey: unemployment down to 4.2% & labor force participation up as employment up 1.1 million,” he tweeted. “But the normally more reliable payroll survey shows only 210K jobs added.”
He’s not sure what’s going on: “Some explanations may emerge but it may just be measurement error.”
Where do expectations come from? Leading up to the monthly release, economists and banks publish their own expectations for what the surveys will find. If the government data doesn’t hit those expectations, disappointment follows.
I talked to Elise Gould, a senior economist at the Economic Policy Institute, about what we do and do not learn from these reports.
She said they need to be viewed as pieces of information, not the full picture, in part because the surveys can overstate things and miss the changing composition of the workforce.
Revisions to jobs reports from recent months have confirmed stronger job growth than what was shown by the surveys.
Still, it’s best to know the latest information, even if we know it’s likely to change, she said.
Also, the pandemic. There is also the pandemic element to confound economic expectations, just like it has confounded people’s lives.
“Everyone in this economy today and the people that are making these predictions have never lived through a pandemic that hit the labor market so strong,” said Gould. “And so their models are not necessarily capturing the ebbs and flows of the pandemic.”
I asked David Goldman, managing editor of CNN Business, for his thoughts on why these reports seem to confound expectations each month. He came back with three points:
  • This is a particularly unusual environment. It is making predictions really difficult for economists. The labor shortage, supply chain crisis, energy crunch, inflation and Covid-19 situations all wrapped into one make for a delicate balancing act. We should cut economists a break.
  • Right in the long run. Economists actually have been proven correct over the past several months when they initially were thought to be wrong. That’s because the reports keep getting revised higher in subsequent months as Labor Department economists get more data. It’s not only hard for economists at Goldman Sachs and JPMorgan to figure out — it’s hard for the government, too.
  • Don’t focus on expectations. The forecasts aren’t the important thing here — it’s the actual data. And one month doesn’t a trend make. We’ve had some shockingly good jobs data in recent months, and November wasn’t all that bad — just not quite as good as we had expected.
There’s uncertainty elsewhere. Leaders at the Federal Reserve, like Chairman Jerome Powell, had been preaching that inflation was temporary — calling it “transitory,” meaning it wouldn’t permanently affect the economy.
But in a signal that inflation may last a little longer than expected, Powell told lawmakers this week the Fed may end some of its pandemic stimulus efforts — they call it “tapering” — earlier than expected.
“At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said.
One wrench thrown into the economy has been the resilience of the coronavirus. We may not quite understand how the surge of the Delta variant over the summer and fall arrested progress.
CNN’s Tappe and Nathaniel Meyersohn wrote about the Delta effect back in August.
Now that the Omicron variant is emerging, it, too, could send things in a new direction.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

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2 days ago

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September 10, 2024

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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

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2 days ago

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September 10, 2024

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

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Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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2 days ago

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September 10, 2024

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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