Economy

Population Growth Is Slowing. Why that Matters for the U.S. Economy – Barron's

Published

4 years ago

December 31, 2020

This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.

Alarming Demographic Trends

Economics Group

Wells Fargo Securities

wellsfargo.com

Dec. 29: The U.S. population increased 0.4% in 2020, to 329 million, marking the lowest growth rate since at least 1900. With a falling birth rate and an aging population, overall growth has slowed over the past five years. In fact, 2020’s projection will likely close out the slowest decade of population growth in the nation’s history. Stalling population growth could have major implications for potential economic output in the longer term. While these estimates precede and are collected independently from the 2020 decennial census, they provide useful insight into national and regional population trends.

Sixteen states saw growth pick up over the year, and 34 states are growing. Residents continued to flock to the West (+0.5%) and the South (+0.8%), which saw the largest gain of the Census regions. The South added just over 976,000 residents in 2020, with Texas (+1.3%), South Carolina (+1.2%), and Florida (+1.1%) posting the fastest increases and each ranking among the top 10 fastest-growing states. In the West, Idaho (+2.1%), Arizona (1.8%), Nevada (+1.5%), and Utah (1.5%) contributed nearly three-quarters of the region’s 354,000 population gain and saw the healthiest growth rates in the country. An affordability migration away from high-cost urban centers is helping fuel population growth in these regions.

—Mark Vitner, Charles Dougherty, Nicole Cervi

Previewing December Jobs Data

Commentary & Analysis

Maria Fiorini Ramirez

mfr.com

Dec. 28: Friday, Jan. 8, delivers the December employment report, along with November wholesale inventories and November consumer credit. The jobs data are tougher than usual to predict, with complicating factors including sizeable holiday-related seasonal adjustment that may distort outcomes, as patterns are anything but normal at the moment. Other tough-to-assess factors include the degree of pandemic-related softness in the service sector, and the speed at which underlying gains are slowing as the initial post-lockdown bounce fades.

With those caveats in mind, expectations concerning December nonfarm payrolls are widely scattered (the overall range is currently -175K to +200K), with very early medians of roughly +60K for the total and +75K for private payrolls. The unemployment rate is seen remaining near the previous 6.7%, the average workweek is generally expected to remain at 34.8 hours, and the median forecast for average hourly earnings is for a 0.2% month-to-month gains.

—Joshua Shapiro

Investors, Beware Complacency

Weekly Technical Review

Macro Tides

macrotides.com

Dec. 28: Investors truly believe that markets are a discounting mechanism and that the stock market is now telling them that 2021 is going to be a good year for the economy. This conclusion is easy to reach if one believes vaccinations will proceed without a hiccup and herd immunity will be achieved by mid-2021. But the majority of investors are wrong at important turning points, which is why the majority of investors are bullish as the market peaks and bearish when it bottoms. Measures of investment sentiment show that investors are currently wildly bullish, so the risk is that they are too complacent about the near-term risk of a Perfect Covid-19 Storm and how smoothly the vaccines will be distributed in coming months. If this assessment is accurate, the stock market could be vulnerable to a quick, sharp correction, as investors are confronted with a less rosy perspective. If the stock market experiences a correction in January, Treasury yields will fall as bond prices rise. Gold, silver, and gold stocks will decline and the dollar will bounce.

—Jim Welsh

Personal Savings Rate Soars

Telemus Special Market Commentary

Telemus

telemus.com

Dec. 28: The Federal Reserve Bank of New York compiled a useful analysis in October, examining what happened with the first round of stimulus payments that were issued this past spring. In summarizing their analysis, roughly one-third was saved, one-third was spent, and one-third was used to pay down debt. The New York Fed also surveyed where further rounds of direct payments might be allocated. Respondents indicated that a greater percentage, roughly 45%, of any future stimulus would be saved. Since the pandemic began, the personal savings rate has accelerated. Prior to 2020, Americans had been saving between 7% and 8% of their income. The savings rate spiked to 33.7% in April, and while trending down, remains elevated at 13.6% as of October. We expect a meaningful portion of the latest round of direct payments to be saved, further strengthening the financial position of the average consumer.

—Matt Dmytryszyn

Georgia (Election) on Our Mind

Cumberland Advisors Market Commentary

Cumberland Advisors

cumber.com

Dec. 28: As we enter 2021, we are very focused on the Jan. 5 Senate runoffs in Georgia. A Democratic victory in both races puts that party in control of both houses of Congress, along with a new Democratic administration led by President-elect Biden. Our view is that this outcome would lead to more spending—in greater amounts and on a faster pace than if the Republicans hold the Senate, which they can do with a Republican outcome in either race. We think bond market participants will start to discount increased spending, and perhaps a higher inflation rate, and that may cause yields to rise. We believe this will happen even with a Republican Senate, although at a slower pace. President-elect Biden still has good relationships with senators who were in office when he was a senator more than 12 years ago, and those relationships should foster some measure of greater cooperation. We think we’ll see rates back to where they were at the end of last year; but certainly, halfway between where they were then and where they are now is a reasonable approximation of where we think yields will be midyear.

—John R. Mousseau

A Brighter Outlook for Tin

Ahead of the Herd

Northern Venture Group

Aheadoftheherd.com

Dec. 23: Tin isn’t the most exciting metal, but it will play an important role in developing a new economy, reliant on green energy, electric vehicles, and advanced technologies like 5G, the Internet of Things, and artificial intelligence. For such a small market, tin has an impressive array of current and potential uses, putting it in the same league as silver, as a metal essential to modern electronics. Its primary use in tin-lead solder practically guarantees tin will enjoy steady demand for years, maybe even decades to come. This more than makes up for tin’s declining usage in kitchen foil and metal beverage containers.

This year, the tin price took a hit from the pandemic, but stormed back, gaining 45% since a mid-March low. When global economic growth resumes, following the rollout of vaccines, demand for tin and other industrial metals will surely pick up. When we factor in current and future supply shortages predicted by the experts, tin looks increasingly like a metal that forward-looking resource investors should have on their radar.

—Richard (Rick) Mills

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

6 days ago

November 8, 2024

Anne Joseph

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.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

7 days ago

November 6, 2024

Anne Joseph

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.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

1 week ago

November 6, 2024

Anne Joseph

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.

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