A now hiring sign outside a business in Somerville, Mass., on Sept. 1, 2022.BRIAN SNYDER/Reuters
U.S. job growth blew past expectations in March and wages increased at a steady clip, suggesting the economy ended the first quarter on solid ground and potentially delaying anticipated Federal Reserve interest rate cuts this year.
The Labor Department’s closely watched employment report on Friday also showed the unemployment rate fell to 3.8 per cent last month from 3.9 per cent in February. The decline in the jobless rate reflected a sharp rebound in household employment, which more than absorbed the 469,000 people who joined the labour force.
The unemployment rate has remained below 4 per cent for 26 straight months, the longest such stretch since the late 1960s. The U.S. economy is outshining its global peers even though the Fed has raised rates by 525 basis points since March 2022 to dampen inflation. The labour market is benefiting from a rise in immigration over the past year.
Though the strong hiring did not alter expectations that the U.S. central bank would start easing rates this year given increased labour supply, financial markets are doubtful of the three cuts envisaged by policy-makers.
“While the favourable supply-side developments are consistent with (Fed Chair Jerome) Powell’s benign view of the outlook, the apparent absence of any cracks developing on the demand side should lessen the urgency to ease policy, and we are pushing back our call for the first Fed cut from June to July,” said Michael Feroli, chief U.S. economist at JPMorgan in New York.
Nonfarm payrolls increased by 303,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said. The economy added 22,000 more jobs than previously estimated in January and February. Economists polled by Reuters had forecast 200,000 new jobs in March, with estimates ranging from 150,000 to 250,000.
Job gains in the first quarter averaged 276,000 per month compared to the October-December quarter’s average of 212,000.
Economists say most businesses locked in lower borrowing costs prior to the U.S. central bank’s tightening cycle, providing some insulation from higher borrowing costs and allowing them to keep their workers.
Industries sensitive to interest rates, like construction, are also boosting hiring as financial conditions ease.
About 59.4 per cent of industries added jobs last month, further easing worries that employment was concentrated in too few sectors. The health care sector led the broad increase in employment, adding 72,000 jobs that were spread across ambulatory services, hospitals as well as nursing and residential care facilities.
Government payrolls increased by 71,000 jobs, boosted by local and federal government hiring.
The construction sector added 39,000 jobs, about double the average monthly gain of 19,000 over the last 12 months.
Leisure and hospitality payrolls rose 49,000, returning employment to its pre-pandemic level. There were also increases in employment in the social assistance, retail and wholesale trade sectors.
Financial activities reported modest gains in payrolls as did mining and logging, transportation and warehousing.
Professional and business services employment rose slightly, with temporary help – seen a as harbinger for future hiring – posting a small decline. But manufacturing added no jobs last month as did the information sector. Utilities shed 400 jobs.
Average hourly earnings rose 0.3 per cent in March after gaining 0.2 per cent in the prior month as some weather-related distortions faded. Wages increased 4.1 per cent on a year-on-year basis, the smallest gain since June 2021, after advancing 4.3 per cent in February.
Wage growth in a 3 per cent-3.5 per cent range is seen as consistent with the Fed’s 2 per cent inflation target.
Inflation data next week will be crucial in determining the timing of the first rate cut. The Fed has kept its policy rate at the current 5.25 per cent-5.50 per cent range since last July. Following the report, financial markets saw two rate cuts this year, according to LSEG data.
“While we … believe the Fed is likely to proceed with three rate cuts this year, reports like these may tilt some policy-makers toward expecting fewer rate cuts in 2024,” said Lydia Boussour, senior economist at EY-Parthenon in New York.
Dallas Federal Reserve President Lorie Logan said Friday that an inflation landscape increasingly beset by upside risks argues against any imminent push toward easier monetary policy.
“I believe it’s much too soon to think about cutting interest rates,” Logan said in remarks prepared for a speech at Duke University.
Before lowering rates, “I will need to see more of the uncertainty resolved about which economic path we’re on. And, as always the (Federal Open Market Committee) should remain prepared to respond appropriately if inflation stops falling,” she said.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
The average workweek rebounded to 34.4 hours last month, from 34.3 hours in February. That together with the strong payrolls boosted aggregate hours worked 0.5 per cent, consistent with expectations for solid economic growth in the first quarter.
Gross domestic product growth forecasts for the January-March quarter are as high as 2.5 per cent annualized rate. The economy grew at a 3.4 per cent pace in the fourth quarter.
The strong job gains seen in the establishment survey last month were mirrored in the smaller and volatile household survey, from which the jobless rate is derived. Household employment rebounded by 498,000 jobs after declining for three straight month.
The two surveys had diverged sharply in recent months. Economists attributed the divergence to an increase in labour supply through immigration that was not yet being captured in the household survey.
The Congressional Budget Office recently upgraded its immigration estimate for 2023 to 3.3 million from 1.0 million.
The BLS uses U.S. Census population estimates and will likely update the population flows in its annual benchmark revision next year.
Researchers at the Brookings Institution in Washington estimated the new CBO projections suggested the labour market in 2023 could accommodate employment growth of 160,000 to 230,000 per month, compared to previous projections of 60,000 to 130,000, without adding pressure to wages and price inflation.
The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to a four-month high of 62.7 per cent from 62.5 per cent in February.
The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, also climbed to a four-month high of 60.3 per cent from 60.1 per cent in February.
“Clearly, the job market has plenty of gas in the tank in terms of demand, and also has room to run in terms of worker supply,” said Nick Bunker, economic research director for North America at Indeed Hiring Lab in Tampa, Florida. “That’s a good thing for all of us.”
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.
