Growing recession alarm at the outset of this year warned of a coming business slowdown and significant job losses — until a government report last month showed that unemployment stands at its lowest level in more than 50 years.
A couple weeks later, in mid-February, fresh retail sales data blew past economist expectations, suggesting resilient consumer spending, the lifeblood of the U.S. economy.
The blockbuster economic performance boosted hopes that the economy would avoid a recession altogether.
Treasury Secretary Janet Yellen, speaking to “Good Morning America” last month, rejected concern about a downturn, saying the economy remains “strong and resilient.” Goldman Sachs cut its odds of a recession in the next 12 months to 25%.
The U.S. economy is humming, at least in some key metrics, but most economists say that the nation remains on a crash course toward a likely recession within the next year. A survey conducted last month by the National Association for Business Economics found that 58% of economists expect a recession in 2023.
An aggressive series of interest rate hikes at the Federal Reserve is expected to continue cooling the economy, economists told ABC News, noting the decline of personal savings that previously fueled the pandemic recovery.
To be sure, economists often err in their forecasts and some told ABC News that the path of averting a downturn is still possible.
Jeffrey Roach, chief economist at LPL Financial, called the coexistence of strong economic data and persistent recession fears a “conundrum.”
“There’s so much flux in the market,” he added, acknowledging the mixed signals sent by the economy in recent weeks. “The economy is still in this massive retooling from the pandemic.”
The high prices that weigh on the economy trace back to the pandemic-induced supply bottlenecks that made it harder to access a slew of goods, including essentials like gas and food.
Meanwhile, COVID forced billions worldwide indoors, shifting demand away from concert tickets and restaurant meals and toward the exact goods in short supply. The Russia-Ukraine war has exacerbated the shortages and sent prices even higher.
The Federal Reserve has imposed a string of aggressive rate hikes since last year that aim to lower inflation by cooling the economy and choking off demand. The approach, however, risks tipping the U.S. into a recession and putting millions out of work.
The Fed’s rate hikes have helped bring inflation down significantly from a summer peak. However, the policy has failed to slow the overall economy, as evidenced by the recent strong economic data, economists told ABC News.
The combination of easing inflation and sustained economic growth have driven hope among some of a “soft landing,” in which the Fed slows the economy and brings down inflation, while preventing the U.S. from entering a recession.
But a slowdown brought about by the Fed typically lags months behind a given rate hike, Nancy Lazar, chief global economist at Piper Sandler, told ABC News.
“Just because the economy is doing OK today doesn’t mean the economy won’t go into recession,” she said. “It’s happening slowly.”
Federal Reserve Chair Jerome Powell addresses reporters during a news conference in Washington, February 1, 2023.
Jonathan Ernst/Reuters, FILE
Some parts of the economy have shown signs of a slowdown. Home sales fell for the 12th consecutive month in January, reaching their lowest rate since November 2010, according to the National Association of Realtors.
The personal savings rate fell to an all-time low in December, suggesting that U.S. consumers have spent down much of their pandemic reserves.
Tina Quigley, president and CEO of the Las Vegas Global Economic Alliance, a group tasked with attracting and boosting economic activity, said the city thrived last year as leisure and travel bounced back from a pandemic lull.
By the end of last year, the average nightly rate for a hotel room in Las Vegas stood at $165, well above the pre-pandemic high of $127, she said. The Las Vegas airport saw 52.6 million passengers pass through its doors last year; a jump from 51.5 million in 2019.
“I don’t want to paint a picture of everything being sunshine and rainbows but certainly 2022 was a very good year,” she said.
Still, the organization assisted far fewer companies in establishing locations in Las Vegas last year compared to the year prior, suggesting recession fears had curtailed business plans and may foretell a further slowdown, Quigley said. The group helped 11 companies locate in Las Vegas last year, a sharp decline from 39 a year prior, it said.
“That pipeline has slowed down,” Quigley said. “We’re preparing for a recession, but not overreacting to it.”
Roach, of LPL Financial, said he expects a recession but recent strong economic indicators raise the likelihood of a mild downturn.
“Recessions are often necessary to break the back of inflation,” Roach said. “But given the fact that there’s so much fundamental stability in the economy, that recession won’t be as bad as your average recession.”
Zweli’s, a chain of three Zimbabwean restaurants in Durham, North Carolina, has enjoyed an uptick in business in recent months, said co-owner Leonardo Willliams, who runs the company with his wife.
Whereas last year a restaurant had about one or two tables occupied at a given time; now it’s four or five, he said. The company plans to hire 10 workers over the next month, increasing its workforce by 40%, he added.
“Business is slowly creeping back up,” he said.
However, rising costs have eaten away at the company’s profits, since major food purveyors charge twice as much for some products as they did before the pandemic, he said. And he fears that a recession would force corporate clients to cut back on catering, which accounts for 70% of the company’s revenue.
“It’s scary,” he said. “As small businesses, we’re equipped to be problem solvers but how much can one take?”
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.
