A child mask-clad due to the Covid-19 coronavirus pandemic, is reflected in a mirror at a street in … [+] Gaza city,on October 8, 2020. (Photo by Majdi Fathi/NurPhoto via Getty Images)
NurPhoto via Getty Images
The upbeat October employment report is likely showing the labor market through the rear view mirror.
The weekly state employment numbers, too, as reported in the mainstream business media, only tell half the story. The entire story includes an additional 9+ million people on CARES Act supplements; a program that is growing as state eligibility is exhausted, but a program that expires as the year’s end.
High frequency data also confirm that the easy economic gains are now behind us.
Hopeful Employment Data
The October employment report looked pretty good, at least a first blush, with the headline Establishment Survey (Payroll Survey) showing a net gain of +638K. Better yet, because federal Census Bureau workers had finished and were let go, private sector employment actually rose +906K. Those sectors that had been hardest hit led the way: Leisure/Hospitality +271K, Retail +104K. In addition, the labor force grew by +768K with the Labor Force Participation Rate and the Employment/Population ratio both showing gains. This usually happens when those who have recently dropped out of the labor force (i.e. have stopped looking) find jobs – a good sign.
The sister Household Survey, from which the unemployment rate is derived, showed net new jobs of +2.24 million, and the U3 unemployment rate fell to 6.9% in October from 7.9% in September, and 14.7% back in April.
But much of this good news now appears to be in the rear-view mirror. All the analytical data and high frequency data appear to bear this out. Let’s go back to the employment numbers. A deeper look reveals that the percentage of the unemployed that have been unemployed for more than 27 weeks has now risen to 32% of the total unemployed.
This number was just over 9% back in July. As one would expect, the median number of weeks of unemployment has also risen, now at 19+. As seen on the chart below, normal is 9 (the dip to 2 in April occurred because the massive layoffs in April skewed the median number of weeks early in the economic shutdown).
Median Weeks Unemployed
St. Louis Fed
These two data points indicate that long-term unemployment is going to be a big economic issue going forward.
The Weekly Employment Data
On a weekly basis, the Department of Labor puts out data on unemployment, both Initial (New) Claims (ICs), and Continuing Claims (CCs). The latest ICs (week ending October 31st) of +738K are nearly identical to those of the prior week and have hardly budged since August. This means that layoffs from businesses that contribute to the state unemployment benefit system (i.e., nearly all employers) laid off 738K people the week ending October 31st, and that level of layoffs or higher has existed, week-in and week-out, since the end of August. (Prior to that, layoffs were much higher.) Contrast this to the worst week of the Great Recession where the peak was 665K and was short-lived.
These are the state numbers. They are reported by the media as stand-alone, and, as such, they completely mask reality. Some media outlets have also picked up on the CCs data from the state reports, which showed a weekly fall of -535K for the week ending October 24th (CCs are one week lagged). Think about this. If these data are really a sign of a strengthening labor market, then why are we seeing a rise in the duration and median? In fact, the fall in CCs at the state level proves not to be much related to re-employment as much as it is a function of the exhaustion of benefits.
What isn’t being reported is the data from the Pandemic Unemployment Assistance (PUA) program (created by the Cares Act). That program paid benefits to 9.33 million people the week ended October 17th, more than in the combined state programs. The PUA program was created for the self-employed, gig workers, and independent contractors. And this program allows those who have exhausted state benefits to apply for an additional 13 weeks via PUA. The chart shows both state and PUA initial claims. On the right-hand side, you can see that layoffs have been fairly constant at 1.1 million/week for all of October, clearly indicating that little employment progress is occurring. The better-looking numbers in the state programs are completely offset by the rising PUA claims.
Total State & PUA ICs
Universal Value Advisors
And, lo and behold, if one looks at the total of all the programs (state and PUA ICs and CCs), the progress shown is minor and there is speculation that the little progress shown may simply be a function of people dropping out (see chart).
Finally, the Cares Act established the PUA programs and they expire on 12/31. Given the state of politics and the various controversies surrounding the Presidential election, one must ask what happens to incomes if the PUA programs simply end? Nothing But Air!
Total All Unemployment Claims
Universal Value Advisors
High Frequency Data
The above comments are reinforced by the most recent high frequency data:
New and existing home sales appear to have plateaued;
State and local governments laid off -130K in the recently released employment data. This sector employs more than 19 million people. Without a stimulus that sends financial help, and pronto, we can expect more layoffs here;
The Census Bureau’s most recent small business pulse survey shows nearly 30% of the businesses surveyed have declining operating revenues. That number is rising from prior weeks. In addition, more than twice as many are reducing hours as are increasing them, and 1.5 more are cutting jobs than are hiring;
Same store sales (Redbook), restaurant bookings (OpenTable), air travel, and hotel accommodations have all rolled over in October;
ZipRecruiter has indicated that holiday related job postings are down -18.5% from a year earlier;
Challenger, Gray and Christmas says layoffs were the highest for any October since 2008 and are up 60.5% Y/Y.
Conclusion
On top of this, there has been a significant increase in the coronavirus case counts in the U.S. and in Europe, with Europe shutting down in places and certainly headed for a double-dip recession. Politics in the U.S. has, so far, made it impossible to reach consensus on a new (and much needed) fiscal stimulus to head off the brewing economic meltdown. Ditto for the next couple of months. And I haven’t even mentioned the oncoming eviction, foreclosure, and default tsunamis, as the forbearance periods for these also lapse at year’s end.
Given the current state of the economy and the political landscape, it is difficult to believe that the pace of job creation/economic activity will continue over the near-term horizon at the pace of the recent past.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
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.
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.
