On Thursday, the latest sign that the economic decline may be bottoming out came as the government reported that 1.9 million Americans had applied for unemployment insurance during the last week of May — a painfully high number but the lowest since the novel coronavirus started spreading widely in the country in March.
The jobs data follows modest signs that the economy may be inching toward the beginnings of a recovery as the nation reopens. Mortgage applications have surged in recent weeks amid record-low interest rates. Consumption of oil and petroleum products is up. The number of travelers at airports, as measured by the Transportation Security Administration’s precheck numbers, has begun increasing in recent weeks. Even restaurant reservations have inched up.
“This covid recession will go down as the shortest and arguably the most severe in history,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi said the recession caused by the pandemic is likely to be over, almost as abruptly as it started. He points out that private payrolls declined by 2.76 million people in May, according to a report released Wednesday by payroll processor ADP. That was far below analysts’ estimates.
Yet, even when economists declared the Great Recession officially over in June 2009, the unemployment rate did not return to prerecession levels until 2017, a reminder that the economic pain can linger for years. Similarly, experts predict that this recovery will take years.
Cheered on by President Trump, some states have lifted some of their most severe restrictions in recent weeks, more businesses have reopened — at least partially — and brought back workers. But there is still no sense of when commerce will resume at the scale seen late last year. Until there’s a widely available vaccine against the novel coronavirus, the economy is likely to continue struggling at a low rate. And public health officials continue to warn of a second wave of infections in the fall or winter, which could bring on another round of shutdowns.
For now, the U.S. economy is in limbo, with many companies operating at half capacity and a big question mark about how long firms can survive that way. Idled workers aren’t sure when they will be called back, so they are hoarding cash. State and local budgets have been decimated, which is likely to trigger more layoffs later this year.
“These are extremely ugly numbers, but because there were so many forecasts talking about a total collapse of the economy, the numbers we’re seeing, while extremely bad, aren’t the worst-case scenario,” said Lindsey Piegza, chief economist at Stifel Fixed Income. “It’s not as bad as it could have been. It’s an odd silver lining.”
The dueling stories about this economy — it is improving yet remains greatly depressed — are likely to play out all the way through the presidential election. Trump is seizing on any data showing a rebound and is taking credit for the bounce-back in the stock market, where the S&P 500 index just experienced its best 50-day rally since 1952.
“By the time of [the] election, I believe the economy will be doing phenomenal numbers. Big job increase, big GDP increases, and that’ll be before the election,” Trump said Wednesday on Fox News Radio’s “The Brian Kilmeade Show.”
“The stock market is booming,” he said.
But presumptive presidential nominee Joe Biden and other Democrats have been quick to point out that millions of Americans remain out of work and that the job losses aren’t as bad in other countries, raising questions about the U.S. government’s response to the pandemic. Biden predicts a slow recovery.
“Economic growth is likely to be back in positive territory by the third quarter,” Stifel’s Piegza said, but “what we’re really talking about is going from extremely terrible to slightly less terrible.”
Official government growth data looks at how much the economy changes from quarter to quarter. Since the April-to-June period is likely to be one of the worst in U.S. history, the third quarter, even if sluggish, will look like a big surge, giving Trump a talking point just before the election.
What matters to many Americans is the job situation. When Americans feel it is easy to get work, they tend to give the economy more-positive ratings and spend more. When people fear they will lose their jobs, have to take pay cuts or have trouble finding new work, they tend to save more. In April, the U.S. savings rate hit a record high of 33 percent, a sign of how scared people are.
“The savings buildup over the past two months can hardly be considered firepower for future consumption,” Bob Schwartz, senior economist at Oxford Economics, said in a recent note. “The stimulus checks were a one-time payment that has already run its course.”
The CBO also said that the pandemic will shrink the size of the U.S. economy by nearly $8 trillion in the next decade, assuming there are no more coronavirus waves that trigger crippling shutdowns in coming months.
More than 40 million people have applied for unemployment benefits during the pandemic, and roughly 30 million are receiving them, previously unimaginable figures that wiped out a job market in which unemployment was at historic lows as recently as February.
“Whatever optimism there is from seeing some people return to work, we’re not seeing a drastic move off unemployment,” said Jay Shambaugh, a senior fellow at the Brookings Institution. “If anything, we’re seeing a stable number of people on unemployment. Last year it was around 1.5 million.”
Still, signs that the economy is no longer plunging are an encouraging start, forecasters said.
New data from the Census Bureau’s weekly Small Business pulse survey shows businesses are starting to get back on their feet. In the week ending May 30, about 3 in 5 small businesses reported revenue of above $15,000. That’s a massive reversal from a month earlier, when 60 percent of businesses reported little or no revenue.
Other signs of a turning point are that only a quarter of businesses closed locations in the past week, down substantially from a month earlier, and businesses are reporting fewer supply-chain problems and missed loan payments.
Flights are also picking up. American Airlines announced Thursday an expansion next month as travel demand picks up again. For July, the airline expects to fly 55 percent of last year’s domestic trips, up from a mere 20 percent in May.
Americans are also beginning to eat out again. Restaurant reservations on the online platform OpenTable showed that more than 30 percent of its participating restaurants had begun taking bookings as of June 3, vs. zero throughout most of April.
The Federal Reserve has scaled back its purchases of government bonds, a vote of confidence that the worst probably is over.
Yet, the manufacturing sector is a telling example of just how modest any rebound is.
The industry experienced its worst contraction in April since the Great Recession. The Purchasing Managers’ Index slumped to 41.5 in April, signaling a deep contraction. In May, the index rose to 43.1, an improvement but far below the 50-mark that is considered healthy and expansionary.
Such contradictions are also apparent in the job-market data, economists say. New jobless claims are trending lower, but even with so much of the economy reopening, nearly 2 million people filed new applications for unemployment aid.
“It’s a sign that things are not getting as worse as they were before,” said Nick Bunker, economic research director at Indeed Hiring Lab. “We have seen a reduction in the pace of people becoming jobless. So that’s positive. But we’re still seeing claims at astronomical levels than what we saw before this crisis.”
Job postings tell a similar story. The number of jobs posted on Indeed’s site in May was 5 percent higher than in April. But those numbers were still 34 percent lower at the end of May than at the same date in 2019 — a staggering drop.
“It is, at most, an extremely partial rebound,” Bunker said. “Postings are still growing at a rate far slower than we saw last year. I think it’s worthwhile celebrating that the pace of things getting worse has slowed down. But that means we haven’t hit a bottom yet. There are still a fair amount of folks losing their jobs and folks not hiring yet.”
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.
