People walk through Times Square, in New York, on July 29.
ED JONES/AFP
The promise of a “normal” U.S. economy this summer, which kicked off with the June revival of restaurants, air travel and baseball games, is transforming into an uncertain fall of rising health and economic risks.
Labor Day weekend, the traditional end of the U.S. summer season, was pegged as the moment when the economy would finally transition out of the pandemic slump, with private sector jobs and wages replacing unemployment benefits.
Instead, the summer is closing with rising COVID-19 case counts, hospitals bulging with patients, a sharp slowdown in jobs and dark predictions. Most startling – the University of Washington’s Institute for Health Metrics and Evaluation projects that between now and Dec. 1 there will be 100,000 COVID deaths, more than in the same period last year, when a wave of winter infections took hold and vaccines were not yet available.
“I don’t think fall 2021 is going to give us the catharsis we were waiting for,” said Nick Bunker, economic research director for hiring site Indeed, or provide a clear view of how fast U.S. job markets can recover the 5.3 million jobs missing from before the pandemic. “The transition is going to be longer than expected. The issue is, is it a stumble or does the baton get dropped?”
Nonfarm payrolls increased by 235,000 jobs last month after surging 1.053 million in July, the Labor Department said Friday. Economists had expected 728,000 new jobs.
Special $300-per-week unemployment benefits end on Saturday. While employers hope that will usher new job applicants into a labour-starved market, there are signs the pandemic may have begun to curb their hiring plans instead.
The reopening of schools, far from smoothing the way for parents to return to full-time jobs, has been marked by erratic outbreaks, quarantines and closures, as school boards battle over masking students.
The manager at The Irish Whisper, a pub near the Gaylord National Resort and Convention Center in Oxon Hill, Maryland, said that business has fallen off since an initial summertime rush.
“It’s not as great as pre-COVID, but it’s better than not having anything,” said the manager, who only gave his first name Andrew. “I thought we were in the clear and then this variant emerged.”
After a strong start early this summer, attendance is dropping in baseball stadiums.
BIDEN’S VIRUS OVERSHADOWED
It is a particularly sensitive moment for U.S. President Joe Biden.
The Democratic president has taken a hit in the polls from the resurgent virus, faces criticism over the Afghanistan withdrawal and must deal with the aftermath of Hurricane Ida and a gauntlet of deadlines in Congress in coming weeks to keep the government funded and his economic agenda on track.
“There’s a lot more work to do,” to fix the U.S economy, Biden said Friday, addressing the weak jobs numbers. “”We need to make more progress in fighting the Delta variant,” he said, repeating that it was a pandemic of the unvaccinated.
Biden’s strategy of wiping out COVID by getting all of the United States vaccinated was hindered by a politically charged antivaccination movement this summer, and the pace of vaccinations has slowed since peaking in April.
A run of higher-than-expected inflation due to supply chain woes and labour shortages consumed what would otherwise have been healthy wage gains. A closely watched index of consumer confidence, which can influence spending, tumbled in August to a six-month low.
Progress on the virus “is (Biden’s) No. 1 advantage, but people are discouraged and frustrated and it’s also interacting with the economy,” said one Biden adviser not authorized to speak on the record.
Administration officials believe the recovery largely remains on track, and infrastructure and spending plans may partly make up for the lapsed weekly unemployment insurance payments.
Democrats are hoping to finalize a $1-trillion bipartisan infrastructure bill as soon as this month while also working on a $3.5-trillion bill that could only secure party-line support.
“This bill is going to end years of gridlock,” Biden said of the smaller infrastructure bill. “Both literally and figuratively it’s going to change things,” he said.
Republicans are fighting the administration’s most ambitious spending plans. Goldman Sachs economists now estimate the “fiscal cliff,” as spending rotates away from the record government transfers of the past 18 months, will be a noticeable drag on growth by late 2022.
Oxford Economics economists expect to trim their outlook for 2021 gross domestic product growth to 5.5 per cent, down from 7 per cent in early August.
The reduction reflects “the deteriorating health situation weighing on optimism and spending, lingering capital and labour supply constraints and a slower inventory rebuild,” Oxford chief U.S. economist Gregory Daco said in an e-mail.
DELTA WEIGHS ON HIRING
The August jobs data released Friday showed the current surge of infections, which drove the number of new cases from around 11,000 a day in mid-June to almost 150,000 daily this week, slowed hiring and the broader recovery.
“Today’s report has the Delta variant written all over it,” Indeed’s Bunker said. “It is clear that the recent surge in COVID-19 cases is a strong headwind to the labour market.”
Economists are not expecting the sort of collapse in demand for restaurants, travel and other services seen in earlier virus waves. Many Federal Reserve officials feel businesses and families have learned to navigate the situation, either finding ways to lower the risk of infection as they resume work and business, or worrying less about infection because they’re vaccinated.
The disappointing 235,000 in new jobs comes as the unemployment rate fell to 5.2 per cent from 5.4 per cent in July. It has, however, been understated by people misclassifying themselves as being “employed but absent from work.”
Some employers argue that job growth figures could be much higher, given the record number of openings, if they had not had to compete with unemployment benefits. That hasn’t been borne out in states that ended the federal benefits early over the summer, where there’s little evidence more people went back to work.
Instead, employers seem to be pulling back on hiring themselves.
Hiring at around 50,000 small businesses has fallen since midsummer, data from time manager Homebase shows, while a work force recovery index from time management firm UKG, which analyzes time card punches, fell 2.4 per cent from July to August.
It was sharpest in the southeast, where the spread of the virus was most intense.
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TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
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