Economy

U.S. recession looks likely — and there are 3 ways the economy could get hit, analyst says – CNBC

Published

2 years ago

July 11, 2022

Rising gas prices are piling pressure on the U.S. economy.

Bloomberg | Getty Images

The odds of the U.S. economy falling into recession by next year are greater than 50%, Richard Kelly, head of global strategy at TD Securities, said Monday, outlining three possible ways it could get hit.

Rising gas prices combined with a hawkish Federal Reserve and a generally slowing economy are among the tripartite risks facing the world’s largest economy right now, according to Kelly.

Could that raise the possibility of a recession? “I don’t think it’s a potential,” he told CNBC’s “Street Signs Europe.”

“The odds of a recession in the next 18 months are greater than 50%,” Kelly added.

Exactly when that downturn might hit is harder to predict, however.

Kelly said the economy could slip into a technical recession — defined as two consecutive quarters of negative growth — as soon as the end of the second quarter of 2022. Analysts will be closely watching the Bureau of Economic Analysis on July 28 for early estimates on that.

Alternatively, the fallout from surging gas prices following Russia’s unprovoked invasion of Ukraine and the Fed’s continued interest rate hikes could both weigh on the economy by the end of the year or into early 2023, he said.

And if the U.S. manages to weather all of that, a general slowdown could take the wind out of the economy’s sails but mid- to late-2023.

“You really have three shots at a recession right now in the U.S. economy,” said Kelly.

“We haven’t even hit the peak lags from gas prices, and Fed hikes really won’t hit until the end of this year. That’s where the peak drag is in the economy. I think that’s where the near-term risk for a U.S. recession sits right now,” he continued.

“Then, if you get past that, there’s the overall gradual slowing as we get into probably the middle or back half of 2023.”

Investment firm Muzinich agreed Monday that a forthcoming recession was not a matter of “if” but “when.”

“There will be a recession at some point,” Tatjana Greil-Castro, co-head of public markets, told CNBC, noting that the forthcoming earnings season could provide a gauge for when exactly that might occur.

“Where earnings are coming in is for investors to establish when the recession is likely to happen.”

The comments add to a chorus of voices who have suggested that the economy could be on the cusp of a recession.

David Roche, veteran investment strategist and president of Independent Strategy, said Monday that the global economic outlook had recently shifted, and it had now become easier to assess how different parts of the world might respond to various pressures.

“You can now make detailed prognosis for different parts of the world which are themselves very different from the simply blanket recession picture,” he said.

Roche said he considered a recession the loss of 2-3% of jobs in a given economy, suggesting that a U.S recession may be some way off. Data published Friday by the Bureau of Labor Statistics showed stronger-than-expected jobs growth, with nonfarm payrolls increasing by 372,000 in the month of June, well ahead of the 250,000 expected.

However, he noted — not for the first time — that Europe is on the brink of what he calls a “war-cession,” with the fallout from the war in Ukraine piling economic pressure on the region, particularly as it pertains to energy and food shortages.

“Europe may be hit by an energy crisis all of its own which produces the war-cession. The recession caused by war,” he said.

It comes as Nord Stream 1, the primary pipeline supplying natural gas to Europe from Russia, is shut down this week for maintenance, raising concerns that it could be turned off indefinitely due to ongoing disputes over Ukraine sanctions.

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

1 day ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

5 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

6 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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