(Bloomberg) — The U.S. economy is showing some scattered signs of picking up from an end-of-year slowdown, muddying President Joe Biden’s efforts to win congressional passage of a $1.9 trillion stimulus package.
New claims filed for unemployment benefits have fallen for two straight weeks, while January payrolls are forecast to rebound from a December swoon in data out on Friday. Managers in charge of buying supplies for U.S. companies reported increased business last month and homebuilders said demand remained robust.
Selected high frequency data, such as weekly consumer confidence readings and restaurant bookings, also point to some strengthening, as virus infections ebb and business restrictions are eased.
“We’re seeing percolating growth underneath the surface,” said Gregory Daco, chief U.S. economist at Oxford Economics.
The tentative improvement comes as Biden’s mammoth package runs into opposition from some lawmakers who question whether that much support is needed on top of the more than $3 trillion the federal government has already delivered or committed.
Read More on Stimulus: Biden, Yellen Tell Democrats GOP Plan Too Small
Jobs Report
The next major update on the economy comes on Friday with the Labor Department’s release of monthly jobs numbers for January. Economists’ estimates for the change in non-farm payrolls vary widely — from a decline of 250,000 to an increase of 400,000.
The median forecast in the Bloomberg survey calls for a 70,000 gain after December’s 140,000 drop. In November, employment increased 336,000.
Wrightson ICAP LLC chief economist Lou Crandall said the data could be skewed higher by seasonal factors that take account of normal January layoffs of retail workers hired for the end-year holidays — a development that didn’t occur at the same pace because of the pandemic.
“To the extent that job creation looks stronger it could take out some of the urgency” for passage of a broad-based stimulus plan as opposed to a more targeted one, said Michelle Meyer, head of U.S. economics at Bank of America Corp.
She cautioned though that the near-term path of the economy will be determined by the country’s progress in getting the virus under control, especially now that new, more contagious variants have shown up in the U.S.
‘Inflection Point’
The economy looks to be already benefiting from the $900 billion aid package Congress approved in late December, with credit and debit card data compiled by Bank of America showing a pickup in consumer spending.
Jefferies LLC economists Aneta Markowska and Thomas Simons see February as an “inflection point” with growth picking up steam after slowing to an annualized rate of 4% in 2020’s fourth quarter from a record 33.4% pace in the third.
Read More: Bloomberg Economics Tracks Recovery in High-Frequency Dashboard
The Congressional Budget Office said Monday that it sees the nation’s gross domestic product recovering from the coronavirus pandemic much faster than previously expected — even before any further stimulus from the federal government. It forecast that GDP will expand 4.6% this year — the fastest pace since 1999 — after contracting by 3.5% in 2020.
If Biden’s package is approved in its entirety, federal government assistance to the economy during the pandemic will clock in at around 25% of annual GDP of almost $21.5 trillion. That compares with the roughly 10% hole the virus tore into the economy at the height of its impact.
“Economists are saying there is room for additional support,” said Peter Hooper, global head of economic research for Deutsche Bank. “The argument is how much do you want to overshoot.”
Biden administration officials tout the advantages of going big. They point to the ravages caused by Covid-19 — about 10 million fewer Americans are employed since the pandemic began a year ago — and argue that now is not the time for the government to hold back.
“We have a real urgency to act and to act comprehensively,” Brian Deese, director of the White House’s National Economic Council, said in a Jan. 31 interview on NBC’s “Meet the Press” news show. “A piecemeal approach, where we try to tackle one element of this and wait and see on the rest, is not a recipe for success.”
Proponents of the package also maintain that it will help limit long-term damage to the economy by returning GDP and the jobs market back to their pre-pandemic heights more quickly.
In making the case for a smaller plan, former CBO Director Douglas Holtz-Eakin said that what’s holding back the economy is the virus, not a lack of money in consumers’ pockets. The personal saving rate stood at 13.7% in December, more than double its average since 2000.
“If we get another jump in the savings rate what are they going to do with it?” asked Holtz-Eakin, who’s now president of the American Action Forum and served as an adviser to the late Republican Senator John McCain. “Are they going to go out and buy GameStop?”
After skyrocketing on heavy retail purchases and short-covering by hedge funds, shares of video-game retailer GameStop Corp. plunged on Tuesday as the buying evaporated.
Most Wall Street economists are betting that Biden will get some, but not all, of the extra spending he’s seeking. But that will still be enough to substantially lift GDP in the coming quarters.
“The economy will be fueled by a one-two punch of virus containment and stimulus support,” Meyer said. She sees GDP rising at a 7.5% clip in the second quarter and 10% in the third on the back of another $1 trillion in stimulus.
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.
