May 31, 2024
Slower-than-expected GDP growth in Q1 is more ammo for a June rate cut, economists say
The Volatile Jobs Market
In December, 2013, the economy lost 45,900 jobs instead of gaining what economists projected would be 14,000 jobs. The unemployment rate rose to 7.2 per cent from 6.9 per cent in November and the dollar started to tank.
Then Statistics Canada reported on February 7, 2014 that the Canadian economy added 29,400 jobs in January and the unemployment rate declined 0.2 percentage points to 7.0 per cent. Analysts had estimated 20,000 jobs would be added last month. The unemployment rate also slid 0.2 percentage points from December to 7.0 per cent for the first month of the year as the number of full-time jobs increased.
It’s hard to determine what those numbers mean. Is the economy healthy or not? The January numbers did offset the December losses somewhat, which means the economy is generating approximately 15,000 jobs a month. That’s not bad, but nothing to write home about, wrote CIBC Deputy Chief Economist Benjamin Tal in his Weekly Market Insight report.
Minister of Finance Jim Flaherty said the said the job trend was good. "This is comforting as we plan the budget and plan modest, steady job growth in Canada," he said in a Globe and Mail report.
But a few economists remain cautious although it does represent a “nice recovery” said BMO Capital Markets chief economist Doug Porter, in a report. “In other words, the underlying trend in job growth is just firm enough to keep up with labour force population growth -- no better, no worse."
A more important indicator is the export market, which many economists and the Bank of Canada hope will lead Canada out of a sluggish economy. The trade deficit has widened $1.7 billion in December. This was a billion wider than the market expected. Right now, the economy has paused, or at least that’s what a few economists are saying.
The export market is key to Canada’s growth because without an active export market, Canadian goods are not leaving the country and no outside money is getting in. A healthy export market means more jobs as the manufacturing sector gears up to meet demand. It also means more investor confidence and a growing economy.
Tal says Canada is in a non-linear recovery, but also says that, economically, the upcoming months will be uninspiring. Add the trade deficit to very low inflation, and a devalued loonie and we have an under performing economy.
Instead of focusing so much on house prices and debt, a new consideration with our economy is that we are now lagging behind the G7 countries, which have already started their recoveries.