After years of solid job creation, the labour market has tightened as evidenced by a U.S. jobless rate of just 4.1% (a multi-year low) and climbing job openings, both of which point to increases in wage inflation and hence overall inflation. Note that job creation now seems to be tilting towards sectors with higher wage inflation. This past week financial markets took note of the rising interest rates. The employment tracker jumped from 56.3 to 61.6, which reflected the strongest expansion in payrolls since data collection began in 1997. Fifteen of the eighteen non-manufacturing industries grew in the month. As a result, financial markets finally pulled back after over 400 trading days of positive returns. The decline in U.S. financial markets was a large point drop but the only the 100th largest percentage decline. While the financial markets volatility was historic, so too was the unprecedented pace of returns for over 18 months to this week’s point.
Canada’s Economy Softened as the U.S.
Canada’s economy diverted from the tax cut infused growth of the American economy. Our job announcements declined with a slump by 88,000 in January according to the Labour Force Survey. This ended the longest streak job growth for consecutive monthly gains since 2000 (17 months). Due to this drop, the unemployment rate rose one tick to 5.9%. Our economy cooled off in part under the short-term weighted on Ontario’s new minimum wage. Our partners at National Bank Financial Economics February 9th, 2018 discussion offers great detailed analysis.
What lies ahead? Enjoy the forward looking economic analysis and a detailed discussion of major upcoming economic news here.