The third quarter GDP reports an economy with stronger growth than expected. Out partners at National Bank Financial Economics offers a thorough analysis that reveals many aspects of our economy remain robust, including: domestic demand fired on all cylinders, consumer demands remains strong, household savings rates increase and inventories continue to be drawn down. Job growth has even outpaced economic growth to this point. These indicators paint a positive picture for 2020 with modest growth projected but recent November 2019 jobs numbers propose a ‘significant fly in the ointment’.
November 2019 Canadian Job Numbers Tumble
Just when it appeared we expected to enter 2020 on a modestly positive keel, the winds of change appear in the November jobs report. The chart below offers a longer term perspective on the recent increase in unemployment. Coupled with the Bank of Canada leaving overnight rates unchanged at 1.75%, the Bank of Canada focused on the resilience of the Canadian economy in their most recent statement.
Although the Canadian (and U.S.) job and employment numbers announced on Friday July 6th were positive, the trends in each country are contrasting. The Canadian job numbers have not done well in comparison to strong U.S. employment. These differences will create contrasts in our interest rate and economic policies. As our partners at National Bank Financial Economics (NBFE) team states, “Total employment registered its worst start of the year in the current expansion due to the 48K drop in private-sector jobs. Major cities were not immune to the slump. Vancouver is down 45K jobs this year and Toronto has seen a pullback of 24K.”
What to look for in this week’s Bank of Canada meeting?
In Canada, the highlight of the week will be the central bank’s report. “With its three core inflation measures close to two percent, it could be said that the Bank has a green light to proceed with further policy normalization. However, the deterioration of the international trade outlook since the central bank’s last meeting ought to give pause to the BoC.” What direction will interest rates take in Canada?
NBFE surmises that “with the U.S. threatening to instigate a trade war with China, and with NAFTA negotiations stalling, we don’t see conditions as supportive of further monetary policy normalization.”
For a detailed report on this week’s economic outlook here.
With the lowest unemployment rate announced on August 4, 2017 since 2008, the summer sunshine is warm in Canada. Canadian employment rose by 11,000 jobs in July according to the Labour Force Survey. That was a touch below consensus expectations. The unemployment rate dropped two from 6.5% to 6.3% (the lowest since October 2008). Self-employment was a majority force in the increase. This trend aligns with the increasing “Gig Economy” predictions that more folks will explore retirement and freelancing from a life-style, flexibility and longevity perspective.