Thirteen Mid-April Economic Nuggets

Apr 12, 2014

In many parts of the U.S. and Canada, the first glimmerings of spring are a welcome relief after what was a take-no-prisoners winter. Hopefully, new buds of growth in the natural world will find reflection in about-to-be-issued private sector and government statistical reports as well.

Meanwhile, Russia continues to act like a bull in Ukraine’s china shop. Other “hot spots” around the world are taking a back seat for the moment. There are strong commercial and political reasons for North America to speed up efforts to supply Europe with oil and gas. Otherwise, Moscow’s control of pipeline supplies from Siberia provides too much leverage.

Against this backdrop, some of the most notable recent economic nuggets have been as follows. 

(1) Speaking of good news, which is how I’m choosing to kick things off, U.S. initial jobless claims for the latest week ending April 5 were a rock-bottom 300,000. That was a week-to-week decline of 32,000. To find a number lower, one has to scroll all the way back to May 12, 2007 (297,000), almost seven years ago and before the start of the Great Recession.

(2) In recognition of the importance of the initial jobless claims series in capturing what is happening in employment markets, the Department of Labor has just expanded the format of its report, going so far as to even add some graphs. When the media quotes initial jobless claims, they are often referred to as “firings”. That choice of language seems a little harsh.

(3) Despite the better news on the jobs front, equity prices – especially in the high-tech sector ‒ have been taking a beating. This was to be expected. The value of NASDAQ is up threefold since its most recent low point of February 2009. Some investors have decided it’s time to cash in their winnings. Besides, weaker profit expectations are shining a spotlight on overvaluations.

(4) At the same time, another story has emerged from equity markets of an altogether different, and positive, nature. Many companies have been realizing good earnings and because the upturn in the non-residential construction cycle has been slow to materialize, ‒ which has been unfortunate for our industry ‒ they have the means to issue record-high levels of dividend payouts. Mutual and pension fund holders are among the chief beneficiaries. This will provide a further boost to consumer spending.

(5) Since its Great Recession low-point in February 2010, the total number of jobs in the U.S. has increased by 6.4%. Three major industry sub-sectors have not only beaten that figure, but achieved double-digit percentage gains: professional and business services, a category which includes a lot of “temporary help” workers, +15.0%; leisure and hospitality, +12.3%; and transportation and warehousing, +10.1%.

(6) Other industry sub-sectors in which the four-year job growth has been above the national average have been construction, +8.3%, and education and health, +7.9%. The former has been helped by the pick-up in housing starts, although there is much more progress to be made.

(7) In three sub-sectors, job growth has been less robust: retail, +6.0% February 2010 to the present; manufacturing, +5.5%; and financial activities, +2.4%. Regulators have pressed the “mute” button on Wall Street. In information services, the staffing story has been cutbacks, -2.5%.

(8) That covers the private sector. What about government? It’s been taking austerity seriously. Since February 2010, the total U.S. public sector payroll has shrunk by 2.8%.

(9) The U.S. unemployment rate in March stayed the same as the month before at 6.7%. North of the border, the jobless rate fell 0.1 percentage points to 6.9%. Canada’s month-to-month jump in employment of 43,000 compared favorably with the substantial 192,000 increase in the U.S. Some Canadian data series have been exhibiting “noise” of late. For example, jobs in the public sector were up 40,000 in March after falling back by 51,000 in February.
 
(10) Earlier this year, Canadians were generally saddened to hear of the retirement from office of our long-standing federal Minister of Finance, Jim Flaherty. He’s the man given much of the credit for successfully steering the country through some very difficult economic times. Now, we’re shocked and in grieving over his sudden death. He’s left a fine legacy for his current successor (Joe Oliver) and all future inheritors of his mantle.

(11) Canadian housing starts in March plummeted. They fell to only 157,000 units, seasonally adjusted and annualized (SAAR). The previous month, they’d been 191,000 units. All the media attention on a possible housing bubble is apparently having an effect on homebuilders. Still, new home starts nation-wide on average are +2% in the first quarter of this year versus the similar January-to-March period of last year.

(12) Among Canada’s six largest cities – each with populations in excess of one million – year-to-date increases in housing starts have been recorded in Calgary (+70%), Montreal (+33%), Vancouver (+10%) and Toronto (+6%). In the nation’s capital, Ottawa-Gatineau (+1%), residential ground-breakings have barely escaped a flat performance. Only in Edmonton (-19%), has there been a contraction. 

(13) Quebec voters went to the polls on April 7 and resoundingly rejected the separatist-leaning Parti Quebecois (PQ). The Liberal Party, led by Philippe Couillard captured 70 seats, well above the 63 needed for a majority. Mr. Couillard previously served as Minister of Health in Jean Charest’s pre-Pauline Marois government. Before entering politics, he “enjoyed” ‒ if that’s the right word, and it probably is ‒ a distinguished career as a neurosurgeon.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.



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