The Real Economy
The middle market economy—often overlooked in the wake of large public companies and emerging Wall Street darlings—is the backbone of U.S. economic growth, accounting for the majority of new U.S. jobs and some 40 percent of the nation’s GDP.
#1 - Initial jobless claims tick up but labor market remains tight
By Tuan Nguyen, Ph.D., RSM Economist
New filings for jobless claims rose on a seasonally adjusted basis to 222,000 for the week ending Nov. 27, beating expectations and continuing the overall improvement of the labor market, according to government data released Thursday.
After a sharp drop in the week before Thanksgiving, the new jobless claims—a proxy for layoffs—were only slightly above the 2019 average of 218,000, before the pandemic.
The previous week’s figure was revised down to 194,000—a pandemic low—mostly because of seasonal variations around Thanksgiving week.
Our preferred measure—the 13-week moving average—also dropped, to 291,000 from 301,000, marking the 39th straight week of declines since February.
The significant decline in November points to an improved payroll report from the Bureau of Labor Statistics coming out on Friday.
After a turbulent September because of the impact from the delta variant’s surge and Hurricane Ida, the 13-week moving average has declined at a much faster rate as those headwinds have subsided.
We expect new claims to decline further in the last several weeks of the year as the tightness of the labor market persists. The new omicron variant of the coronavirus, though, is a major risk.
The total number of claims for all programs for the week ending Nov. 13 was 2.3 million, up by 21,564 from the prior week and down from 20.8 million a year ago.
The number of claims for regular state programs led the increase, while claims for pandemic-related programs declined for the same week.
On the state level, largest increases in new claims for the week ending Nov. 20 were in Virginia (up by 12,703) and New Jersey (up by 2,061), while the biggest drops were in California (down by 7,233) and Kentucky (down by 3,910).
The takeaway
Though the emergence of the omicron variant has become a significant wildcard in the economy, we expect filings to remain low in the coming weeks as businesses scramble to find workers and retain those that they have to meet surging demand.
#2 - Canada’s unemployment rate approaches pre-pandemic level
By Dr. Tu Nguyen, Economist and ESG Director, RSM Canada
Canada added 153,700 jobs in November, bringing the unemployment rate down to 6% as it approaches the pre-pandemic level, according to data released by Statistics Canada on Friday.
The report was a sign that Canada’s heated labour market was finally benefiting workers who have been left out of the recovery.
The report was a sign that Canada’s heated labour market was finally benefiting workers who have been left out of the recovery, including those in the goods-producing sector, the long-term unemployed and the underemployed.
In November, the employment rate among core-age women reached 80.7%, the highest ever recorded. The growth occurred mostly in full-time work and occurred across industries.
One reason for the higher participation rate is that greater flexibility for work during the pandemic has enabled more women to be in the workforce as they juggle responsibilities.
This new flexibility comes as the population ages and workers retire, which has only heightened the need for workers. The shift toward working from home and offering employees greater flexibility is most likely here to stay.
Long-term unemployed
The number of Canadians considered long-term unemployed, or those out of work for 27 weeks of more, decreased by 16.2%, the first monthly decline since August. For those unemployed for 52 weeks or more, the decline was even more dramatic, at 23.4%.
Research has shown that the longer a worker stays unemployed, the more difficult it is to find work, so the decrease in long-term unemployment, which has been a major drag in the recovery, is an encouraging sign.
The short-term unemployment rate, which covers those out of work for 26 weeks or fewer, had been steadily declining throughout the year and in November dipped below levels of February 2020, before the pandemic.
The tight labour market is also having an effect on wages. With job vacancies surpassing 1 million, wages are rapidly increasing, a trend that will continue as businesses try to attract and retain talent.
While the labour market has been a bright spot in Canada’s economic recovery, the omicron variant remains a looming threat, threatening to undo the progress made this year.
The takeaway
November’s jobs report is a gift for the Canadian economy as the recovery kicked up a gear. Employment increased across industries, provinces and demographic groups, expanding what had been a concentration in a few sectors like professional services.
Businesses will see increasing shortages in specific skills and a hypercompetitive market for talent, even as the uncertainties regarding the omicron variant remain.
#3 - Canada’s trade surplus grew in October, fueled by autos and energy
By Dr. Tu Nguyen, Economist and ESG Director, RSM Canada
Canada’s merchandise trade surplus widened to CAD $2.1 billion in October—a 10-year high—as exports of motor vehicles and parts as well as energy surged, according to data released by Statistics Canada on Tuesday.
Both exports and imports rose, especially in trading with the United States, primarily because of the automotive industry. October’s figure was an increase from September’s downwardly revised surplus of CAD $1.42 billion.
The automotive industry, which has been affected by supply chain bottlenecks, had a turnaround as exports of motor vehicles and parts rose by 30.8% from September, while imports rose by 5.3%, accounting for most of the growth in total imports.
Although there are signs that the worst of the semiconductor chip shortages might be passing, trade in this sector has fluctuated widely. Exports in October were still much lower than pre-pandemic levels and it will take more time for the industry to fully rebound.
Energy exports reached record highs in October, with crude oil exports rising by 11.6% and coal exports rising by a stunning 62.8%. Strong global energy demand and high energy prices contributed to this trend.
The floods in British Columbia disrupted transportation via ships, rail and highways. Trade in and out of Vancouver, the largest port on Canada’s West Coast, was profoundly affected, particularly with Asian countries.
We expect trade data for November and December to reflect these disruptions across sectors and product categories.
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