Employment Improves

Michael Rudd, CFA | President, CEO and Portfolio Manager

There have been several employment related reports published this past week. We thought that we would take this week to discuss the current state of employment in North America. The job situation is critical to the economy. In our opinion, it is the management of both employment and inflation that continue to drive the economic recovery. We believe that the recession that came as a result of the pandemic was ultimately due to supply issues (i.e. commerce was closed for a period of time) rather than a slowdown in demand, which is the typical way that a recession comes about. Indeed, in our daily lives, we hear about supply issues, price increases and labour shortages more often than we hear about people complaining that sales are slow or businesses are closing.

Last week, the U.S. Bureau of Labor Statistics released its monthly job report and the headline number was somewhat disappointing.  Last month, the US economy produced 235,00 jobs which was far lower than the just under 1 million jobs it created the month before. There were, however, a number of encouraging signs that showed continued growth in business:

  • Most of the job losses this past month were in local government and leisure & hospitality, rather than a broad decline in general business. Younger people are now employed back at levels that formed the base of previous recoveries and the number of permanent job losses has fallen faster than other recessions. In other words, beneath the headlines, the details are encouraging.
  • This week, Jobless Claims were also reported and the data came in at a new pandemic low. Figure 1 presents claims since the fall of 2019, with the scale changed to better present recent data without the pandemic’s impact on the data series. It is still somewhat elevated when compared to before March 2020 but the trend is unmistakably better.
  • In Canada, we also had a good monthly report with Statistics Canada releasing data this morning. Last month, we created 90,000 jobs which is three straight months of job creation for a total of 350,000 new jobs added over the summer.

“This means that” the North American economy continues to recover. It appears that if job creation continues as it has over the past year, the “pandemic employment hole” in both the US and Canada will be filled in middle to late 2022. While this is encouraging, inflation, business supply chain issues and the potential for COVID to become endemic could dampen the recovery.  We continue to be laser focused on the development of the economy and its impact on markets.

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