US and Canadian Employment
The US and Canada release employment data on the first Friday of every month. Last month, we noted in our Pathfinder Investment Outlook that weak employment data led to financial asset volatility. Many market participants look to employment and inflation data as the prime barometers of the economic situation. Over the long-term, stock and bond markets tend to move in tandem with the economy; however, there are times over the short and medium-term where valuations of financial assets can drift away from the economy, especially when major central banks are involved. For this reason, close attention is paid to employment and wage data as an indicator of overall economic health. This month’s report was anticipated because the data last month was surprisingly poor. For May, the US has bounced back with solid job growth. Canada, on the other hand, continues to struggle, with negative job growth again for a second month in a row.
- The US created 559k jobs last month which was much better than the 278k that it created the month before. It was also more in line with what economists were expecting. Cumulatively, the US has lost 7.3 million jobs since the pandemic started. There still remains a long path back, but sequential improvement continues. Canada, on the other hand, had two straight months of declines, also remains 500k jobs from full recovery. Figure 1 presents the data of both counties since Jan 2020.
- Figure 2 presents the higher frequency Weekly Jobless Claims data, which continues to post strong results and is approaching somewhat more normal numbers.
“This means that” we will continue to watch the employment situation carefully. While the aggregate data does show some improvement, there is still a long way to go. Furthermore, we are hearing anecdotal reports of labour shortages in several employment sectors that is creating wage inflation. Indeed, the pandemic has created major misallocations of resources and this is one sector that will take time to normalize.
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*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
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