Wednesday , March 27 2019
Home / Worthwhile Canadian Initiative / Hopefully, Tomorrow Won’t Be Yesterday

Hopefully, Tomorrow Won’t Be Yesterday

Summary:
A short quick post.  Yesterday’s job numbers for Canada were greeted with surprise.  With 55,900 jobs added in February, the sentiment as best summarized by Doug Porter, Chief Economist with BMO Capital Markets is that: “The economy clearly is not falling off a cliff by any means, arguably quite the opposite”.  This is despite what seems to be a slowdown in the Canadian economy as indicated by consumer spending, exports and capital investment by business in 2018.  The more entertaining headline was by BNN Bloomberg which led with the Canadian labour market is off to its best start since 1981 as “The two-month gain is the best start to a year since 1981.” Of course, if the economy is doing so well one wonders why we are holding off on interest rate increases but I digress. More to the

Topics:
Livio Di Matteo considers the following as important: , , ,

This could be interesting, too:

Stephen Gordon writes Canada’s Gross Domestic Income and trading gains: An update and estimates for the provinces

Livio Di Matteo writes The Federal Debt of the United States, 1791 to 2018: A Presidential Ranking

Bradford DeLong writes Still Haunted by the Shadow of the Greater Recession…

Siobhan Miller writes The costs of public sector patronage: lessons from the British Empire

A short quick post.  Yesterday’s job numbers for Canada were greeted with surprise.  With 55,900 jobs added in February, the sentiment as best summarized by Doug Porter, Chief Economist with BMO Capital Markets is that: “The economy clearly is not falling off a cliff by any means, arguably quite the opposite”.  This is despite what seems to be a slowdown in the Canadian economy as indicated by consumer spending, exports and capital investment by business in 2018.  The more entertaining headline was by BNN Bloomberg which led with the Canadian labour market is off to its best start since 1981 as “The two-month gain is the best start to a year since 1981.” Of course, if the economy is doing so well one wonders why we are holding off on interest rate increases but I digress.

More to the point is what those of us with more historical memory remember about 1981.  Take a look at Figure 1 which plots seasonally adjusted monthly employment gains from January 1980 to December 1982.  January and February 1981 were certainly the two biggest consecutive gains in that period and quite impressive at 66,500 and 76,800 jobs respectively.  But look at what happened next – employment shrank in March of 1981, growth resumed for a few months afterwards and then – well, the economy fell off a cliff into the 1981-82 recession which saw unemployment rates soar to peak at 13.1 percent in December of 1982.

Slide1

Slide1

If we compare monthly employment in the year leading up to January February 1981 to a similar range for January-February 2019 as in Figure 2 one sees that it is not inconceivable that we are again about to fall off a cliff especially given the accompanying aforementioned economic indicators for 2018.  However, a big difference between now and then is monetary policy and interest rates which peak at their post war high about this period.  We are currently still at pretty historic lows for interest rates.  However, based on what happened to employment in 1981, we should know by the end of summer if we are in store for some employment drops.

Leave a Reply

Your email address will not be published. Required fields are marked *