Insights & Resources

Canadian unemployment rate near recessionary levels

Statistics Canada announced that 90,900 jobs were gained during the month of December 2024, adding to the 50,500 gain reported in November. Despite the overall advance, total job gains stood at a relatively modest 2.0% over the prior 12 months. Nearly half of the job gains seen in this report (40,400) were in the public sector. On a year-over-year basis, public sector employment is up 3.7%, private sector employment is up 1.4% and self-employment is up 2.4%. At the same time, the overall unemployment rate edged down from 6.8% to 6.7% as the labour force reported another increase (66,700). Another significant increase in the population (67,100) left the participation rate (the percentage of working-age individuals who were either working or looking for work) at 65.1%, far below the pre-pandemic peak of 67.3%. This indicates that as the population has surged, there are now some 736,000 potential workers still on the sidelines. As can be seen in the accompanying graph, the extraordinary growth in Canada’s population has altered the appearance of the unemployment rate. The annual population growth (of workingage Canadians) stood at 3.6% in December. This is the fastest pace on record, going back to 1976. With many of the newer Canadians not participating in the job market, a return to 67.3% participation (normalized) would produce a more realistic view of the unemployment rate. As can be seen, the small deviation between these two rates has widened considerably in the past 10 years. Once again, the current data indicates a reported unemployment rate of 6.7%. With 67.3% participation, the unemployment rate would be 9.7%, a level traditionally associated with recessionary periods

U.S. consumer spending robust

The U.S. Census Bureau announced that retail and food services rose 0.4% (seasonally adjusted) in December following a revised 0.8% gain in November. Overall sales were up 3.9% compared to December 2023. Excluding autos, sales were up 0.4% during the month and up 2.9% on a year-over-year basis. For the final quarter of 2024, overall retail spending grew at an annualized rate of 7.3%. This is now the strongest quarter for spending since Q1/2023 (7.6%) and suggests that broader personal consumption expenditure (PCE) figures, which represent approximately 69% of all economic activity in the U.S., were similarly robust during the three-month period. The market focus will now shift to the questionable case for any further easing in the Federal Reserve’s monetary policy stance.

Longer view

The experiments of spending now and worrying later have proven to be too costly. Additionally, pursuing “green” initiatives at any price has contributed to deteriorating economic conditions in Canada. Both Americans and Canadians are calling for new governments that will prioritize “common sense” policies. It is expected that the interest rate gap between Canada and the U.S. will remain wide for some time, as the Bank of Canada will need to cut rates more quickly to improve competitiveness. Bond yields indicate a 1.4% gap over the next 10 years, which will likely result in a weaker Canadian dollar. Hundreds of billions are being invested in artificial intelligence initiatives aimed at boosting productivity, increasing earnings, enhancing lifestyles, and creating new industries. The next big development on the horizon is “full self-driving” technology, which will revolutionize the transportation ecosystem, from ownership and storage to usage and safety. Imagine reaching your destination with just the touch of a button. Just as the iPhone changed the way we communicate, full self-driving could transform the way we commute.

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