North American GDP and Unemployment
September 30, 2010
Canada and the United States released subdued GDP figures today.
Canadian July GDP slipped 0.1%. Although negative growth in July had been expected, this was the first decline in eleven months, and weakness was pervasive. Manufacturing and construction respectively contracted by 0.7% and 0.5%. Energy, utilities, retail and wholesale turnover fell by 0.6%, 0.4%, 0.5% and 0.2%. If not for increases in mining and financial services, the drop in July would have been more pronounced. In the three prior months, Canadian GDP had been unchanged in April, up 0.1% in May and 0.2% higher in June. In the third of a year lying between March and July, real GDP expanded just 0.7% at an annualized rate in Canada.
We now have fairly complete U.S. GDP figures for the first four quarters of the economic expansion that followed an 18-month recession through June 2010. The quarterly pace of annualized GDP growth (saar) during this period is compared below to growth in the first year after the previous four significant recessions. This past year’s pattern of growth looks similar to what followed the 2000/01 U.S. recession, but these comparable properties leave much more slack in the economy this time than last because the recession was much deeper. The recovery this time also resembles the one in the early 1990’s, which also was a bounce from a comparatively mild recession. The recoveries in the mid-1970s and early 1980s were much more robust.
| GDP, saar | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter |
| 2009-10 | 1.6% | 5.0% | 3/7% | 1.7% |
| 2001-02 | 1.4% | 3.5% | 2.1% | 2.0% |
| 1991-92 | 2.7% | 1.7% | 1.6% | 4.5% |
| 1982-83 | 0.3% | 5.1% | 9.3% | 8.1% |
| 1975-76 | 3.1% | 6.9% | 5.3% | 9.4% |
Labor market properties after these five recession conformed to a similar pattern. The U.S. jobless rate in June 2010, one year after the recession ended, was identical to that in June 2009, and by August it had crept higher to 9.64%. In the year after the recessions that ended in October 2001 and March 1991, unemployment on balance had risen by 0.4 percentage points to 5.7% and 0.6 percentage points to 7.4%. In contrast, the jobless rate fell by 1.0 percentage points to 7.6% between March 1975 and March 1976 and by 2.3 percentage points to 8.5% between November 1982 and November 1983. New weekly jobless claims averaged 458K during the past four reported weeks to September 25, similar to the last week alone which saw claims of 453K. A year after the recession that ended in October 2001, new jobless claims were running at 410K, and the jobless rate in that business cycle didn’t crest until June 2003. One of the early signals that an economy has entered a recession is a rise of jobless insurance claims from less than 400K to more than that threshold, but recoveries tend to start before claims again recede under 400K. In the 2008-09 recession, new jobless claims spike briefly above 650K in the spring of 2009, and they initially fell back quite quickly. But the downtrend in jobless claims stalled after November 2009, averaging 463K in the sixteen weeks to March 13, 2010, 459K in the sixteen weeks to July 3, and 468K in the twelve weeks to September 25.
Canada has a more dynamic labor market than its southern neighbor. Canadian unemployment had dropped to 8.1% in August, one year after peaking at 8.7% in August 2009. Canadian jobs advanced 396K or 2.4% between those two Augusts. The gain in workers was larger than the 229K increase in U.S. jobs even though the United States has 7.57 times more employed workers than Canada. A final comparison of Germany to these North American economies reveals a jobless rate of 7.5% reported today for the month of September. While that is lower than the U.S. or Canadian jobless rates now, the really impressive fact is that German unemployment is also 4.5 percentage points lower than the 12.0% high in March 2005. Back then, U.S. and Canadian unemployment stood at 5.2% and 6.9%. As markets chatter on about who’s winning the currency wars, Germany is running victory laps around the United States and Canada in job market competition.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
Tags: Canada, currency wars, GDP, unemployment, United States
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