Improving Trends in Canadian GDP and U.S. Jobless Insurance Claims

March 31, 2011

Monthly Canadian GDP figures, calculated from the supply side, showed a second straight brisk rise of 0.5% in January, resulting in a three-month annualized 5.7% rate of rise compared to a 2.0% growth rate in August-October.  Industrial production rose 1.3% on month and 6.9% on year in January, with factory output increasing by 2.8% on month and accelerating to a 12-month 6.0% advance from 4.5% in the year to December.  Wholesale turnover increased 0.7% following monthly advances of 1.1% in November and 1.0% in December, but retail sales fell for a second straight month, albeit by just 0.1%.  Personal consumption to increase more quickly in the future, in light of the trend in average weekly earnings, which were 4.2% higher in the year to January compared to a 2.2% increase over the previous statement year.

The U.S. jobless rate generally trends lower when new jobless insurance claims are running below 400K as they have been doing recently.  Such totaled 388K last week and averaged 393K over the past eight reported weeks, down from 424K in the previous eight weeks to January 29, 437K in the eight weeks to December 4, and 458K in the eight weeks to October 9.  The unemployment rate has indeed fallen sharply from 9.7% in October to 8.9% by February.  It would not be surprising if data due tomorrow showed a pause in the downtrend with another print of 8.9% or even an uptick to a 9-handle.  But it has already dropped more than analysts imagined six months ago. In the transition from recession to recovery, it is customary for a diminishing layoff rate as we’ve seen precede a quickened pace of hiring.  This second phase hasn’t kicked in yet, even though the GDP recovery is entering its eighth consecutive quarter.  And so to put the worst possible spin on the labor market performance, there were 130.515 million U.S. nonfarm workers in February 2011 versus 130.532 million in December 1999, a net drop of 17K over 134 months!  On balance of the previous 134 months between October 1988 and December 1999, jobs climbed by almost 24.3 million. 

Other analysts often quote a 7.5 million job deficiency in the United States, taking the difference between the current level and the pre-recession peak in January 2008.  That figure vastly understates the scope of the problem as it neglects to account for a growing population of 281.4 million in 2000 but roughly 311.1 million at present.  The true size of the labor market imbalance lies between 25 and 30 million workers, and that’s a gap that is unlikely to get closed for a couple of decades.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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