Economy in Brief: December 2022

The unemployment rate for Canada in November fell to 5.1% in November from 5.2% in October. Canada, like the United States, has inflation problems whose profile looks quite similar to the U.S. inflation statistics. The two countries seem to be in the grip of the same cycle, which is usually the case. For now their domestic statistics are looking remarkably similar. What that means is that Canada's drop in the unemployment rate is unexpected and not what policy has been looking for. Canada's inflation rate for its core is over 5% and the headline CPI is much higher than that at nearly 7%.

Canadian job growth rose by 10,100 in November, sharply weaker than the 108,300 gain in October and weaker than the 21,100 in September. The three-month average gain of 46,500 is far ahead of the 4,300 average over six months and better than the 30,700 average over 12 months. In percentage terms, total employment rose by 1.9% over 12 months

Goods sector employment shed 9,400 jobs in November after gaining 45,100 in October and losing 24,800 in September. The sector has been erratic in current months. However, good sector job gains have been slowing steadily from an average of 11,300 over 12 months to an average of 8,700 over six months, to 3,600 over three months. The sector has gained 3.5% over 12 months

Within the goods sector, manufacturing jobs rose by 18,500 in November, rose by 23,800 in October and fell by 27,500 in September. Manufacturing sector jobs are marginally lower over 12 months. Gains average a monthly rise of 6,900 over six months and 4,900 over three months. Over 12 months manufacturing jobs are lower by 0.1%.

Service sector jobs gain 19,600 over November, slower than the 63,200 for October and the 45,900 in September. Service sector job gains average 19,500 over 12 months. The average decline is 4,300 over six months but now has averaged gains of 42,900 over three months. Sector gains in services have also been relatively volatile; the sector has gained by 1.5% year over year.

Within the service sector, accommodation and food supply workers have seen the fastest growth at 6.7% over 12 months. Professional and technical jobs have been the next strongest, rising 5.6% over 12 months. Jobs in information and culture have grown at a 4.5% pace. At the other end of the spectrum, the services sector jobs in transportation have declined by 3.8% over 12 months; jobs in trade have declined by 2.7% over 12 months while gains in healthcare and service professionals have increased by only 0.6%. There have also been very small gains in management. The number of managers employed has grown by only 0.2%.

The labor force participation rate in Canada has moved slightly lower. Its 12-month average is 65.1%. Its three-month and six-month averages both are 64.8%, which is the same as its value in November. The participation rate has been relatively stable; however, it tends to the weak side. Over 12 months the unemployment rate has fallen by 1%; its 12-month average is 5.4% that fell to 5.1% over six months and averages 5.2% over three months although in November the unemployment rate is back down to 5.1%.

Personal consumption expenditures increased 0.8% (7.9% y/y) during October after rising an unrevised 0.6% in September. The gain matched expectations in the Action Economics Forecast Survey. The 0.5% rise (1.8% y/y) in real sending was the strongest increase in nine months, up from 0.3% in September. Real spending on durable goods surged 2.7% (2.0% y/y) last month as spending on motor vehicle & parts jumped 5.8% (1.1% y/y) after improving 0.5% in September. Real spending of furniture & appliances gained 1.2% (-0.7% y/y) after two months of slight decline. Real spending on recreational goods & vehicles rose 1.0% (5.5% y/y) after a 0.3% gain. Real spending on nondurable goods rose 0.3% (-1.4% y/y) after rising 0.7% in September as outlays on gasoline & other energy products fell 0.8% (-1.0% y/y) following two months of strong increase. Apparel spending rose 0.3% (1.2% y/y) after rising 1.6% in September and real outlays on food & beverages gained 0.4% (-5.2% y/y). Spending on consumer services improved 0.2% (2.8% y/y), the same as in September. Real transportation services outlays improved 0.3% (3.6% y/y) after a 0.5% rise while real housing & utilities expenditures rose 0.2% (1.3% y/y) after holding steady in September. Real healthcare spending gained 0.3% in last month (2.1% y/y) after a 0.2% rise. Recreation services buying improved 0.2% (4.8% y/y), the same as in September, but real expenditures at restaurants & hotels strengthened 0.6% (6.7% y/y) after rising 0.9%.

The PCE chain price index rose 0.3%, the same as in the prior two months. The 6.0% y/y rise remained below the June peak of 7.0%. It remains nearly the highest rate of price inflation in over 40 years. A 0.2% m/m increase in the price index less food & energy followed two months of 0.5% gain. The 5.0% y/y gain stands close to y the largest since the autumn of 1983. Food & beverage prices rose 0.4% (11.6% y/y). Energy prices strengthened 2.6% (18.4% y/y) following three months of decline.

Nondurables prices rose 0.8% (9.2% y/y) as energy prices moved higher. The overall gain included a second straight 0.5% drop (+4.4% y/y) in apparel prices. The services price index followed with a 0.4% gain (5.4% y/y), after two months of 0.6% increase. The rise reflected a 0.5% gain (16.1% y/y) in transportation prices. Housing & utilities costs rose a moderate 0.4% (7.8% y/y). Recreation services costs rose 0.6% (4.1% y/y) after no change in September. The decline in the durable goods price index of 0.6% (+4.0% y/y) came after a 0.4% September increase. Motor vehicles and parts prices fell 0.6% (+6.6% y/y) and home furnishings weakened 0.8% (+7.3% y/y). Recreational goods prices weakened 0.2% (-0.4% y/y

Personal income rose 0.7% (4.9% y/y) during October versus expectations for a 0.4% rise. The gain reflected a 0.5% rise (6.7% y/y) in wages & salaries, corresponding to continued employment growth. No change (3.9% y/y) in proprietors' income was accompanied by a second straight 0.4% gain (8.2% y/y) in rental income. Receipts on assets rose 1.0% (5.1% y/y) as interest income increased 0.6% (6.5% y/y) and dividend income jumped 1.5% (3.7% y/y). Personal transfer receipts increased 1.6% (0.5% y/y). Disposable income rose 0.7% last month (2.8% y/y) after increasing 0.3% in each of the prior two months while real disposable earnings rose 0.4% (-3.0% y/y) following little change in September.

The personal saving rate fell to a near-record low of 2.3% in October. The level of personal savings fell 4.8% and was 67.9% lower y/y.

The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.

The European Monetary Union approaches reduction in its unemployment rate in October to 6.5% from 6.6% in September, continuing the long crawl lower back toward its previous trend decline that had been in place before COVID struck and interrupted that improving progression.

The numbers of unemployed have declined in each of the last two months, a decline in numbers of 1.3% in October and 0.3% in September. Since the unemployment rate is a ratio calculation that involves both the number of people unemployed as well as some estimate of people in the workforce, it's encouraging to see that when we look at the numbers unemployed that this part of the unemployment rate calculation continues to move lower on its own - it's an incredibly good signal.

However, when we back off to look at employment trends, we begin to see that the width of the yellow brick road appears to be narrowing. The table includes 12 of the longest-standing members of the European Monetary Union over 12 months. Eleven of these 12 countries have seen their unemployment rates drop. The exception is the Netherlands where the unemployment rate is higher by 1% over 12 months. Over six months the unemployment rate is higher and five of these twelve countries an unchanged and one other (Germany). The countries with higher unemployment rates over six months are the Netherlands, Luxembourg, Portugal, Finland, and Austria- a somewhat eclectic mix of countries. Over three months unemployment increases in four countries and is unchanged in two others. The unemployment rate is unchanged in Austria and in Germany. The unemployment rate is higher in Luxembourg, Ireland, Portugal, and the Netherlands.

Monthly data for the European Monetary Union also shows a somewhat uneven hodgepodge of changes in unemployment, but most countries are showing declines. Some show increases and the number of them show unchanged unemployment rates from period to period.

For the record, on the same timelines the United States has an unemployment rate that's higher by two-tenths of a percentage point; the U.S. rate is lower by nearly a percentage point over 12 months. U.S. unemployment ticks slightly higher over six months and three months. Japan has an unemployment rate that's lower over 12 months by 0.2 percentage points. Japan's unemployment rate is unchanged over three months and six months.