These are stories Report on Business is following Friday, Nov. 2, 2012.
What the jobs report means
You can spin today’s U.S. jobs numbers any way you want. But personally, I agree with economist Justin Wolfers of the Wharton School: “This was good news, period.”
What you think of the numbers depends, foremost, on whether or not you have a job, and how you spin them on whether you’re supporting Barack Obama or Mitt Romney.
Mr. Romney, of course, wasted no time this morning in condemning the uptick in the jobless rate to 7.9 per cent as “a sad reminder that the economy is at a virtual standstill.”
If he has his way, he’ll fix it.
Mr. Obama, in turn, who inherited the crisis, can claim the labour market is clearly on the mend. Which it is, and only an idiot, or a political opponent, would see it as a quick fix.
Indeed, a senior adviser to the president put it well when he said on television that “we’re not where we all want to end up, but we are making serious important progress moving forward.”
Today’s report showed that the U.S. economy churned out a better-than-expected 171,000 jobs in October, and the August and September numbers were revised up.
True, the jobless rate inched up from 7.8 per cent. But, as The Globe and Mail’s Kevin Carmichael reports, that’s because out-of-work Americans grew more hopeful and went looking for work. Thus, they were counted in the survey.
And remember that it’s down a full percentage point from last October’s 8.9 per cent.
“Reporters claiming there's good news for both sides in today's jobs report are doing their readers a disservice,” said Mr. Wolfers. “This was good news, period.”
Some observers – not all, of course – agree.
“This suggests the economy is gathering a little momentum, and that GDP growth will improve further in Q4 from the 2-per-cent pace of Q3, despite a slight knock from Sandy,” said senior economist Sal Guatieri of BMO Nesbitt Burns, referring to the hurricane that slammed several American states this week.
“The president’s election strategists will have something to cheer about in the final four days of the campaign.”
Toronto-Dominion Bank’s James Marple had a similar message.
“Ignore the naysayers, the U.S. economy is showing incredible resilience in the face of significant challenges,” the senior economist said.
“Despite acute uncertainty over the fate of the fiscal cliff and a struggling global economy, America continues to generate jobs at a respectable pace. In fact, this report adds to a string of surprisingly good data from U.S. consumer spending, confidence, manufacturing and the housing market.”
All of this is spot on.
Confidence is improving, the housing market is rebounding from its bottom and the labour market is on the right track, though it’s a long and slow road back to the Federal Reserve’s desired jobless rate of 5.5 per cent.
- Solid U.S. jobs data a boost for Obama in election stretch run
- Kevin Carmichael's Economy Lab: Today's U.S. jobs report will become backdrop for election finale
Canada's labour market stalls
Canada’s jobs market stalled in October after an exceptionally strong September.
The country’s unemployment rate held at 7.4 per cent, with job creation at just 1,800, Statistics Canada said today. That's well shy of what economists had expected, The Globe and Mail's Tavia Grant reports.
October’s reading was actually saved by an increase in the ranks of the public sector, by 37,000, while private companies cut back.
"All of the hiring was in the public sector – where hiring could continue to come under pressure from government belt-tightening in months ahead," warned Emanuella Enenajor of CIBC World Markets.
Here’s how things stand over the course of a year: Employment is up by 1.3 per cent, or 229,000 positions, all in full-time, while private payrolls are up by 1.4 per cent or 157,000, and public by 2.1 per cent or 74,000.
The flat showing in October follows two months of gains.
Notable in today’s report is the continuing struggle of young people to find work, with a jobless rate of 1lmost 15 per cent and employment down by 2.1 per cent, or 52,000, from a year ago.
Canada's jobless rate is high, though much lower than those of many countries in Europe. And the outlook for bringing it down isn't good at this point, particularly among weak economic growth.
"Today's small rise in employment finished off a week of disappointing reports with real GDP having contracted by 0.1 per cent in August and the October read on the RBC purchasing managers' index showing that the pace of growth in the manufacturing sector slowed for the fourth consecutive month," said assistant chief economist Dawn Desjardins of Royal Bank of Canada.
The private sector has now cut back in four of the past six months, noted senior economist Matthieu Arseneau of National Bank Financial, down 12,000 jobs compared to a hefty gain of 76,000 jobs in the public sector.
"Needless to say, this is unsustainable in the context of looming spending cuts in a number of provinces next year," he said. "As for the private sector, with earnings of TSX companies down 30 per cent so far in Q3, we do not expect a hiring spree anytime soon. Labour markets conditions are likely to remain difficult in the months ahead."
- Canadian hiring stalls in October
- Armine Yalnizyan's Economy Lab: Welcome to Canada's 'wageless recovery'
- Multinationals retrench in face of gloomy outlook
- Generation Nixed: Why Canada's youth are losing hope for the future
- The real youth jobs crisis: underemployment
Japan Inc. is being hit hard, to the point of one of its electronics giants is questioning its very survival.
As the Bank of Japan and the government wage a battle against deflation and try to prop up an economy flirting with recession and dogged by a strong currency, the electronics manufacturers that put the country on the corporate map are stumbling amid heightened competition, while its auto giants suffer from a dispute with China.
“The case for Japan to weaken the yen was made very clearly this morning as Sharp was downgraded to 'junk' by Fitch,” said Kit Juckes, the chief of foreign exchange at Société Générale.
“Once upon a time, [Manchester United] players had 'SHARP' emblazoned on their shirts and Arsenal players had 'JVC' on theirs,” he said in a report today.
“The humbling of Japanese exporters in the face of Taiwanese and Korean newcomers is sad, and if the yen were weaker, reversible. The yen's weaker this morning on the hope the BOJ will find the courage to 'do more.’”
The downgrade of Sharp Corp. today followed the company’s warning of a $5.6-billion (U.S.) loss yesterday, when it also warned it finds itself “in circumstances in which material doubt about its assumed going concern is found.”
To fight that, it said, it plans to slash salaries and expenses, seek voluntary retirement among its staff, and sell assets. It has also secured hefty bank loans. (The analysis is a bit odd as, given its comments in the same statement, Sharp added that “by implementing these specific countermeasures, we judge that Sharp is not in circumstances in which material doubt about its assumed going concern is found.”)
“During the six months ended Sept. 30, 2012, the Japanese economy saw signs of a partial recovery in company profits,” Sharp said.
“However, overall conditions remained extremely severe, due to such factors as yen exchange rate appreciation and ongoing deflation.”
Panasonic Corp., one of the other major electronics companies, is also in trouble.
Major auto makers such as Honda Motor Co., Nissan Motor Co. And Toyota Motor Corp., meanwhile, are taking a hit from a dispute between Japan and China over uninhabited islands in the East China Sea, which has led Chinese consumers to shun Japanese products.
Earlier this week, the central bank pumped trillions of yen into its asset-buying program, and analysts expect more stimulus amid intense political pressure for an aggressive response.
“Since Japan first slipped into deflation in 1994, inflation has averaged -0.1 per cent,” said Mr. Juckes.
“Over the same period real GDP growth has averaged just 0.2 per cent per quarter, a little less than 1 per cent per annum,” he added in his report.
“The BOJ knows Japan needs to break free from deflation but if low rates don’t induce people to spend, if [Japanese government bond] buying doesn’t make much difference, and if a large debt burden limits the scope for fiscal easing, what can they do? The obvious solution is to get the yen to weaken.”
That, however is not an easy task, Mr. Juckes warned, noting that Japan is seeking far higher real interest rates and real bond yields than either the embattled euro zone or the United States.
- Japan's electronics sector warns of dire outlook
- Japan auto makers' China slump accelerates on islands row
- Bank of Japan makes modest move amid gloom