- Global Economy Gaining Momentum
In March 2024, the global economy demonstrated an increasing momentum, according to the latest S&P Global PMI surveys, with the overall index reaching a nine-month high of 52.3 (Williamson, 2024). This marks the fifth consecutive month of growth acceleration, highlighting a broad-based expansion across both the manufacturing and service sectors and spanning a variety of regions. Emerging markets, particularly India and Brazil, reported robust growth, with India achieving the fastest expansion since July 2010. In the developed world, the eurozone saw a modest resurgence in economic activity, marking its first growth since last year, driven primarily by the services sector.
Employment figures from around the globe also reflected positive trends, with March witnessing the highest increase in job creation in seven months. The service sector was mainly responsible for this rise, although there was also a marginal increase in manufacturing employment. Forward-looking indicators provided further reasons for optimism, inflows of new business and companies' output expectations for the coming year both rose significantly. Despite these positive indicators, regional disparities remain evident, as seen in Canada's ongoing contraction and job losses in Germany, contrasting sharply with strong employment growth in Spain, Brazil, and Russia.
- Canadian Labour Force: Stagnation, Sectoral Shifts, and Shifting Sentiments
In March 2024, the Canadian job market experienced subtle but notable shifts, with the economy losing 2,200 jobs (The Canadian Press, 2024). This marginal change contributed to the unemployment rate rising from 5.8% to 6.1%, marking the most significant increase since the summer of 2022. The sectors most impacted by job losses included accommodation and food services, wholesale and retail trade, and professional, scientific, and technical services. Conversely, the health care and social assistance sectors saw employment growth, illustrating an uneven impact across different industries.
Despite these challenges, wages showed resilience. Average hourly wages in Canada increased by 5.1% year-over-year to $34.81 in March 2024, buoyed by an influx of 60,000 individuals entering the job market or returning from temporary layoffs (Caruso-Moro, 2024). This wage growth occurred alongside a rise in job vacancies, which increased to 656,700 in February, a 3.4% rise from January. Significant job vacancy increases were particularly notable in Ontario and Alberta, with respective rises of 8.4% and 13.7%, suggesting that some regions and sectors are experiencing growth even amidst broader employment stagnation.
However, the overall sentiment towards job security in Canada has declined, reaching its lowest level since May 2020, with only 44.9% of respondents feeling secure in their employment (Caruso-Moro, 2024). This growing uncertainty is a stark contrast to the stable hard data on layoffs and job postings, which remain above pre-pandemic levels. The youth labour market has been particularly affected, with the employment rate for individuals aged 15 to 24 falling sharply to 55%. In comparison, the employment rate for core-aged workers remains robust at over 84%, underscoring a significant dichotomy within the Canadian labour market.
- Bank of Canada Holds Steady Amid Inflation Concerns and Economic Uncertainties
At a recent meeting, the Bank of Canada's governing council faced divided opinions on whether to cut the key overnight interest rate amid fluctuating inflation and robust domestic demand (Shecter, 2024). Some members advocated for maintaining the current restrictive monetary policy, arguing it was necessary to ensure ongoing progress in controlling inflation. Others believed the policy might be too restrictive, noting that inflation rates across various components had begun to normalize. Despite these differing views, the council reached a consensus to keep the rate steady at 5%, citing still high inflation and existing, albeit reduced, risks. This decision underscores a cautious stance towards monetary policy easing, focusing on a gradual process aligned with the uncertain economic outlook and the slow path to achieving the inflation target.
In the broader economic landscape, the Canadian dollar showed strength against the U.S. dollar, appreciating by 0.3% to 1.3665, buoyed by positive domestic wage growth and anticipation of U.S. inflation data potentially signalling Federal Reserve rate cuts (Reuters, 2024). This gain in the Loonie came as the U.S. dollar fell due to unexpected slow economic growth and high inflation. Meanwhile, Canadian economic indicators such as payroll employment and average weekly earnings presented a mixed picture, with slight job losses offset by stronger wage growth. The oil market, pivotal to Canada's exports, saw prices modestly increase, reflecting the complex interplay of demand concerns and supply disruptions. Similarly, Canadian government bond yields increased, tracking U.S. Treasury moves, amidst ongoing economic and inflation uncertainties.
Financial Tip of the Month: Automate You Savings
To effortlessly grow your savings, set up automatic transfers from your pay check directly into a savings account. This strategy ensures you consistently save a portion of your income before you have a chance to spend it. Over time, this "set it and forget it" approach can significantly increase your savings without impacting your daily finances.
At Alpen Investment Advisors, your trusted North Vancouver iA Investia team, we are committed to keeping our valued clients informed. We trust that you have found this market recap informative and insightful. Please do not hesitate to reach out to your dedicated financial advisor, jonathan@alpenia.ca for any questions about your portfolio or to help navigate the process of growing and preserving your wealth.
References:
The Canadian Press. (2024, April 5). Canada’s job numbers almost unchanged in March, while unemployment rose to 6.1% . CBCnews. https://www.cbc.ca/news/business/labour-force-survey-march-2024-1.7164471
Caruso-Moro, L. (2024, April 25). Monthly earnings rise, payroll employment falls: Jobs report. CTVNews. https://www.ctvnews.ca/business/monthly-earnings-rise-payroll-employment-falls-jobs-report-1.6861362
Reuters. (2024, April 25). Canadian dollar gains as investors eye U.S. inflation pressures. The Globe and Mail. https://www.theglobeandmail.com/investing/markets/inside-the-market/market-news/article-canadian-dollar-gains-as-investors-eye-us-inflation-pressures/
Shecter, B. (2024, April 24). Why the Bank of Canada decided to hold interest rates in April |. Financial Post. https://financialpost.com/news/economy/why-bank-of-canada-hold-interest-rates-april
Williamson, C. (2024, April 5). Global economic expansion gains momentum in March as PMI climbs to nine-month high. S&P Global Market Intelligence. https://www.spglobal.com/marketintelligence/en/mi/research-analysis/global-economic-expansion-gains-momentum-in-march-apr24.html#:~:text=S%26P%20Global’s%20PMI%20surveys%20indicated,end%20of%20the%20first%20quarter.
Zhao-Murray, J. (2024, April 22). Perceived job security in Canada falls to lowest since Covid. Yahoo! Finance. https://ca.finance.yahoo.com/news/perceived-job-security-canada-falls-135202525.html
