Monday, May 11, 2009

Too early to cheer, but we are allowed a smile

The economic convulsions of last fall—when financial institutions fell like duckpins, credit became as scarce as hen’s teeth and stock values plummeted like a one-winged sparrow—are still fresh in our minds more than a half a year later. Yet, dare we hope that now we are beginning to see a recovery of sorts? Perhaps it is too early to cheer, but surely we can indulge in a smile or two.

Canada was treated to an absolute wave of upbeat economic news this week—not just ‘less-bad’, but some of it downright good, which is a major change of tone. … domestic economic reports were almost uniformly much better than expected as well, led by a surprising 35,900 rise in April employment. … We are highly doubtful that this marks an end to the job losses in Canada, but at least the pace of deterioration is likely to be much milder than the horror show over the first three months of 2009.

– Douglas porter
BMO Capital Markets

Borrowers with decent credit ratings—from home buyers to small businesses to large corporations—are finding money more available and on terms they can afford. Home sales are up in many markets in the United States, albeit at lower prices. That’s the sector where the problems started so its recovery is important to us all on both sides of the border.

After five months of significant losses, April yielded a nice surprise for the Canadian job market: a positive number, with 39,500 jobs being created in the month, halting the upward trend in the unemployment rate at 8.0 per cent. And perhaps most importantly, Canadian consumer confidence bottomed out in January and has increased by a material degree since then (Conference Board of Canada).

Yet the economy remains anemic with further tough times being faced in households and corporate boardrooms. After all, Canada has lost 321,000 jobs since October, so hundreds of thousands of households are will have to keep scrimping to get by.

“We’ve just had the worst hit to wealth in the history of the data,” says Robert Barbera, chief economist at the U.S. research and trading firm the Investment Technology Group. “The labor market data is unambiguously horrible.”

Yet I do feel that, while hard times might be with us for a while, there is the feeling that perhaps we have bottomed out and things will begin to improve for the majority of us.

© 2009 Russell G. Campbell

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