Benjamin Tal Economic Buzz – 2011 Winter Edition
Article by Benjamin Tal
Deputy Chief Economist, CIBC World Markets
The US labour market is gathering momentum with private sector hiring picking up speed throughout 2010. That uptrend is likely to be sustained as the economy strengthens further this year. Job gains will support consumption spending, which enjoyed a strong fourth quarter. Retailers should post decent results in early 2011 as well, helped by the extension of tax cuts.
In Canada, employers added 22,000 workers to payrolls in December, with full-time jobs replacing part-time positions, and private sector workers displacing the (relatively lower-paid) self-employed. Going forward, we expect private sector jobs to lead employment gains in 2011, compensating for restraint in public-sector hiring.
Rate hikes unlikely until second quarter
After falling for four straight months, November’s rebound in the price of natural gas, along with gains in crude oil prices, should energize Canadian exports. However, our trade balance will continue to be held down by a relatively elevated Canadian dollar which bites into exporters’ competitive position.
As for Canada’s housing market, starts may tick down from November’s rebound as house builders face additional headwinds from tightened policy and potential rate hikes in the second quarter of 2011. But the Bank of Canada will likely proceed cautiously, wary of tightening too soon and sending the already soaring loonie to new heights.