Bill Owens: Confounding And Confusing Events 4/26/21
The soft wood lumber dispute with Canada continues to hang around in trade corridors. The reality is that soft wood lumber is necessary to construct homes and the US produces 70% of what it needs (which may even be less if the Biden administration is successful in developing a program to build more energy efficient homes). Canada supplies the bulk of the remaining lumber, and thus, is a necessary economic partner in this process. Canadians hope that this gives them some edge in terms of reaching a resolution of this knotty issue.
Prince Phillip died approximately two weeks ago, and there was much ado about his passing, and certainly it has significance in England. This, to me, is like the Meagan Markle, Prince Harry’s interview with Opera Winfrey. Lots of press coverage. Would the death of Meagan Markle’s husband get this coverage? Go figure.
Canada’s recovery continues with a blow-out month in March of job gains of almost 303,000, with unemployment falling to 7.5%. This signals that the economy which had a gain of 259,000 jobs in February and exceeded expert’s anticipated job gains is, in fact, moving in the right direction. It should also be noted that Canada has not seen an increase in weekly job claims in the same way that the US has suffered from them, which creates inconsistency in the US economic recovery.
Continuing on the Canadian job front. Canada has overtaken the US for the first time as the most desirable destination for international workers. The Boston Group did a study in late 2020 and indicate that “the most striking shift in our survey is the fall of the US from the top spot . . ., which is due to an inconsistent pandemic response, the adoption of more nationalistic policies and social unrest”. Australia ranked third in this analysis.
I recently read the “Bag Man” which is about Spiro Agnew’s political career. Agnew’s strategies, language, temperament, ideology, and corruption make it appear that Mr. Trump studied Agnew carefully before entering politics.
It appears that both Canada and the US are anticipating an inflationary trend following the COVID crisis and are working together in an attempt to stave off inflation with the economy shrinking by 3.3% in 2020. The world economy is projected to expand by 6% this year followed by a 4.4% advance in 2022. It is also anticipated that the recovery in the US will outpace the recovery in Canada although Canada should have solid growth in 2021 and 2022. This creates the opportunity, if you will, for inflationary activity which both countries have determined they will take the steps necessary through their Central Banks to fight. The tools at their disposable will be their money supply strategy. Over the next several weeks and months we should hear about this, but it is worth noting that there is going to be a strong attempt to control inflation and we will see if it works.
As we look at the recent legalization of marijuana it is worth noting what Canada’s experience has been like. Many Canadian suppliers of legal pot have stumbled economically. The basic issue is that the production has exceeded the demand which was originally anticipated to be far greater than what actually has occurred. Clearly if I’m an American company getting into the pot business, I should be taking a careful look at my expectations for sales. It also is worth noting that this may have an impact on the amount of tax revenue that is actually collected as it may be significantly less than anticipated. There are always surprises, but the counter intuitive ones can really rock assumptions.
A somewhat obscure publication known as the Trade Finance Market Report which covers manufacturers data including shipment price, revenue, gross profit, and business distribution, help consumers and other business strategists look to what is happening globally. We also see the large banking institutions like City Group, PNP Parabus, ICBC, China Export Bank, etc. getting into the trade finance market which means that they are financing trade like accounts receivable for shipments made to foreign countries which is also the province of the US Export Import bank. These reports are a key indicator for where the global economy is heading and something worth paying attention to.
As COVID restrictions end or at least are somewhat lessened, the data indicates that a variety of things have risen to the top of what American’s want to buy including champagne, skirts, and shaving kits; retail sales rose by 9.8% in March which was a reflection of the $1,400.00 stimulus checks and the impact of vaccinations. There has been an increase in travel and many are making plans to travel. Will this demand for products mark an increase in prices? One question is will there be an adequate supply, and a second, will this cause inflation?
President Biden has decided to bring the remaining troops home which number about 2500 from Afghanistan. There is much discussion about this, and there should be. It is my view that we have expended enough blood and treasure in that region and that after 20 years, if we have not accomplished the goal, it is not likely we will. One of the strategies expressed early on was attacking the Taliban in their own country hopefully would prevent them from attacking us in our homeland. I think we have a better handle on the intelligence gathering function than we did before and we have other tools at our disposal, however but it is appropriate to take our troops out of harm’s way. We cannot continue to defend the Afghan people, they are unfortunately going to have to get that done themselves, and there will be pain. This pain would have come at some point whether it was 5 years ago, today, or 5 years from today.
It should come as no surprise that Governor Cuomo has essentially ceased all open press conferences as he is investigated by the Attorney General and by the Justice Department for both his inappropriate sexual harassment and with regard to the nursing home deaths. It is striking that this aggressive and assertive man has decided to step back and not allow in effect questions about those subjects to be raised as he limits his interactions to Zoom, press releases, etc., just saying.
On the scientific front, the first T-Rex mass death site in the Southern US was found in Utah, and that provides evidence of pack behavior. It will also give numerous insights into how these dinosaurs died which appears likely to be in a seasonal flood after a slow burn fire between 66 and 100 million years ago. Fascinating discoveries.
New job claims fall to 547,000, a good sign.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.