The value of US/Canada energy trade had dipped in line with lower consumption, and lower commodity prices in 2020. This is reversing itself at this juncture as commodity prices have obviously increased, particularly for oil and other energy products, and the economy is now, at least partially reviving. This shows just how dependent Canada is on energy exports, and how it effects the overall balance of trade between the United States and Canada.
Continuing with Canadian trade issues, a Canadian delegation is headed to Washington to address two very important issues, the first is made in the USA vehicle credits and the second is softwood lumber duties which were recently increased. In both instances, Canadians are terribly agitated by the direction that the US seems to be going in, and wonders, I suspect what the value of the USMCA is to them. These are issues which clearly should be negotiated as, in fact, they have adverse impacts on both sides of the border. Spurring jobs by offering credits is not something which is new or unusual, and many countries do this. The softwood lumber issue though is hard to understand because what, in effect, it does is drive up the price for American builders and home owners, thus, as I have noted before, contributes to inflation. It is one of those that is simply confusing.
On the US jobs front, the unemployment rate fell to 4.2% which is always a good thing, or at least it should be, but the labor market did not add as many jobs as one would have anticipated as the increase in November was 210,000, while October had a revised upward increase to 546,000 jobs created. The fact that there are still millions of jobs going unfilled and the unemployment rate has gone down is something which needs to be dissected to a greater degree so that we can understand exactly what is going on in that market. It is also interesting to note that a survey conducted by the Department of Labor indicates that there are 1.1 million more people employed in November than October, and the labor force participation rose to 61.8%. What is difficult to understand is how you could only see a 210,000 increase in employment, but yet, but have 1.1 million people more employed. Are these people who went back to a job and had not been filing for unemployment benefits, that certainly could be the case and, if so, again, that is a good thing.
The Democrats and Republicans recently announced that they had reached a compromise that involves some procedural hocus pocus. Republicans will support with at least 10 votes, so as to get over the filibuster, a Bill which allows another piece of legislation to move forward by waiving the filibuster for that legislation that will allow the debt ceiling to be increased without any Republican votes. The Bill is substantively a common-sense piece of legislation, but Republicans do not want to vote for raising the debt ceiling, even though they are substantially responsible for the need to.
Canadian Member of Parliament Brian Massey, a personal friend of mine from my time in Congress, has advanced the idea that in response to the US Electric Car Credit that Canada adopts the same or similar legislation in an effort to spur sales in Canada and effectively curtail any exporting from the US to Canada of electric vehicles since they would not be eligible for the credit. This seems like a sensible response to me, and one that might wake up the Administration as it obviously would not have awoken the prior Administration, that these kinds of tactics are not additive in the long run to our GNP.
Canada posted its biggest trade surplus in 10 years. With exports jumping 6.4% primarily based on motor vehicles and parts, along with record energy exports. This surplus rose to $1.65 billion which is the largest since a $2.12-billion-dollar surplus in December of 2011. In some senses there is no surprise here as we all know energy prices are increasing, but also the fact that it appears the auto sector is recovering and there is a tremendous amount of supply chain activity between the US and Canada as it relates to the auto industry. It is good for us all.
On the labor front, we are continuing to see job openings outpace the number of available workers as there are nearly 5 million more open positions than people seeking work. This is of course a complex bit of data and an requires an even more complex analysis. We also have 6.9 million people who are unemployed, but say that they want work. A graph of US job openings from 2012 to the present shows it beginning at around 3.7 million openings and jumping to nearly 11 million in the latter part of 2020 and has now settled, as we noted above, at about 5 million. This ties into what is known as the “great quitting” as many lower wage workers have left because there are better jobs available at higher wages and more consistent weekly hours. Obviously, the other factor here is that many of those low wage jobs would be filled by immigrants, however that process has been gravely disrupted by the actions of Mr. Trump and now I suspect many who support Mr. Trump are negatively impacted by the lack of immigrant labor. We need to move in a sensible direction and to focus our immigration policy, certainly legal immigrants, but also bringing in people who will fill the jobs that we have, and need to be filled.
As you may have observed, there are few new cars on dealership lots and a substantially diminished supply of used cars. If you are shopping for a used car, read the article in the Times entitled “Tips for Buying a Used Car” dated December 9, 2021 which is definitely worth taking a look at. We all know that the prices for used cars have sky rocketed which is a classic supply and demand issue and I would note has no doubt impacted inflation which is directly tied to supply chain issues since the production of new cars has been limited due to the lack of chips being shipped from China and other overseas locations. The other obvious issue that this raises is, if you are paying more for a used car and financing it, once this market resets, will the value of that car drop below what you owe? Unfortunately, that is a distinct possibility.
The week of December the 6th saw job claims plunge to 184,000 which is the lowest level since 1969. This creates yet another datapoint which adds difficulty to the analysis of where both the job market and the economy are going.
Following the Canadian trend, an increase in US imports narrowed the US trade deficit by 17.6% with exports increasing 8.1% and imports rising 0.9%. One of the areas that is important to our region of course is food exports which rose by 2.1 billion while capital goods increased 3.1 billion. These are all good signs that the world is reengaging in trade which benefits virtually everyone.
And the most important news, Gil Hodges, a real Brooklyn Dodger, was elected to the Hall of Fame.
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.
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