Global equity markets had been trading near all-time highs, benefitting from a relatively quiet period on the trade front. But some volatility resurfaced in the wake of an escalating conflict in the Middle East between Israel and Iran. It is difficult to assess the implications at this time - much will depend on whether any retaliation creates risk of a broader conflict.
In this economic update, we discuss an issue that was concerning a month or two ago: weak sentiment among businesses and consumers. In what is a refreshing break from tariff, the key question we want to answer whether this weak sentiment would lead to any real economic weakness. In short, the answer is no – at least not yet.
We are also proud to announce the news of our latest pledge to the Foundation of Guelph General Hospital – over the next five years, we have pledged $125,000 towards multiple initiatives, including the creation of the Hospital’s community diagnostic imaging centre.
We are also sharing a friendly reminder that our offices are observing Summer Hours. Please see the details of those hours below.
Economic Update
Soft data turns down…
Some of the early damage from tariff threats emerged back in March and April in the form of significant deterioration in what is often referred to as “soft data”. The Bank of Canada’s quarterly business outlook survey revealed a sharp drop-off in how businesses were feeling.
Sentiment readings in the U.S. also showed a notable decline among businesses and consumers. Recent readings suggest there has been modest improvement, but sentiment readings still sit at levels well-below historical averages. While concerning, poor sentiment has not always been a reliable precursor to weaker economic activity.
…but Hard data is more important.
When it comes to so-called “hard data” (tangible, quantifiable, objective economic metrics), there is no shortage of things to look at: trade flows, new orders, prices, and retail sales, among many other things.
But none may be as important as jobs and employment metrics, given the importance of the consumer and the direct impact labour markets have on economic activity. Employment figures for the month of May suggest overall employment trends have hung in so far, despite some weakening at the margin.
Employment picture in North America has been resilient so far
Canada has been the weaker than the United States with respect to job growth. Nevertheless, the Canadian economy added a modest number of jobs in the month of May, demonstrating some resilience in the face of a volatile trade environment.
Not surprisingly, areas more vulnerable to trade headwinds like manufacturing, transport, and warehousing saw job losses. Regions across southern Ontario have borne the brunt of job losses brought on by the threat or imposition of tariffs on motor vehicle and parts exports. As a result, unemployment levels in the region are noticeably higher than the 7.0% average in the rest of the country.
South of the border, the employment picture revealed a relatively resilient job market. Similar to Canada, there was weakness in goods-producing sectors that are more impacted by trade. Services sectors like health care, leisure, and hospitality drove most of the job gains. Prior months were revised downwards, suggesting job growth this year has not been as strong as first reported. Moreover, the labour force participation rate (the number of people in the workforce) has declined, driven by a rise in retirements and an exodus of undocumented immigrants. All this said, U.S. job growth has been slowing but has not experienced any notable signs of worsening in recent months.
Summary
Only time will tell whether prevailing uncertainty and weak sentiment will translate into more meaningful layoffs and broader economic deterioration, or whether the resilience of businesses and consumers to date will persevere. Markets seem to concur with the latter view given the strong rally in stock prices since the lows reached just a few months ago. While reassuring, we remain mindful that risks to the economic outlook remain a bit higher than normal.
$125,000 5-year pledge to The Foundation of Guelph General Hospital
On Tuesday June 3rd, the Elinesky Schuett Private Wealth team was proud to be on-site at Guelph General Hospital to celebrate our team’s new pledge to the Foundation of Guelph General Hospital.
Elinesky Schuett Private Wealth is pledging $125,000 to the Foundation over the next five years - supporting the Circle of Life, the annual Black Tie Bingo fundraiser, and the creation of the Hospital’s community diagnostic imaging centre. Together with GGH CEO Mark Walton, FGGH CEO Julie Byczynski, and FGGH Director of Philanthropic Programs Matt Peltomaki, our team celebrated our new commitment to fostering a brighter, healthier and happier future for the communities we serve. Our team met with Dr. Alex Ferguson (Chief of Staff at GGH) to learn about the Emergency Department expansion and new community based medical centre project. We also had the opportunity to tour the Special Care Nursery space, which our previous 5-year pledge had contributed towards building.
Our team has been incredibly proud to support the Foundation for over twenty years – and we look forward to continuing to support the Foundation and fulfil our commitment to helping improve the lives and well-being of our neighbours and community.
Office Summer Hours are in effect
A quick reminder that our offices are observing Summer Hours between June 5th and September 5th. During this time, our offices will be open as usual Monday to Thursday from 8:30am to 4:30pm, and on Fridays our offices will be closing at 4:00pm. Thank you for your understanding!
As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.