US Economy Up, Canadian Economy Down

Continuation of improvement in the US and weakening in Canada. Also, S&P 500 flashes signs of concern

Justin Lim
April 11, 2022
April 5, 2024
Market Review

April has brought a continuation of previous data, US up and Canada down. This is putting Canada in a difficult position with interest rates and their decision to cut. Also, the S&P 500 is showing some technical difficulties that should not be ignored. 


US Jobs Strong

Canada Jobs Weak

US Inflation (Last week)

Interest Rate Reactions

S&P 500 Flashing Warnings

US Jobs Strong

The US managed another strong jobs report for the month of March, lowering their unemployment rate to 3.8%, down from 3.9% in February. A few takeaways from the inner details of this report. Firstly, they continue to add jobs in Hospitality & Leisure, Government, and Education. This shows that the jobs you would like to be added in the more cyclical areas such as Financials and Technology are still not progressing. This has been the story for about 18 months when Big Tech started laying off highly paid employees. Secondly, the wage increase was in line with expectations. This is an important indicator because higher wages are a strong indication of inflation, this is an important metric that the US Federal Reserve pays attention to. 

This was a very good jobs report showing a broadening US labour market, without an inflationary wage increase. However, take it with a grain of salt because the jobs being added are either through government spending or in hospitality which is still below pre-COVID levels. As their economy continues to hum along, they can continue to wait on interest rates, reducing their risk of a large recession.

Canada Jobs Weak

On the flip side, we had a negative surprise in our jobs report. With unemployment jumping to 6.1%, an increase from 5.8% last month. The forecasts didn’t have unemployment going over 6% until the early summer, therefore seeing this in March is not good. This is the first time Canada has been above 6% since 2017 (outside of the COVID years). This came with also a large increase in people looking for jobs. The only areas to add jobs were Healthcare & Social Assistance and Construction. The construction additions are likely seasonal as the warmer weather has come sooner than expected.

This was the opposite of the US, a very bad jobs report. We are experiencing a weak labour market in Canada and with immigration continuing to grow this is unlikely to change quickly. While the Canadian Central Bank is trying to remain in line with the US, there is very little reason to leave interest rates at 5% at this point. We are staring at a recession in the face and the longer they wait the deeper the recession with this economy.

US Inflation

The personal consumption expenditures (PCE) price index, settled in at 2.8% for February matching the year-over-year rise in January. This is stabilizing and was seen as good news for the market last Friday as inflation is slowing down. PCE is the preferred measure of inflation for the US Federal Reserve because it measures consumer spending vs. a total of everything like the CPI. PCE excludes more volatile areas such as food and energy, on which interest rates have little effect. Therefore, the US Federal Reserve can better understand when to cut or raise interest rates.

Over the past 5 years this jumped to over 5% and since has been a consistent decline for the past couple of years. This number is getting much closer to the target of 2% and they are likely to cut well before this number hits 2%, but rather when they feel 2% is more certain.

Interest Rate Reactions

For Canada, this is a very difficult spot to be in. Our largest trading partner is doing very well and can keep a strong economy with high rates. This is an issue because their currency will appreciate vs. ours and make trade more difficult for Canadian businesses because they will have higher costs due to high-priced US goods and services, which will hurt the Canadian economy further. There is a positive spin that Canadian goods and services begin to look cheaper to the US and they could spend more here but this is not guaranteed especially in a protectionist world.

Canada has every reason to cut rates at this point and the upcoming inflation data will likely improve this reasoning. The only argument against this is keeping pace with the US. On the other side of the border, the US should cut but with a strong economy have no reason to rush their decision. The US Federal Reserve has indicated they would rather wait than cut and have inflation increase. 

S&P 500 Flashing Warning Signs

The S&P 500 did something on Thursday April 4th, 2024, that it has not done in over a year. 

source: TD Direct Investing

This chart looks pretty good, but there are a couple of things to pay attention to here. The S&P 500 had the largest intra-day negative trade in over a year dropping from a high of 5256.59 and closing at 5147.21. This is a 2%+ intra-day drop, this has not occurred since 2022. While this could have many reasons, generally, large drops like this are not a good technical signal. Secondly, while everything seems ok the peak of the index is around 5261 which was reached two weeks ago on March 21st, 2024. The S&P 500 has come close to this high 4 times since then and has failed to break through each time. 

This combined with higher-than-normal price-to-earnings valuations is indicating an index that investors need more positive data to push valuations higher. This does not mean it cannot, positive data can push the market higher but the quick flash sale of 2% shows sellers are willing to sell quickly on signs of weakness. 


The economy in the US is doing very well and is in a very good position. They can leave rates where they are and save “ammo” for a really bad day in the future. The Canadian economy is continuing to weaken and is in a tough spot where they are running out of options, they will need to stimulate (cut rates) at some point. The next couple of inflation data points will tell if the US needs to cut rates or not but they can wait for that. In Canada, the inflation data would need to change course and accelerate for them not to cut. There are some weakening technical signs in the S&P 500, but the Federal Reserve can save it and cut rates if needed, therefore declines in the S&P 500 will likely not be long lived without a black swan event.

Justin, Konrad, and Merriel

More articles and information are available at 

Content Sources: Bloomberg, Trading Economics, Yahoo Finance, BCA Research

Disclaimer: This newsletter is solely the work of Konrad Kopacz and Justin Lim for the private information of their clients. Although the author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and the author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by the author. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions, and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.