US Jobs are Weaker than Thought and a Weak Canadian GDP Should Lead to a June Rate Cut

The Consumer may not be as strong as expected

Justin Lim
April 11, 2022
May 6, 2024
Market Review

Recent reports are showing that the US job picture might not be as robust as previously thought. A Business Employment Dynamics Summary released in late April did show a drop of 192,000 jobs in Q3 of last year vs. a reported rise of 521,000 jobs over the same period. This is a large difference. Parallel to this many large companies are showing continued weakness in their customer as they “trade-down” in their purchases. After a strong start to Canadian GDP in January, with 0.5% month-over-month growth, this was followed by a 0.2% February and a 0.0% March. The Canadian economy quickly lost all that steam even with a strong oil price.


US Jobs and Consumers Weaker than Expected

Canadian Rate Cut for June 2024

US Jobs and Consumers Weaker than Expected

Lower than reported jobs in the US

Not only did the unemployment in the US rise very slightly from 3.8 to 3.9% in April but there may be some job revisions coming up from late year in the US. The Business Employment Dynamics Summary released in late April showed a DECREASE of 192,000 private jobs in Q3 of 2023 vs. a stated INCREASE of 521,000. 

This large difference in a jobs market that was thought to be impervious to interest rates, when in reality it may have been peaking. Coincidently, the Federal Reserve Chairman Jerome Powell did drop a small hint in his public address last week that one of the reasons they may need to lower rates would be a weakening job market. Which may mean he is aware that this could be coming down the pipe.

Starbucks and other companies report weak consumer

Many companies such as McDonald's, Target, and Macy’s have been reporting their customers “trading down” to lower-cost items. For McDonald’s this is easy to see when the average sale per customer begins to drop as they move the value menu. Another company that is a great barometer for this is Starbucks. They had a not-so-great earnings call last week, showing a decline in revenue and this could be a result of them losing that “part-time” customer. The part-time customer is very important to Starbucks, they are not ritualistic 6 am coffee drinkers but are there every so often to get their caffeinated treat 1-2 times a week.

Starbucks has been dropping for these issues but also many other issues but the report of consumers tightening their belts and no longer “splurging” on a Frappuccino may be a warning sign.

These are two examples of “cracks” in the US. This does not mean everything is falling apart but it does not resemble a market that should be priced for perfection and the “no rate cut” scenario is far from set in stone.

Canadian Rate Cut for June 2024

This should not come as too much of a surprise but Canada’s GDP, after a strong January went back to being weak.


The one-time spike in January is the exception rather than the norm. That quickly fell to 0.2% growth in February and 0.0% in March. This is really putting the nail in the coffin for a June rate cut. There is an unemployment update on May 10th, but the expectation is another 0.1% rise to 6.2%. This shows the Canadian economy remains weak and we have a struggling consumer. By not cutting in June our central bank would be behind the ball and might force much faster cuts later in the year to catch up. While inflation is elevated, it is flat and is still below 3%, the rising unemployment and no growth GDP are becoming concerning and could result in a “hard” landing for Canada. This just means that they waited too long, and employment and GDP will take a longer time to recover than if they started cutting earlier. 


The market continues to remain at high levels, but new data is not encouraging. The US economy is not in a bad place, it may be that they are just not as good as previously thought. The job numbers will still need to be confirmed and revised, but they will likely be revised lower and the market does not appear to acknowledge this. For Canadians, a rate cut is coming, and it appears they are a little late. 

Justin, Konrad, and Merriel

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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.

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