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Weekly Economic Letter

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A positive U.S. employment report before yearend: Is it possible?

Wed, Oct 14 2009, 06:24 GMT
by Economic and Strategy Team

National Bank of Canada


Summary

  • A recovery in U.S. profits is key to Corporate America hiring again. Since the start of the year, the profitability of corporations has much improved. Nonfinancial corporate profits, a major driver of investment spending, were up 64.8% and 54.9% in Q1 and Q2, respectively. 

  • The U.S. economy is experiencing very strong productivity gains, a bellwether for improved labour conditions.

  • Typically, a recovery in non-financial profits and expanding production will result in increased business investment. We expect business investment in Q3 and Q4 to be positive. 

  • Historically, there is a strong relationship between investment growth and employment growth. When one rises, the other is never far behind. 

  • Based on our forecast of 3% and 8% growth in investment spending for Q3 and Q4, we estimate the probability of U.S. private employment growth turning positive in Q4 2009 at 96%.

Published on  Wed, Oct 14 2009, 06:28 GMT


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Legal disclaimer and risk disclosure

This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.

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