Someday in the future, we’ll have real-time data on just about everything. For now, we have to deal with lags. Big lags. And we’re the lucky ones—other countries have far worse data problems. But even for Canada, using this data is like trying to drive forward looking through the rear-view mirror. And given the instant and outsized effects of COVID-19 on the economy, that’s a real problem. So, even with all their limitations, do today’s data give any cause for optimism about near-term growth?
Before answering, let’s go back to the data. A standard reporting lag is about 60 days. In other words, if something occurs in April, you’ll hear about it in June. International trade, manufacturing, retail and wholesale sales all have this two-month delay. And with good reason—it takes time to collect, clean and classify the data, and let’s face it, most businesses and consumers can’t be bothered with the surveys used to gather all these facts. There are some series we get faster, though. Data on prices, jobs and purchasing managers’ intentions are among key series that are available in a month or less. These are typically eye-catchers, especially if they are harbingers of what’s to come.
COVID-19 has beaten them all, though, in more ways than one. Clearly, the data series are all pummelled by the effects of COVID, as the numbers are way off any previous scale. But the data are already available in as close to real time as possible. Sure, purists will point out all the flaws in the system, but it’s amazing that the infection, recovery and death data from this pandemic for all parts of the world are all updated every 20 minutes. These data have quickly become the world’s top leading economic indicator. The journey back from COVID-19’s onslaught is being tracked in terms of infection curves flattening and death rates dropping around the world, starting with the “first wave” countries.
We’re now seeing remarkable recovery data from those first hit with the pandemic, sparking optimism in the marketplace. Even cautious return-to-work policies are producing dramatic increases in employment, sales and production intentions in places, like China, South Korea and the earliest-infected countries in Western Europe. It’s all so rapid that it seems a bit surreal, and for the more cynical, downright hard to believe. Then there are the worries about another resurgence of infection rates in a second wave, and a repeat of lockdown.
Closer to home, data for April are generally being released. As this was the first full month of lockdown, the data are dismal. Trade and manufacturing were clobbered, and given the drubbing retailers received in March, April is bound to be awful.
What about May? Well, if the job numbers are anything to go by, we have turned the corner. Canada added 290,000 jobs in the month, mostly full time, and tilted toward provinces, like Quebec, where return-to-work policies were already kicking in. It’s a far cry from the three million jobs lost in March and April, but it’s 10 times more than monthly job creation in a good pre-COVID month. What’s more, the United States economy also bounced back, adding 2.5 million jobs after losing about 22 million.
This is the first glimmer of hope in weeks, and it begs two questions: First, what will happen when the newly re-employed ramp up their spending? (Answer: The effects will spill into retailing, housing and services of all description). In addition, it will likely induce those still on the payroll during COVID to part with some of the surplus cash that wasn’t spent on commuting, restaurants, sporting events, shows, vacations and so on. A second inspiring question is, what of June? As the partial and hesitant return in May turns to a broadening return in June and beyond, momentum will only grow. And there’s maybe a third: Will the momentum actually be self-reinforcing? That is, as we all see some get back to more normal activity, as long as there are no second-wave infections, won’t it induce a more fulsome return to normal? Time alone will tell, but past experience suggests so.
A second wave of infections could be the fly in the ointment. However, known incidences have been dealt with abruptly and as far as can be seen, effectively. This makes sense, as the cost of not doing so is potentially huge, and also, the mechanisms for dealing with the pandemic are already in operation, and can be activated or redeployed with far less effort and fuss.
