The Economic and Labour Market Outlook

Sonya GulatiSenior Economist

November 2013

GLOBAL GROWTH OUTLOOKGLOBAL GROWTH OUTLOOK

-1

0

1

2

3

4

5

6

Canada U.S. Eurozone DevelopingEconomies

2013 2014 2015

Real GDP Y/Y % Chg.

Source: TD Economics.Forecast by TD Economics as of September 2013.

EMERGING MARKETS BACK IN THE SPOTLIGHTEMERGING MARKETS BACK IN THE SPOTLIGHT

-6

-4

-2

0

2

4

6

8

10

2002 2004 2006 2008 2010 2012 2014F

Advanced Developing

Source: IMF, Forecast by TD Economics as of September 2013.

Forecast% chg, y/y

GDP Growth, YOY % Chg.

U.S. ECONOMIC GROWTH TO ACCELERATEU.S. ECONOMIC GROWTH TO ACCELERATE

0

1

2

3

4

5

Q1.2012 Q3.2012 Q1.2013 Q3.2013 Q1.2014 Q3.2014

Real GDP, Annualized Q/Q % Chg.

Forecast by TD Economics as at September 2013Source: Bureau of Economic Analysis

Forecast

Annual Forecast2013 - 1.6 %2014 - 2.6 %

FISCAL DRAG HAS WEIGHED ON U.S. GROWTHFISCAL DRAG HAS WEIGHED ON U.S. GROWTH

-8

-6

-4

-2

0

2

4

6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Real government consumption & investment

Real final sales to private domestic purchasers

Y/Y % Chg.

Source: Bureau of Economic Analysis, Haver Analytics. As of September 2013.

THE FED’S EXIT STRATEGYTHE FED’S EXIT STRATEGY

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2007 2008 2009 2010 2011 2012 2013 2014

Mortgage backed securities

Treasury securities

Agency securities

Liquidity programs & other assets

Federal Reserve balance sheet, $U.S. (Trillions)

*Assuming purchases are reduced starting in the beginning of 2014 and ending mid-2014. Source: Federal Reserve Board, TD Economics. As of September 2013.

This is what tapering will look like*

CANADA HAS OUTPERFORMEDCANADA HAS OUTPERFORMED

-10

-8

-6

-4

-2

0

2

4

6

8

Canada US Germany France Japan UK Italy

Source: Haver Analytics. *Last data:Q2 2013. As of September 2013.

GDP change since pre-recession peak*, %

CONSUMERS & GOVERNMENTS CAN NO LONGER BE THE ENGINE OF GROWTHCONSUMERS & GOVERNMENTS CAN NO LONGER BE THE ENGINE OF GROWTH

-4

-3

-2

-1

0

1

2

3

4

2005-2008 2009 2010-2012 2013-2014

Net-exports & business investment

Consumers, government, & res. investment

Source: Statistics Canada, Haver AnalyticsForecast by TD Economics as of September 2013

Average annual contribution to Canadian real GDP growth, %

Forecast

HOUSEHOLD DEBT TO GROW MORE IN LINE WITH INCOMESHOUSEHOLD DEBT TO GROW MORE IN LINE WITH INCOMES

0

20

40

60

80

100

120

140

160

180

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

0

2

4

6

8

10

12

14

Household Debt-to-Income Ratio (lhs)

Household Debt Growth (rhs)

Source: Statistics Canada.Forecast by TD Economics as of September 2013.

%Year-over-Year % Change

Fcst*

CANADIAN EXPORTS TO PICK UP MODERATELY IN 2013-14CANADIAN EXPORTS TO PICK UP MODERATELY IN 2013-14

-25

-20

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012 2014

Canadian Real Exports

U.S. Activity Index

Source: Bureau of Economic Analysis, Statistics Canada, Federal Reserve, Bank of Canada.Forecast by TD Economics as of September 2013

Year-Over-Year % Chg.

Forecast

INTEREST RATES TO REMAIN LOWINTEREST RATES TO REMAIN LOW

0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012 2014

US Federal Funds Target Rate

Bank of Canada Overnight Rate

Source: Bank of Canada/Haver Analytics. Forecast by TD Economics as of September 2013.

%

Forecast

CANADIAN EMPLOYERS HAVE BEEN BUSYCANADIAN EMPLOYERS HAVE BEEN BUSY

80

85

90

95

100

105

110

2000 2002 2004 2006 2008 2010 2012

Canada G7 U.S.

Employment level, indexed to 2007 Q4 = 100

Source: Haver Analytics

MOST SECTORS HAVE BEEN ADDING TO PAYROLLSMOST SECTORS HAVE BEEN ADDING TO PAYROLLS

-4 -3 -2 -1 0 1 2 3 4 5

Manufacturing

Agriculture

Utilities

Other Services

Information, Culture and Recreation

Transport and Warehousing

Trade

Accommodation and Food Services

Total

Business, Building & Other Support Services

Public Administration

Finance, Insurance, Real Estate

Educational Services

Forestry, Fishing, Mining, Oil & Gas

Health Care and Social Assistance

Professional, Scientific & Technical

Construction

% annual change in employment, 2003-13

Source: Haver Analytics, Labour Force Survey.

THE WEST HAS LED JOB CREATIONTHE WEST HAS LED JOB CREATION

0.0

0.2

0.4

0.6

0.8

1.0

1.2

B.C. Alberta Sask. Manitoba Ontario Québec Atlantic

2003-2009 2010-2013 YTD

Average Annual Employment Growth, %

Source: Statistics Canada

SENIORS INCREASINGLY LEAVING THEIR THUMBPRINT ON THE LABOUR MARKET SENIORS INCREASINGLY LEAVING THEIR THUMBPRINT ON THE LABOUR MARKET

0

5

10

15

20

25

30

2003-2007 2008-2012

Employment Labour Force

Source: Statistics Canada

Share of Total Job Gains and Labour Force Growth by 65+, %

YOUTH, BY CONTRAST, HAVE YET TO RECOVER FROM THE RECENT DOWNTURN YOUTH, BY CONTRAST, HAVE YET TO RECOVER FROM THE RECENT DOWNTURN

5

7

9

11

13

15

17

19

21

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

15-19 20-24 TotalUnemployment Rate, %

Source: OECD, Statistics Canada

vs. 2008 + 2.1%

vs. 2008 + 4.6%

vs. 2008 + 1.1%

SUPPLEMENTARY UNEMPLOYMENT MEASURES POINT TO LABOUR SURPLUSSUPPLEMENTARY UNEMPLOYMENT MEASURES POINT TO LABOUR SURPLUS

61.0

61.5

62.0

62.5

63.0

63.5

64.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Employment Rate, %

Source: Statistics Canada

STATISTICS CANADA VACANCY RATE HAS BEEN RELATIVELY FLAT STATISTICS CANADA VACANCY RATE HAS BEEN RELATIVELY FLAT

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2011-03 2011-09 2012-03 2012-09 2013-03

Vacancy Rate, Industrial Aggregate Excluding Unclassified Business, %

Source: Statistics Canada/Haver Analytics

ALTERNATIVE MEASURE OF VACANCIES POINTS TO INCREASED MISMATCHALTERNATIVE MEASURE OF VACANCIES POINTS TO INCREASED MISMATCH

0

1

2

3

4

5

6

Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013

Skilled Trades (Weighted Average)

All Other Occupations (Weighted Average)

Source: Statistics Canada, WANTED Analytics; Calculations by TD Economics.

Vacancy Rate, %

A FEW PROVINCES SHOWING REAL LABOUR MARKET TIGHTNESSA FEW PROVINCES SHOWING REAL LABOUR MARKET TIGHTNESS

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2009 2010 2011 2012 2013 YTD

Alberta Unemployment Rate

Saskatchewan Unemployment Rate

Alberta Vacancy Rate

Saskatchewan Vacancy Rate

Source: Statistics Canada, WANTED Analytics; Calculations by TD Economics.

%

BUT, WAGE PRESSURES HAVE BEEN SURPRISINGLY TAME, EVEN OUT WESTBUT, WAGE PRESSURES HAVE BEEN SURPRISINGLY TAME, EVEN OUT WEST

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Atlantic

Québec

Ontario

Manitoba

Saskatchewan

Alberta

B.C.

Canada

* Based on which are perceived in shortage in Canada, not necessarily in each province individually.Source: Statistics Canada, WANTED Analytics; Calculations by TD Economics.

Average Wage Growth 2009-2013 in Shortage Occupations* in All Provinces, %

TD ECONOMICS LONG-TERM LABOUR MARKET FORECAST TD ECONOMICS LONG-TERM LABOUR MARKET FORECAST

2

3

4

5

6

7

8

9

2003 2005 2007 2009 2011 2013 2015 2017

-3

-2

-1

0

1

2

3

4Unemployment Rate, % Employment, Year-over-year % Chg.

Source: Statistics Canada; Forecast by TD Economics as of September 2013.

TD Economics

www.td.com/economics

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