Daily Commentary

MarketMinder’s View: Can you combine two misperceived takes to reach a sensible conclusion? That is the question we pondered after perusing this coverage of Canada’s May jobs report, which showed employment boomed higher, offsetting almost all the jobs shed earlier this year, with gains broad-based and focused on full-time workers. The article casts this good news as a signal that Canada’s economy isn’t as weak as two straight quarterly headline GDP contractions—which some dub a “technical recession”—suggest. We agree with that take on Canada’s economy. Claiming it is in a recession overlooks the fact that the Q1 2026 decline was chiefly centered in government spending and tied to rising imports, which the math of GDP treats as a negative to offset consumption. But labor market data are late-lagging, with major shifts coming long after growth trends change. So while we think that handwringing over prior declines in employment and GDP is overdone, we wouldn’t hang our hat on one jobs report to show why. Furthermore, the S&P TSX is up 10.6% year to date (in USD), edging past the world’s 10.5%—and that follows its huge 38.2% last year, which vastly outperformed the world (source: FactSet). Stocks are leading economic indicators. If Canada’s economy were truly in or about to enter a recession—or were in one before—you would ordinarily see markets pre-price that by falling for a prolonged period. That is absent.

MarketMinder’s View: The headline is correct but requires critical context. First, the titular Irish GDP contraction (-12.1% q/q, much sharper than a previously estimated -2.0%) would be for Q1—ancient news for markets, given we are in Q2’s final month. Second, should eurozone GDP actually have contracted in Q1, that is less a reflection of the 21-member bloc and more illustrative of Ireland’s uniqueness. “Irish economic data is very volatile, since it is affected by the activities of a small number of very large U.S. companies. … The CSO [Central Statistics Office] said the contraction was largely confined to the activities of U.S. businesses based in the country, with the output of what it calls the MNE (Multinational Enterprise)-dominated sectors down 27.1% during the quarter. While U.S. technology companies are included in that category, the decline appears to have been led by pharmaceuticals, with industrial production down 35% on the previous quarter.” This is why the Irish statistics office publishes a specialized statistic to track the economy, called modified domestic demand, or MDD. MDD grew 0.6% q/q in Q1, which utterly shatters the notion that Irish economic activity is a drag on the whole. (Source: Central Statistics Office of Ireland) Besides, as the article explains, US tariffs last year prompted American businesses domiciled in Ireland for tax purposes to build up inventory—which buoyed exports (and made Irish GDP one of the fastest-growing last year). That activity is now cooling as things return to normal, so Irish GDP’s slowdown is no surprise. Though more recent data have indicated soft patches in Europe, mixed growth isn’t a negative for global markets, especially with expectations toward non-US markets relatively cool. For more, see last month’s commentary, “A May Global Economic Check-In.” 

MarketMinder’s View: Please note, MarketMinder is nonpartisan and prefers no political party or politician over another. Our interest here is solely with the notion that a government funding package can sustain a given business or industry over the long term. First, the details: “The funding package would provide more than $425 million to upgrade 13 existing coal-fired power plants. Another $185 million would be used to match corporate funding for coal projects in Alaska, Maryland and West Virginia, while $75 million would support construction of the long-proposed West Gateway coal export terminal in Northern California, according to the White House official.” These figures are subject to change, but what hasn’t changed: coal’s dwindling importance as an energy source for America. “Coal generated more than half of U.S. electricity in 2000. Today, it accounts for less than one-fifth of power generation, according to data from the U.S. Energy Information Administration, as utilities have increasingly shifted toward natural gas and renewable energy sources.” Despite pledges from both parties to support the coal industry and/or coal-dependent communities, government policies haven’t been able to change coal’s downward trajectory. Rather, other energy replacements (namely, natural gas) and market economies have been the primary culprit. Even Emerging Markets, long a source of export demand for US coal, are shifting gears gradually. Keep that in mind whenever a politician promises they can “save” an industry through government support. For more, see our still-relevant 2020 commentary, “Coal’s Continued Decline Defies Political Narratives.”