Still Waiting for a Tune from the Fat Lady

Unemployment numbers released today in Canada and the U.S. indicate a worsening labour market. In one sense this is not surprising -- employment is always a lagging indicator. But this, combined with unprecedented productivity growth and worsening prospects for manufacturing are causes for concern in what otherwise appears to be a robust recovery.

More than anything, this would seem to indicate that it is not time to put on the fiscal or monetary brakes. As so many have noted, for all the noise about public sector debt, interest on government bonds shows little real concern; there is much more smoke than fire here. This remains an opportune time for public investment in crumbling infrastructure.

The Bank of Canada and the U.S. Fed have shown little interest in tightening monetary policy though the giveaways to the banks are being curtailed on both sides of the border. In short, main street is still in trouble and the role for government remains significant.