Statistics Canada reported this morning that Canada's GDP grew 0.3 percent in November. That's good news, so needless to say it received next to no coverage in the media, though you can read about it here. November's expansion comes after a decline in September and a flat performance in October, and the growth was quite broad-based, with both goods and services production moving ahead. Manufacturing output expanded, and there was even some growth in the beleaguered oil and gas sector.
There's every reason to look for further GDP growth in December. The weather was exceptionally mild across most of the country, so the usual weather-related slowdowns in sectors like construction were probably avoided. (As an illustration, the Welland Canal, which links Lakes Erie and Ontario on the St Lawrence Seaway and carries an enormous amount of bulk freight, closed at the very end of December this year without having once frozen over. This hasn't happened for several years). Even so, the slow pace of activity in the final months of the year has led most forecasters, including the Bank of Canada, to scale back their expectations for GDP growth in 2016 to around 1.5 percent. If the recent bounce in oil prices holds, that may be a little on the low side, but it's not going to be a banner year.
The recovery in growth in November appears to validate the Bank of Canada's decision to keep rates on hold earlier this month. At the same time, the Bank will be watching nervously to see if the recent sharp rebound in the exchange rate persists. Dollar "strength" might imperil the hoped-for growth in non-resource exports that the Bank is looking for to keep the overall economy moving ahead.
Turning back to the December outlook for a second: data for that month will be issued on the same day that the Bank issues its report on overall activity for the entire fourth quarter. Because of the fall in GDP in September, the economy entered Q4 at a lower rate of output than it had averaged in Q3. Even if growth in December matches the November outcome, it's possible that GDP for the full quarter will be slightly down on Q3. If that happens, it's dollars to donuts that the media will ignore the fact that GDP grew for two out of three months in the quarter, and again start to tout the risks of a renewed recession. Remember you read it here first.
Friday 29 January 2016
Thursday 28 January 2016
Falling Star
There was carnage in the Canadian media industry while we were sunning ourselves down south. Multimedia conglomerate Rogers Communications announced yet another job-shedding restructuring; one of the country's oldest local papers, in Guelph, Ontario, will publish its last edition this Friday; and the Toronto Star, which some how combines a stridently left-wing editorial stance with ferocious focus on its own bottom line, outsourced the printing of the paper (with a loss of 200 skilled jobs) and offered buyouts to its entire newsroom.
No profession is more self-regarding than journalism, and the Star has been full of stories warning us how much we'll miss the old-style media when they're gone. Here's an example, written by Heather Mallick. Ms Mallick is a good writer, provided you can stomach her strident, sometimes hate-filled form of feminism, and she's apparently an ace speller, since she won the Star's in-house spelling bee this year. But she's not a journalist. She doesn't investigate stories and reveal scoops; she expresses her opinions about whatever takes her fancy -- or, more often, about whatever puts her back up. There's nothing wrong with that, of course, but it's not the kind of newspaper work that helps prevent us from slipping into a fascist dictatorship, as she seems to imagine.
Reading the Star these days is dispiriting. Without actually counting the column inches, I'd venture to suggest that more than half of the "news" content is provided not by the paper's own editorial staff but by wire services -- Canadian Press, AP, Slate, Bloomberg and many others. Some of the reporters who remain on staff don't exactly seem to be heavy hitters; today the paper ran on its front page this story about an absurd woman who is hiring someone to manage her love life, she herself being too busy to do so.
That seems to be the future for the Star, and very likely for many other newspapers that can't quite figure out a way forward. The older hands will take the buyout, leaving the paper to be filled with wire service content and puff pieces by inexperienced reporters. And all the columnists, Ms Mallick and the rest, will stay on, making the Star less and less of a newspaper and more and more, a views-paper. Those columnists had better hope their families and friends all take out subscriptions, because I'm not sure the rest of us will want to for much longer. Me, I'll hang in with the paper for now -- my wife likes the daily sudoku -- but when I'm looking for serious news coverage, you'll find me online.
UPDATE, 29 January: I posted the paragraphs above before the Star had to publish a correction of one of the main claims made by Heather Mallick in her original article. I don't want to be mean about it -- I'll leave the meanness to Ms Mallick, who specializes in it -- but just what does that correction tell us about Ms Mallick's pretensions to be a "journalist"?
No profession is more self-regarding than journalism, and the Star has been full of stories warning us how much we'll miss the old-style media when they're gone. Here's an example, written by Heather Mallick. Ms Mallick is a good writer, provided you can stomach her strident, sometimes hate-filled form of feminism, and she's apparently an ace speller, since she won the Star's in-house spelling bee this year. But she's not a journalist. She doesn't investigate stories and reveal scoops; she expresses her opinions about whatever takes her fancy -- or, more often, about whatever puts her back up. There's nothing wrong with that, of course, but it's not the kind of newspaper work that helps prevent us from slipping into a fascist dictatorship, as she seems to imagine.
Reading the Star these days is dispiriting. Without actually counting the column inches, I'd venture to suggest that more than half of the "news" content is provided not by the paper's own editorial staff but by wire services -- Canadian Press, AP, Slate, Bloomberg and many others. Some of the reporters who remain on staff don't exactly seem to be heavy hitters; today the paper ran on its front page this story about an absurd woman who is hiring someone to manage her love life, she herself being too busy to do so.
That seems to be the future for the Star, and very likely for many other newspapers that can't quite figure out a way forward. The older hands will take the buyout, leaving the paper to be filled with wire service content and puff pieces by inexperienced reporters. And all the columnists, Ms Mallick and the rest, will stay on, making the Star less and less of a newspaper and more and more, a views-paper. Those columnists had better hope their families and friends all take out subscriptions, because I'm not sure the rest of us will want to for much longer. Me, I'll hang in with the paper for now -- my wife likes the daily sudoku -- but when I'm looking for serious news coverage, you'll find me online.
UPDATE, 29 January: I posted the paragraphs above before the Star had to publish a correction of one of the main claims made by Heather Mallick in her original article. I don't want to be mean about it -- I'll leave the meanness to Ms Mallick, who specializes in it -- but just what does that correction tell us about Ms Mallick's pretensions to be a "journalist"?
Sunday 10 January 2016
Out of here
No posting for the next two weeks or so as we escape the Canadian winter (such as it is this year) for a spot of R&R. (Both Rs stand for "rum").
Friday 8 January 2016
Employment grows, south and north of the 49th parallel
It's hard to find much to dislike in the US non-farm payrolls report for December, released earlier today. A total of 292,000 jobs were created, well above the analysts' consensus of 200,000. Data for the preceding two months were revised higher, by a total of 50,000 jobs. The unemployment rate was stable at 5 percent, but only because strong labour market conditions are attracting large numbers of people back into the workforce.
If this report was all the Fed had to consider at the next FOMC meeting, there would be little doubt that the committee would restate its commitment to gradual tightening of monetary conditions, although a further rate move is unlikely until the end of Q1. However, the problems in global markets may yet stay the Fed's hand, especially if it judges that weakness in China and elsewhere will have a negative impact on the US's far-from-robust export sector. It's too soon to tell.
In Canada, the December employment numbers also look good at first blush, and even beyond the headlines, there are good things to be found. The economy added almost 23,000 jobs in the month, beating expectations. The economy added a total of 158,000 jobs for the year as a whole, a gain of 0.9 percent. That's slightly higher than the annual gains seen in 2013 and 2014, and is a bit surprising in light of the slow GDP growth (including a near-recession) seen throughout the year.
Although employment in the resource sector fell, there was an encouraging increase in manufacturing employment. This rose 2.1 percent for the full year, the first increase since 2012. Surprisingly, though, most of these gains were seen in British Columbia rather than the traditional manufacturing heartland of southern Ontario. If you're inclined to see the cup as half empty -- and in this case, I surely am -- this could be construed as a further sign that the manufacturing jobs lost in Ontario's automotive sector over the past couple of decades are gone for good.
This is all well and good, but it remains impossible to feel any level of comfort with StatsCan's monthly labour force survey. The gyrations within the report -- full versus part time employment, private versus public sector, province versus province and so on -- continue to defy belief. In the December report we are told that only Ontario saw any job gains (35,000 positions in total); that there were no full-time jobs created, only part time; and that there were on aggregate no new jobs in either the private or public sectors, yet 40,000 people found new self-employment in the month. Department store Santas, maybe?
When data are sliced-and-diced as many ways as employment numbers are, odd things will occasionally happen. With the Canadian labour force survey, very odd things seem to happen every month.
If this report was all the Fed had to consider at the next FOMC meeting, there would be little doubt that the committee would restate its commitment to gradual tightening of monetary conditions, although a further rate move is unlikely until the end of Q1. However, the problems in global markets may yet stay the Fed's hand, especially if it judges that weakness in China and elsewhere will have a negative impact on the US's far-from-robust export sector. It's too soon to tell.
In Canada, the December employment numbers also look good at first blush, and even beyond the headlines, there are good things to be found. The economy added almost 23,000 jobs in the month, beating expectations. The economy added a total of 158,000 jobs for the year as a whole, a gain of 0.9 percent. That's slightly higher than the annual gains seen in 2013 and 2014, and is a bit surprising in light of the slow GDP growth (including a near-recession) seen throughout the year.
Although employment in the resource sector fell, there was an encouraging increase in manufacturing employment. This rose 2.1 percent for the full year, the first increase since 2012. Surprisingly, though, most of these gains were seen in British Columbia rather than the traditional manufacturing heartland of southern Ontario. If you're inclined to see the cup as half empty -- and in this case, I surely am -- this could be construed as a further sign that the manufacturing jobs lost in Ontario's automotive sector over the past couple of decades are gone for good.
This is all well and good, but it remains impossible to feel any level of comfort with StatsCan's monthly labour force survey. The gyrations within the report -- full versus part time employment, private versus public sector, province versus province and so on -- continue to defy belief. In the December report we are told that only Ontario saw any job gains (35,000 positions in total); that there were no full-time jobs created, only part time; and that there were on aggregate no new jobs in either the private or public sectors, yet 40,000 people found new self-employment in the month. Department store Santas, maybe?
When data are sliced-and-diced as many ways as employment numbers are, odd things will occasionally happen. With the Canadian labour force survey, very odd things seem to happen every month.
Thursday 7 January 2016
Oh, puh-leeze, Poloz!
Speaking in Ottawa this morning, Bank of Canada Governor Stephen Poloz said that Canadians should get used to a weak exchange rate and higher inflation.
Can I maybe put that another way? The head man at the nation's central bank is perfectly OK with policies that have reduced Canadians' wealth (the lower exchange rate) and will now systematically erode the value of their incomes (higher inflation). It's a while since I read the Bank's mission statement, but I don't quite recall either of those things being a part of it.
Now, I don't want to put all the blame for the current situation on Gov. Poloz. As he argued this morning, the present exchange rate is largely the result of the weakness in global oil prices: the last time oil was trading at these levels (2002/03), the currency was in the same feeble shape. However, it's hard to suppress the thought that Poloz's regular apocalyptic statements on the economy, coupled with his repeated hints that the Bank may cut interest rates even further, may be making things worse.
Like his predecessor Mark Carney, Poloz seems stunned that the business sector is not using all that almost-free money to boost investment. But if the central bank is talking and acting as if the entire national economy is about to go to hell in a handcart, why should businesses feel any different? What reason do they have for optimism about the future?
To which Poloz would no doubt respond that the lower exchange rate offers all kinds of profitable export opportunities for non-resource companies. In fact, that's what he's counting on to get the economy growing again. So how's that working out? Well, there are some positive signs. Statistics Canada reported this week that Canada's trade deficit narrowed in November, thanks in part to a small rise in exports. Energy exports were unsurprisingly weak, but there was a healthy bounce in manufactured exports, led by a jump in sales of autos and auto parts. Good news, no doubt: but consider that after a currency depreciation of more than 30 percent in the last five years, exports in November were actually slightly below prior-year levels.
Relying on a cheap dollar to boost trade, and relying on trade to boost overall economic growth, doesn't look like a bet with a short term payoff. And in the meantime, the negative effects of low interest rates continue to build. Young couples are borrowing up a storm to get into an increasingly overpriced housing market; older Canadians, finding that their retirement funds are no longer growing, are getting into debt in order to maintain their lifestyles -- personal bankruptcy rates for retirees are now rising faster than those for any other age cohort.
Back when the monetary authorities began using unconventional measures -- zero rates, QE and such -- plenty of people wondered if anyone had a game plan for getting things back to normal when the time came. The US has at least managed to end QE, though it remains to be seen whether the Fed will be able to continue tightening, given the recent ructions in global stock markets. For Canada, it's becoming very difficult to see any palatable way out, short of the kind of sustained US growth that rescued us back in the 1990s.
Can I maybe put that another way? The head man at the nation's central bank is perfectly OK with policies that have reduced Canadians' wealth (the lower exchange rate) and will now systematically erode the value of their incomes (higher inflation). It's a while since I read the Bank's mission statement, but I don't quite recall either of those things being a part of it.
Now, I don't want to put all the blame for the current situation on Gov. Poloz. As he argued this morning, the present exchange rate is largely the result of the weakness in global oil prices: the last time oil was trading at these levels (2002/03), the currency was in the same feeble shape. However, it's hard to suppress the thought that Poloz's regular apocalyptic statements on the economy, coupled with his repeated hints that the Bank may cut interest rates even further, may be making things worse.
Like his predecessor Mark Carney, Poloz seems stunned that the business sector is not using all that almost-free money to boost investment. But if the central bank is talking and acting as if the entire national economy is about to go to hell in a handcart, why should businesses feel any different? What reason do they have for optimism about the future?
To which Poloz would no doubt respond that the lower exchange rate offers all kinds of profitable export opportunities for non-resource companies. In fact, that's what he's counting on to get the economy growing again. So how's that working out? Well, there are some positive signs. Statistics Canada reported this week that Canada's trade deficit narrowed in November, thanks in part to a small rise in exports. Energy exports were unsurprisingly weak, but there was a healthy bounce in manufactured exports, led by a jump in sales of autos and auto parts. Good news, no doubt: but consider that after a currency depreciation of more than 30 percent in the last five years, exports in November were actually slightly below prior-year levels.
Relying on a cheap dollar to boost trade, and relying on trade to boost overall economic growth, doesn't look like a bet with a short term payoff. And in the meantime, the negative effects of low interest rates continue to build. Young couples are borrowing up a storm to get into an increasingly overpriced housing market; older Canadians, finding that their retirement funds are no longer growing, are getting into debt in order to maintain their lifestyles -- personal bankruptcy rates for retirees are now rising faster than those for any other age cohort.
Back when the monetary authorities began using unconventional measures -- zero rates, QE and such -- plenty of people wondered if anyone had a game plan for getting things back to normal when the time came. The US has at least managed to end QE, though it remains to be seen whether the Fed will be able to continue tightening, given the recent ructions in global stock markets. For Canada, it's becoming very difficult to see any palatable way out, short of the kind of sustained US growth that rescued us back in the 1990s.
Friday 1 January 2016
That didn't take long
According to this story from the Huffington Post, some of the Syrian refugees admitted to Sweden are already having second thoughts and planning to move back to the Middle East. Despite the fact that there are already many thousands of Muslims living in that country, the newcomers are realizing that assimilating into the liberal Swedish lifestyle may not be easy for them.
Meanwhile here in Canada, local news is reporting that there are problems in settling the Syrian refugees now being airlifted to Canada, even though the number arriving so far is well short of the 25,000 that the Trudeau government had originally hoped to welcome by the end of 2015. Just about everything is said to be lacking -- Arabic speakers, directions to halal food outlets, diapers for the children, and so on.
None of this is to suggest that either Canada or Sweden is wrong to welcome the refugees. However, the sheer press of newcomers can easily overcome the ability of each country to settle the refugees properly. There are plenty of voters in both countries just waiting for something to go badly wrong so that they can leap up and start screaming that the whole refugee effort is a horrible, dangerous mistake. Better for governments to slow the pace a little, and do things right, rather than give fodder to the xenophobes who are just waiting for an opportunity to pounce on any misstep.
Meanwhile here in Canada, local news is reporting that there are problems in settling the Syrian refugees now being airlifted to Canada, even though the number arriving so far is well short of the 25,000 that the Trudeau government had originally hoped to welcome by the end of 2015. Just about everything is said to be lacking -- Arabic speakers, directions to halal food outlets, diapers for the children, and so on.
None of this is to suggest that either Canada or Sweden is wrong to welcome the refugees. However, the sheer press of newcomers can easily overcome the ability of each country to settle the refugees properly. There are plenty of voters in both countries just waiting for something to go badly wrong so that they can leap up and start screaming that the whole refugee effort is a horrible, dangerous mistake. Better for governments to slow the pace a little, and do things right, rather than give fodder to the xenophobes who are just waiting for an opportunity to pounce on any misstep.
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