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Economy Lab

Delving into the forces that shape our living standards
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Higher education no silver bullet in fight against inequality

ANDREW JACKSON

Young people are constantly told a post-secondary qualification is the key to getting a good job, and tens of thousands of students are graduating this year in search of full-time employment matching their qualifications.

For an individual, a good education certainly raises the odds of finding a good job. But it does not follow that further raising the educational level of the work force as a whole will boost the overall quality of jobs or reduce growing income inequality.

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Why gold doesn’t matter

CARL MORTISHED

What better signal that financial bubbles are bursting than a sudden rush to sell gold? On Wednesday the price of gold fell for the 10th consecutive day, apparently the longest losing streak since 2000. The precious metal is at its cheapest in five years, falling to $1,092 (U.S.) per troy ounce on the Comex futures exchange and there are more funds with short than long positions, the first time since 2006, according to statistics from the U.S. Commodity Futures Trading Commission.

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Harper government must stop hiding behind surplus illusion

DAVID PARKINSON

The Parliamentary Budget Officer is saying what the Harper government won’t, or can’t: Emperor Surplus has no clothes.

In a report Wednesday updating the government’s 2015-16 budget, the PBO calculated that because of Canada’s disappointing economy, the budget is on track not for its targeted $1.4-billion surplus this fiscal year, but rather a $1-billion deficit. That’s based on the Bank of Canada’s latest economic outlook, issued last week, in which the central bank slashed its 2015 gross domestic product growth forecast to 1.1 per cent – barely half of the 2-per-cent forecast on which the spring budget was based.

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Why the Bank of Canada doesn’t care about the latest inflation numbers

DAVID PARKINSON

Canada’s inflation heated up a bit in June. And frankly, the Bank of Canada doesn’t care.

That might sound odd for anyone who has followed Canadian monetary policy for the past quarter-century. It was in 1991 that the central bank adopted an explicit inflation target as its guide for setting interest rate policy. The bank’s expressed sole aim with its policy is to achieve stable inflation around its 2 per cent target.

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Canada’s fall into recession far from a sure thing

DAVID PARKINSON

The question of whether Canada slipped into a recession in the first half of 2015 may depend on our definition of “recession.” And most of us have been using the wrong one, says one of the country’s top experts on measuring business cycles.

Many commentators pointed at the Bank of Canada’s revelation this week that the Canadian economy likely contracted in the second quarter as evidence that the country met the “technical” definition of a recession: two consecutive quarters of declining gross domestic product. Indeed, much was made of Bank of Canada Governor Stephen Poloz’s unwillingness to even utter the word “recession” after the central bank’s interest-rate cut Wednesday.

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Debating the ‘R’ word is a waste of time

TODD HIRSCH

Many Canadians have experienced being on a flight somewhere warm and tropical and returning home to cold and miserable weather. Leaving Phoenix or Fort Lauderdale, it may have been 30 degrees. But as the plane begins to land at the Canadian destination, the pilot may announce, “The current temperature is 1 degree.”

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Loss of Greek sovereignty a warning for other indebted EU members

CARL MORTISHED

If old-fashioned Greek colonels had Twitter accounts, they might find wry amusement in the latest hashtag #itsacoup where some very old-fashioned German-bashing by younger folk is trending. The notion is that Monday’s bailout deal between Greece and the Eurogroup finance ministers is tantamount to a German takeover. Angela Merkel, the German Chancellor, is cast as a jackbooted Swabian housewife invading the Ionian beaches.

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Practicality the key word to explain Poloz’s rate move

DAVID PARKINSON

For the Bank of Canada, Wednesday’s interest-rate cut wasn’t quite a case of “now or never.” But it was starting to look a lot like “now or many months from now.” Facing a choice of being potentially too early or too late, it made the safer choice.

On the surface, the decision by Governor Stephen Poloz and his colleagues on the central bank’s Governing Council was by-the-numbers. The bank acknowledged that the Canadian economy likely suffered its second successive contraction in the second quarter. It slashed its 2015 growth forecast to 1 per cent from 1.9 per cent. It trimmed its estimate of underlying inflation slightly, to 1.5 to 1.7 per cent, pushing it a bit further away from the bank’s 2-per-cent target. The slower growth and slower inflation means we’re further away from the economy reaching full capacity and inflation returning to the target on a sustainable basis; the bank now thinks that won’t happen until the first half of 2017, versus late 2016, previously. It all presents a solid case for a rate cut.

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The five fundamental errors that led to the Greek debt crisis

GLEN HODGSON

Greece has come to the edge of the abyss – leaving the euro zone – and blinked, apparently choosing an orderly but painful adjustment within the euro zone over financial chaos outside it. How did we get here? As dispassionate North American economic observers, we have identified five fundamental errors over the past two decades that led to the latest Greek debt and banking crisis.

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For Poloz, latest jobs report not enough to sway the rate pendulum

DAVID PARKINSON

If Bank of Canada Governor Stephen Poloz was looking for a good reason not to cut interest rates at the central bank’s policy meeting next week, he didn’t find it in the June employment numbers.

Statistics Canada’s Labour Force Survey showed that the country shed a modest 6,400 jobs in June. It’s the last major Canadian economic release that the Bank of Canada will see before making its decision on interest rates next Wednesday; given the persistent weakness in other recent economic indicators, many pundits were saying before the employment report that Mr. Poloz would have to see strong job numbers to convince him that a rate cut isn’t necessary to prop up the slumping economy.

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The cost to the West for losing Greece is not worth it

BRIAN LEE CROWLEY

When asked about the wisdom of backing an American-aligned Third World dictator, Anastasio Somoza, then-U.S. president Franklin Roosevelt supposedly remarked that while Somoza might have been an SOB, in a bi-polar Cold War world “he was our SOB.” Today’s version might run along these lines: Greece may be an embarrassing mendicant, but it is our mendicant.

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China’s crash: a correction to a badly regulated capitalist casino?

CARL MORTISHED

Think of the size of the Canadian economy and then double it; that was roughly the scale of last month’s losses on the Chinese stock market. Thursday, after the deluge, the Shanghai and Shenzhen indexes rose about 6 and 4 per cent, respectively, in response to the strong-arm measures of China’s regulators. Liquidity injections into brokerages and selling bans on major shareholders are some of the Chinese authorities’ desperate efforts to shore up the rotten foundations and fill the $3.5-trillion hole that was suddenly exposed in China’s corporate stables.

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China’s stock slide not a reflection of overall health

IAN McGUGAN

China’s stock market is not China. Observers of the global economy, as well as ordinary investors, should keep that thought firmly in mind.

The amazing ascent of the Shanghai Composite index ground to a halt a month ago. Its subsequent plunge has sparked fears that the slide signals wider difficulties in the Chinese economy, and stiffer headwinds for global growth.

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Joe Oliver’s own budget belies his insistence to stick to the numbers

DAVID PARKINSON

Joe Oliver insists that Canada’s economic downturn (just try to get him to say “recession”) hasn’t derailed his plans for a budget surplus this fiscal year. His own budget suggests otherwise.

The federal Finance Minister said this week that despite the mounting evidence that the country’s economic slump has been deeper and longer than the government anticipated in its spring budget, the projected $1.4-billion surplus for fiscal 2015-16 is not in jeopardy. Even though many economists now believe Canada slipped into a recession in the first half of the year, Mr. Oliver is confident that a rebound is coming in the second half.

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Europe’s likely Grexit bill tabulated at €341-billion

ERIC REGULY

Showing Greece the door could destroy the Greek economy. It could also cost Europe hundreds of billions of euros.

Data compiled by Barclays Bank show that the euro zone’s collective exposure to Greece is €341-billion ($480-billion). There is no telling how much of that amount would be lost were Greece to default on its obligations – it missed a €1.6-billion payment to the International Monetary Fund on June 30 – and drop the euro.

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Corporate income tax cuts are failing to boost investment

ANDREW JACKSON

Andrew Jackson is an adjunct research professor in the Institute of Political Economy at Carleton University and senior policy adviser to the Broadbent Institute.

Corporate tax cuts have been central to the Harper government’s economic agenda. The result has been a huge loss of public revenue for negligible economic gain, suggesting that we need a major policy rethink.

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Calgary Stampede: Poor economy gauge but a good economic respite

JEFFREY JONES

It’s a media tradition: Reporting on the level of hootin’ and hollerin’ at the Calgary Stampede as a barometer of the city’s and province’s overall economic health.

Interviews with street vendors, tallies of corporate parties, auction results for the right to plaster company logos on the tarps of the chuckwagons – they go hand in hand each July with oil prices, real-estate data and GDP in the quest to pinpoint the state of the economy.

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Full-time employment model is giving way to the Gig Economy

TODD HIRSCH

Many economists and social advocates are fretting these days about the job market. It seems that more Canadians are working in low-paying, part-time jobs. Benefits and pensions are becoming less common and job security is eroding.

The concern is understandable. In the language of philosophers and anthropologists, the 21st-century labour market is in the liminal space. It’s at a threshold. The old patterns and rituals are rapidly passing, but the new has not yet fully arrived. It is that point between chapters of a person’s life when all seems ambiguous, confusing and even terrifying.

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Canada’s public infrastructure gap will require a creative solution

GLEN HODGSON

After decades of neglect, public infrastructure deserves to be made a much higher economic policy priority. The issue of public investment in infrastructure won’t be ignored in the federal election campaign. It is already a hot topic in provincial legislatures and city council chambers across the country, and the overall political commitment to provide financial support must begin to reflect current needs and future opportunities.

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Trade woes are not merely a Canadian problem

DAVID PARKINSON

If there’s any consolation in the frustrating lack of sustained momentum in Canadian exports (and for an export-focused economy there’s not much), it’s that we’re not alone. Much of the rest of the industrialized world is in the same rudderless boat.

To say Canada’s trade in recent months has been a disappointment would be an understatement. The sector was supposed to be leading the country’s economy to better times; instead, it posted its two biggest deficits in history in March and April, a combined $6.9-billion trade crater. Exports have fallen in six of the past seven months.

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Pacific trade deal an opportunity for Canadian dairy to expand and export

CHRISTOPHER RAGAN

Christopher Ragan is an associate professor of economics at McGill University in Montreal and a research fellow at the C.D. Howe Institute in Toronto.

Over the next few months, Canadians will hear a lot about the negotiations of the Trans-Pacific Partnership (TPP) and about the possibility that our “supply management” of the dairy and poultry industries is on the bargaining table. This might even become a significant issue in the fall federal election. So this seems like the right time for a primer.

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Greece’s euro exit would reaffirm fragility of the currency club

IAN McGUGAN

The common currency that was intended to unite Europe’s bickering countries and carry them forward to prosperity has had precisely the opposite effect.

Now, as Greece lurches toward an unprecedented exit from the currency club, the euro project looks fragile. Its design flaws are glaring, its shortcomings are obvious.

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Greece controls: Desperate measures for desperate times

BERTRAND MAROTTE

Desperate times call for desperate measures.

The implementation of capital controls in Greece is the latest in a series of such moves by countries in financial turmoil. Cyprus, on the brink of bankruptcy two years ago, slapped restrictions on how much money could leave the island.

For Greece, capital controls have an air of inevitability about them given the European Central Bank’s decision to freeze the amount of emergency loans to the Greek banks.

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