These are stories Report on Business is following Tuesday, July 16, 2013.
OECD warns on jobs
Canada has among the least restrictive job protection legislation among OECD member countries, the group said today as it urged governments to deal with long-term unemployment.
In its employment outlook released this morning, the Organization for Economic Co-operation and Development noted that regulations governing layoffs of permanent workers are softer only in New Zealand and the United States.
Rules governing temps are the softest, the OECD said in its study of its own 34 member countries and nine emerging economies.
The organization looked at 21 issues related to employment protection, among them the notification periods required for layoffs, severance pay, and the timing imposed by governments.
“Adjusting the level and composition of the work force to adapt to changing demand conditions and technology is vital for effective business operation and therefore for productivity and economic growth,” the OECD said.
“But job displacement entails significant costs for workers concerned in terms of earning losses and the possible obsolescence of their job-specific skills and experience,” it added in its outlook.
“Social costs are also important. For example, greater financial distress associated with job loss may entail health problems. To minimize these costs, public policies such as unemployment benefits, job-search assistance and active labour market programs are put in place by governments. But these policies are financed by the society through higher taxes. Striking an adequate balance between allowing an efficient reallocation of labour resources and the need to protect employees is therefore a key priority for policy makers.”
The OECD also found that long-term unemployment in Canada remains a blight in the post-crisis era.
To be sure, Canada’s labour market rebounded from the recession at a far faster pace than most other countries, recouping the jobs lost to the slump, and then some.
Using the measure favoured by the International Labour Organization, Canada’s jobless rate was 7.1 per cent in the first quarter of this year, down from its peak of 8.5 per cent in the depths of the crisis and a far cry from levels in countries such as Greece and Spain, which have been crippled by rising unemployment.
In its new forecast, the OECD projected Canada’s jobless rate will ease further, to 6.7 per cent by the end of next year, still somewhat above the 6.1 per cent level of before the recession.
But the long-term unemployed, or those out of work for at least a year, have not fared as well.
“The share of the unemployed who have been jobless for a year or longer has nearly doubled since the beginning of the recession and this group needs additional assistance to be able to benefit from an improving labour market,” the OECD said.
“The number of short-term unemployed grew rapidly early in the recession, when many workers were laid off, and then receded as workers either found jobs in the recovering labour market or fell into long-term unemployment,” the Paris-based organization added.
“By contrast, the number of long-term unemployed has yet to decline. A possible reason that the long-term unemployed have been so slow to benefit from the recovery is that employers recruiting new workers often prefer to hire new labour market entrants and the short-term unemployed.”
Those hit hardest in the slump were young people and workers with low skills, who are suffering jobless levels of 13.8 per cent. That compares to the 6.3 per cent jobless level among those with medium skills, or those who graduated high school but went no further, and the 5.4 per cent for high-skilled employees, who have at least a bachelor’s degree.
“The outlook argues that is especially important to improve labour market outcomes of these groups in preparation for the retirement of the large baby boom cohort from the labour market, since this demographic transition could otherwise weaken the economic outlook,” the OECD said.
“Canada should also reduce barriers to geographical and occupational mobility, for example by promoting greater cross-provincial recognition of vocational qualifications.”
According to the latest reading by Statistics Canada, unemployment held at 7.1 per cent in June, with some 1.35 million people out of work. In the year to June, Canada created 240,000 jobs.
But employment gains have slowed of late. In the first half of this year, job creation averaged 14,000 positions a month, compared to the 27,000 in the last six months of 2012.
Across the 34 countries of the OECD, the organization projects that unemployment will ease only marginally over the next year and a half, to 7.8 per cent by the end of next from 8 per cent now, with some 48 million people unable to find work.
“The social scars of the crisis are far from being healed,” OECD Secretary-General Angel Gurria said as the group unveiled the report.
“Many of our countries continue to struggle with high and persistent unemployment, particularly among youth,” he added.
“Therefore, the recent commitment by OECD ministers to do more to help youth, as set out in the OECD Action Plan for Youth, is an essential tool in our fight against the scourge of joblessness.”
- Read the OECD report on Canada
- Read the section on employment protection
- David Parkinson in Economy Lab: Better U.S. job numbers good news for Canada's stagnant labour market
Analysts boost Loblaw, Shoppers outlook
Analysts are revising their outlook for shares of Loblaw Cos. Ltd. and Shoppers Drug Mart Corp. in the wake of yesterday’s blockbuster takeover deal.
Kenric Tyghe of Raymond James today boosted his price target for Loblaw shares to $54 from $46, and for Shoppers to $62 from $50.
Analysts have generally praised the proposed $12.4-billion takeover of Shoppers by Loblaw, the announcement sending the shares of both surging yesterday.
Here’s what Mr. Tyghe said today of Canada’s biggest grocer:
“The transaction, as announced, is in our opinion about Loblaw driving (and thereby leading) a disruptive change in the Canadian grocery and drug retail landscape, and as such Loblaw is playing offence versus defence.”
And of Shoppers:
“Shoppers’ proposed acquisition by Loblaw would facilitate Shoppers further levering its private label, convenience food and class-leading loyalty competencies, and Loblaw leading the charge on the grocery format evolution in Canada (in addition to levering its class-leading private label and recently refreshed loyalty offering).”
Keith Howlett of Desjardins upped his price target for Loblaw to $55 from $50, though he noted: “While ‘health, wellness and nutrition’ is a theme that aligns well with changing consumer values and demographics, it is not yet clear how the combined entity is going to ‘grow faster together’ and monetize the opportunity.”
He raised his target on Shoppers to $64 from $42.
- Loblaw's bulk buy: $12.4-billion deal for Shoppers creates a colossus of retail
- Loblaw looks to a new generation of shoppers
- Galen G. Weston's plan to grow his family's legacy
- Boyd Erman in Streetwise (for subscribers): Bank's willing ness for risk made Loblaw deal possible
- Scott Barlow in ROB Insight (for subscribers): Shoppers purchase a strong play for Loblaw
Sun cuts jobs
Canada’s largest chain of newspapers is cutting hundreds of jobs and closing several publications to deal with plummeting profits, the second time in less than a year that Sun Media has slashed its staff aggressively to deal with falling print advertising revenue, The Globe and Mail's Steve Ladurantaye reports.
The Quebecor Inc.-owned media company said it will cut 350 jobs, bringing the total number of positions lost in the last year to 850 from a staff of approximately 5,500. Sun Media publishes 36 daily newspapers and more than 200 community papers.
Goldman tops forecasts
Goldman Sachs Group Inc. is the latest major U.S. bank to post earnings above the expectations of analysts, doubling its second-quarter profit to $1.93-billion (U.S.).
Profit of $3.70 a share compared to $962-million or $1.78 a share a year earlier, Goldman said today.
“The firm’s performance was solid especially in the context of mixed economic sentiment during the quarter,” said chief executive officer Lloyd Blankfein.
“Improving economic conditions in the U.S. drove client activity and the strength of our global client franchise allowed us to deliver positive performance across a number of our businesses,” he added in a statement.
“While the operating environment has shown noticeable signs of improvement, we continue to put a premium on disciplined risk management, particularly in regard to the firm’s strong capital and liquidity levels.”
Factory sales rise
Canadian manufacturers pulled off a surprise win in May – a surprise in that economists had expected a decline in sales.
But, Statistics Canada said today, factory shipments climbed 0.7 per cent, marking the second increase in five months.
Sales rose in 11 of the 21 industries measured, accounting for some 57 per cent of the sector.
The chemical industry saw the biggest increases, primarily because of faster than normal sales of fertilizer.
“Wetter and colder weather this year delayed spring planting,” Statistics Canada said.
“Hence, the annual ramp-up in fertilizer production occurred later this year than in previous years.”
Inventories dipped 0.2 per cent, having climbed for four consecutive months, while the inventory-to-sales ratio declined marginally to 1.42.
Unfilled orders rose 0.6 per cent.
“The bounce-back in the volume of manufacturing sales in May still only partially retraced a large decline the prior month and left the sales pace running 3.3 per cent below its level a year ago,” said economist Nathan Janzen of Royal Bank of Canada.
“As well, while the pick-up in monthly sales is encouraging for future activity in the sector, a pull-back in inventories in May suggests that the sales gain was largely pulled from existing inventories rather than new production.”
Condo sales slip
Toronto’s condo market continues to soften, though area realtors stress that prices are still holding up.
Sales of condominiums in the Toronto area fell by about 6 per cent in the second quarter of the year, compared to a year earlier, to 5,984 units. That's better than the first quarter of the year, when condo sales declined by 17 per cent.
Notably, new listings fell by about 4 per cent , while active listings were up by less than 2.5 per cent at the end of the latest three-month period, the Toronto Real Estate Board said today.
The average selling price increased 1.7 per cent to $347,896, while the Multiple Listing Service home price index gained 1 per cent.
"The GTA condominium apartment market has been the subject of much discussion recently, due in large part to the number of new units completed over the past two years and the number of units that remain under construction,” said Dianne Usher, president of the realtors group.
“With this in mind, it is important to point out that the condo market has fared quite well. Even with sales down and the number of active listings up, the average selling price has found support at current levels.”
The bulk of the sales were in Toronto proper, where prices rose. They also gained in Durham Region to the east of the city, but slipped in the regions of Halton, Peel and York.
If new listings were to continue to decline and sales improve, “we could see the pace of condo price growth accelerate as market conditions tighten,” said Jason Mercer, the group’s senior manager of market analysis.
Canada’s housing market cooled rapidly after Finance Minister Jim Flaherty tightened mortgage rules a year ago.
Recently, however, there have been signs of stability, though the condo markets of Toronto and Vancouver are still of concern.
“With resales and the MLS HPI moving up consistently month-to-month since the end of winter, momentum is rebuilding in the Canadian market – suggesting that the restraining effect on demand of the changes to mortgage insurance rules introduced in July 2012 may have diminished substantially by now,” senior economist Robert Hogue of Royal Bank of Canada said earlier this week.
“We believe that the recent bout of weakness has run its course; yet the Canadian market is unlikely to return to its earlier heated state.”
- Home sales below year-earlier levels in June, prices rise 4.8%
- Rule changes may have knocked 10% of home buyers out of market
- A funny thing happened on the way to the housing crash (It didn't crash)
- Building permits jump 4.5 per cent, mark fifth month of growth
- Vancouver real estate: The $1-million white picket fence
- Doug Porter's version of The Rant: 'We flatly reject' sell-Canada narrative
- Toronto housing sales fall slightly in June, prices jump 4.7% year over year
- Greater Vancouver housing market shows signs of revival
- Toronto’s soaring condo market ignites fears of a U.S.-style crash
- Sheryl King in Economy Lab: Prognosis grim for Toronto condo investors
- Rob Carrick: How risky is the Toronto condo market?
- Canadian housing market defies doomsayers with spring surge
Streetwise (for subscribers)
ROB Insight (for subscribers)