These are stories Report on Business is following Friday, Oct. 7. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
The good, the bad and the weird A collection of dumb, smart and downright weird things in the business world today:
1. Treasury Board chief Tony Clement tells Bloomberg News the government is linking the pay of senior officials to performance in its efforts to bring the deficit into line. If you slash and burn, you get a bonus. If you shower your riding with tens of millions to spruce it up before a G8 summit, presumably you don't.
2. Chancellor Angela Merkel reportedly said in a speech today that the euro is the "elixir of life for Germany." Who writes this stuff?
3. Let's hope Canadian Pacific Railways and Canadian National Railways don't get wind of a plan by their Dutch counterpart to bring in "pee bags" on short-haul trains without toilets. Here's the way it works, according to Agence France Presse: You go to the back of the train, where there's a little cabin, and pee into a spout attached to a bag that's filled with powder, and together they make a gel, sort of like how disposable diapers work. A rail spokeswoman says it's only for "extreme emergencies," but one woman pointed out the obvious to the news agency: "For a man it may be easier."
4. Greek support for Prime Minister George Papandreou's governing party has slipped to 22.5 per cent, according to a recent poll. Given the anger over cutbacks and fears of a bankruptcy, I'm surprised it's that high. Mark your calendar. This comes today from Benjamin Reitzes of BMO Nesbitt Burns: "A Greek default and restructuring are now part of our base case forecast, but are unlikely to happen until December at the earliest."
5. The ratings agencies decided today to clear their books before a relaxing weekend. Moody's downgraded 12 British banks and nine Portuguese banks, followed by downgrades of Italy and Spain by Fitch late in the day, London time. As Will Hedden of IG Index put it in a tweet this afternoon: "It's Friday, are you coming to the pub? Fitch: No, we'll stay in the office and dish out some downgrades."
6. Carl Weinberg, the chief economist at High Frequency Economics, makes an interesting point today about the European debt crisis and why leaders are scrambling to assure markets they can prop up their banks: "The importance of being earnest about backstopping the banking system is that safe banks are the way to short circuit anxiety about the financial system. If banks are sound enough to withstand any possible shock, then no one cares if borrowers or governments fail to meet their obligations.
7. Hertz is under fire for suspending more than 30 Somali Muslim workers at Seattle's airport for praying on the company's time, according to reports today. The Teamsters union has filed a complaint with the National Labor Relations Board because it didn't tell the union it was planning to change its policy. A spokesman for the rental company told The Associated Press that the shuttle drivers must punch out after an earlier settlement with the Equal Employment Opportunity Commission. Those who did clock out weren't punished. Break times are paid, he said, but there's a 10-minute window. “We felt it was reasonable for our Muslim employees who need to pray a couple times during the workday to clock in and clock out."
8. Shares of 99 Cents Only Stores have been pushing higher on reports of a competing takeover bid. 99 Cents shares are now worth about $20 (U.S.).
9. Dalton McGuinty says yesterday's election left him with a "major minority." Cute phrase, here's another: Major trouble. Here's how TD economists Derek Burleton and Sonya Gulati put it today: "With the difficult job of winning re-election now complete, the government now faces the even tougher job of addressing its sizeable deficit and steeply rising debt burden in a challenging economic environment. Given this limited wiggle room, the campaign promises of the Liberal Party were relatively modest in scope. Still, the task will not be made any easier by diminishing growth prospects since the current government issued both its 2011 budget and election platform. What’s more, the new government is in a minority position, which in turn, could exacerbate the challenge of slaying the deficit dragon."
10. This is not meant to make light of a serious condition known as Anorgasmia, or the trouble some women have in reaching orgasm. I'm just intrigued by the name of the recently completed testing for the intranasal treatment announced yesterday by Eugene Melnyk's Trimel Pharmaceuticals Corp.: "Phase II Vibro-Tactile Stimulation (VTS) clinical study."
Sarkozy, Merkel to meet European leaders are sending strong signals to the markets that they're cobbling together a plan to shore up the region's banks amid the debt crisis. While it seems everyone wants to do it, however, that's a long way from an actual plan.
And according to reports today, German Chancellor Angela Merkel and French leader Nicolas Sarkozy don't see eye to eye in advance of a meeting Sunday. Mr. Sarkozy, according to Reuters, wants to use the euro bailout fund, or EFSF, to recapitalize the French banks, while Ms. Merkel thinks the banks should first try to tap the markets. For now, the European Central Bank has moved to reassure investors with loans to the institutions at the ready.
"There remains no consensus across Europe on recapitalization efforts and whether or not to proceed," warned Scotia Capital economists Derek Holt and Karen Cordes Woods.
"There also remains no consensus on how to pay for it as even France may balk at paying directly versus using the EFSF to which it has already committed guarantees. Using the EFSF poses the challenge that it would sap the fund’s ability to bail out states particularly in order to stem contagion risk should all of this rush to recapitalize be focused upon intensified concerns over a medium-term Greek default to which the French are opposed but the Germans are not."
Ratings agencies hit Europe Moody's Investors Service slapped down 12 British banks today, including Royal Bank of Scotland and Lloyds Banking Group, while Fitch hit the governments of Italy and Spain.
The ratings of the dozen banks were all downgraded as Moody's questioned the level of support the British government is willing to provide.
"The government is likely to continue to provide some level of support to systemically important financial institutions," Moody's said. "However, it is more likely now to allow smaller institutions to fail if they become financially troubled."
Moody's also cut ratings among several Portuguese banks, but no one outside Portugal appears to care all that much.
- Moody's downgrades a dozen U.K. banks
- Nine Portuguese banks hit with downgrade
- Fitch downgrades Italian, Spanish credit ratings
Jobs market rebounds Canada's labour market has rebounded from a two-month stall, and the jobless rate has dipped, though it's still above 7 per cent and the numbers may not be quite as good as they look.
The better-than-expected showing was pumped up by the education sector, which been seen skewing the overall jobs picture in the back-to-school season.
Still, the economy created 61,000 jobs in September - and, notably, they were all full-time positions - and the unemployment rate edged down to 7.1 per cent, the lowest since late 2008, from 7.3 per cent a month earlier. Employment in the private sector, though, slipped by 15,000, Statistics Canada said today, as the ranks of the public sector and self-employed grew.
"As expected, a lot of the gain (38,000) came in education, where a quirk in the seasonal adjustment process has, for the past few years, shown big job losses at the end of the school year and then heavy rehiring when the new school year begins," said Avery Shenfeld, chief economist at CIBC World Markets.
In the past 12 months, employment has increased by almost 300,000, or 1.7 per cent, largely because of gains in Ontario and Alberta, The Globe and Mail's Tavia Grant reports. In a strong sign, full-time employment is now up by 344,000 or 2.5 per cent while part-time work has declined by 50,000 or 1.5 per cent.
Having said that, the jobs market is slowing overall, and isn't expected to show such hefty gains going forward. And among young people, unemployment rose last month at the jobless rate stuck firm at 14 per cent.
"Canadian employment growth has indeed slowed, from a 2.4-per-cent annualized pace in [the first quarter]to a 1.2-per-cent pace in the third quarter," said Robert Kavcic of BMO Nesbitt Burns. "With economic growth expected to remain soft through yearend, look for employment growth to remain modest as well."
Senior economist Jacques Marcil of Toronto-Dominion Bank agreed, saying jobs growth in the third quarter is consistent with "tepid underlying growth in the economy" when you remove the seasonal factors.
- Hiring jumps, jobless rate falls
- Tavia Grant's Economy Lab: Is the road to better pay through college or university?
Some hope in U.S., but only some There is, suddenly, some optimism in the United States, though, as Ben Bernanke put it, unemployment remains a national crisis.
The U.S. economy created 103,000 jobs in Spetember, according to the U.S. Labor Department today, though 45,000 of those included workers at Verizon who ended a strike. And the jobless rate remained at 9.1 per cent.
But as well as reporting a better-than-expected jump, the Labor Department also revised the readings from July and August to show almost 100,000 more jobs than initially believed.
"One month does not make a trend, and the labour market is likely to remain constrained by structural problems, e.g. skills atrophy (long -erm unemployeds) and skills mismatch," said senior economist Krishen Rangasamy of National Bank Financial.
"We need monthly employment gains over 200,000 to make a significant dent in the unemployment rate. So, the sooner the Obama jobs plan (or a similar plan) passes Congress, the better for consumption and hence the U.S. economy."
Soros on West's troubles George Soros, who knows a thing or two about finances, likens the threats to Europe and the United States to that of the dying days of the Soviet regime.
“Something similar is happening in the West,” Mr. Soros told Bloomberg Television. “You had a financial crisis where the market did actually collapse, but it was kept alive by the authorities. People don’t realize that the system has actually collapsed.”
The Hungarian-born financier said he himself is confused by Europe's woes.
Some business chiefs sympathetic The 'Occupy' protests that began in New York and have now spread to several cities have caught the eye of some in the financial world who, rightly so, are not dismissing the demonstrations, but, rather, are paying heed.
That's a good thing because, whether or not you agree with them, the protests signify mounting mistrust and anxiety in an era of high unemployment and new financial strains.
This was not lost on Michael Neal, the chief of the finance unit of General Electric Co. . Nor was it lost on Laurence Fink, the chief executive officer of BlackRock Inc. . Nor on Richard Fisher, the president of the Dallas Federal Reserve, who told a business audience that he was "somewhat sympathetic."
Their comments are important for business because the spreading protests, which began with "Occupy Wall Street," should be a wake-up call in the wake of the financial crisis.
“We have a very uneven distribution of income," Mr. Fisher was quoted as saying yesterday. "We have too many people out of work for too long. We have a very frustrated people, and I can understand their frustration.”
Mr. Neal was also quoted by Reuters as being sympathetic.
"People are really angry, and I get it," he said. "If I were unemployed now, I'd be really angry too ... I've got a 21- and 19-year-old son, they might march with them. There are a lot of unhappy people right now, and there's not a lot going on that gives you much reason to be inspired."
Mr. Fink, in turn, said there are "structural issues" that need to be fixed.
“The protesting is a statement the future is very clouded for a lot of people,” he said. “These are not lazy people sitting around looking for something to do. We have people losing hope and they’re going into the street, whether it’s justified or not.”
- Wall Street protest grows as unions swell ranks
- A manifesto for Wall Street protesters
- Activists throughout Canada set to show solidarity with Wall Street protesters
Bank of Japan stands pat The Bank of Japan held its benchmark interest rate at virtually zero again today, noting the country continues to bounce back from the devastation of the mid-March earthquake and tsunami, but still worried about the risks from outside its borders.
"Japan's economic activity has continued picking up," the central bank said in its statement.
"Production and exports have continued to increase, although their paces have moderated after going through the recovery phase immediately following the quake-induced plunge. In this situation, business fixed investment has been increasing moderately, and private consumption has been picking up on the whole. Meanwhile, financial conditions have continued to ease, albeit with weakness still being observed in the financial positions of some firms, mainly small ones."
The central bank also cited the threats from Europe's debt crisis and the "balance sheet adjustments" in the United States.
Headlines of note
In Economy Lab Mike Moffatt examines the Harper government's proposal to kill the $2-per-vote subsidy for political parties.
In International Business The physical oil market continues to show remarkable strength even if futures prices are lagging amid worries about the impact of an economic slowdown on demand, Javier Blas of The Financial Times reports.
In Globe Careers Harvey Schachter examines the issue of work-life balance.
From today's Report on Business
- Steve Jobs: A savvy communicator with a singular point of view
- Won't force change to mine deal, Mongolia says
- Chungking Mansions, home of the 'bandit phone'
- Pummelled emerging markets offer growing temptation