These are stories Report on Business is following Wednesday, Aug. 13, 2014.
Sorry, wrong number
By the time Friday morning rolls around, some market players may have lost, and others gained, from Statistics Canada’s error in last week’s key jobs report.
It all depends, of course, on the corrected numbers the federal agency releases in the wake of a rare mistake.
To recap, last week’s jobs report was lousy, to put it bluntly.
It showed a loss of 59,700 full-time jobs in July, and a gain of 60,000 part-time positions in what has generally been a lagging labour market. That flew in the face of forecasts for job gains in the area of 20,000.
As The Globe and Mail’s Bill Curry reports, Statistics Canada surprised the markets yesterday by disclosing that it erred, though it didn’t specify the mistake, saying instead that would put a new report this Friday. Separately, Canadian officials involved with the employment insurance program have decided to put new claims on hold, awaiting the new report, Mr. Curry writes.
That report may well move the Canadian dollar, just as the incorrect release did last week.
Which means, when all is said and done, someone may have lost or someone may have gained in the currency and bond markets, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
The loonie, as Canada’s dollar coin is known, was sitting at 91.65 cents U.S. just before last Friday’s jobs release.
It tumbled by about half a cent in the wake of what was deemed a negative report.
Then on Monday, the currency gained for other reasons. And yesterday, after Statistics Canada’s admission of the error, it gained, as well.
This morning, the dollar sat at 91.57 cents, or almost back to where it stood Friday morning before the report. And by late today, it had inched up to 91.61 cents.
The currency and bond yields react to such reports because of what they tell us about Canada’s economic fundamentals, and how the Bank of Canada might lean in terms of interest rates.
So a stronger economic backdrop, for example, might indicate that rate hikes may come sooner rather than later, which could boost the currency.
That’s not to say that Statistics Canada erred to the downside last Friday. We don’t know, and we won’t know for a couple of days yet. It could well be that the agency, which stressed it was an isolated mistake, erred in the other direction.
“Somebody could have gained and somebody could have lost,” Ms. Sutton said of the players in the currency and bond markets.
Some observers might question why Statistics Canada is leaving us hanging until Friday, rather than telling the markets now where the mistake lay.
But until we know the error, and its severity, there’s simply not enough information to make that call.
“There is no guidance on which way the revision will go, but CAD’s rally on the announcement, which has extended slightly overnight, suggests the market has moved to price in something closer to the original consensus of a 20,000 increase (reported as flat),” said Adam Cole of Royal Bank of Canada in London, referring to the loonie by its symbol.
Others agree that there’s no way of knowing, and thus the currency is back to last week’s level.
“The market reaction through CAD (dearer) and Canada 2s (cheaper) may be inappropriately creating a very one-sided bet that we can’t really justify with what we know at this point,” Derek Holt and Dov Zigler, Ms. Sutton’s Scotiabank colleagues, said in a research note late yesterday.
They were referring to two-year yields.
“Taking the very rare step of issuing a formal correction, however, suggests that this may not be a minor revision,” they said.
“In response to what Statistics Canada might correct, well, it’s hard to point to just one possible oddity in the report that jumps out as there were so many possible candidates,” the Scotiabank economists added.
“Really, anything is fair game by way of what they might correct. Neither the direction nor magnitude of headline or component revisions is obvious so it is not apparent to us why CAD is strengthening versus the USD on the news of a data correction in the works other than simple speculation that the number was weak after another weak month previously and therefore it must be headline employment that will be revised, and with the direction being higher. This is pure speculation that is risking skewing the price risk too far in one direction if it continues.”
- Bill Curry: EI claims on hold while Statscan fixes jobs report error
- David Parkinson in ROB Insight (for subscribers): Markets shouldn't have to wait for reliable jobs data
- Bill Curry: Statistics Canada rushing to redo July job numbers
- Kevin Carmichael: Surprisingly negative jobs report supports low-rate stance
12 (hopefully funnyish) jokes
It’s not often one gets to poke fun at statisticians. (In fact, I don’t think I ever have.)
So, twisted mind that I am, I Googled “jokes about statisticians” in the wake of the jobs report error that has markets abuzz.
And here are some that I found on various websites, including workjoke.com, StackExchange and others, including one that had to explain the jokes and another that said I had to be at least 13 years old.
1. I asked a statistician for her phone number, and she gave me an estimate.
2. A beggar asks a British Treasury statistician for money, saying he hadn’t eaten in three days. Says the statistician: “How does that compare with the same period last year.”
3. A physicist, a chemist and a statistician are in an office when they see a fire in the trash can. The physicist says they have to cool down what’s on fire, while the chemist urges cutting the oxygen supply. They’re both troubled as the statistician begins lighting other fires, asking what he’s doing. His reply: “Trying to get an adequate sample size.”
4. Three statisticians out hunting find a deer. The first one shoots and misses by a meter on the left, the second by a meter on the right. The third member of the group doesn’t shoot because “on average, we got it.”
5. “Being a statistician means never having to say you’re certain.”
6. The average statistician is just plain mean.
7. Did you hear the one about the statistician? Probably.
8. A statistician is someone who draws a mathematically precise line from an unwarranted assumption to a foregone conclusion.
9. A statistician tried to cross a river that was, on average, a meter deep. He drowned.
10. Top reasons to become a statistician: Deviation is deemed normal, they feel complete and sufficient, they’re right 95 per cent of the time, they’re truly significantly different, and no one else wants their job.
11. What’s an actuary? Someone who didn’t feel Statistics was boring enough, so put it together with Insurance.
12. And, finally, the one about the Statistics Mob: They make you an offer you can’t understand.
CMHC sees no meltdown
Canada Mortgage and Housing Corp. joined the Bank of Canada and other observers today in calling for a soft landing for the real estate market.
In its third-quarter outlook, the government housing agency said the market “will continue to be supported by economic and demographic fundamentals for the rest of 2014 and into 2015.”
Some observers have warned of the frothy nature of the Canadian market, particularly where condos are concerned in Toronto and Vancouver.
But the central bank and many economists, and today CMHC, see no U.S.-style meltdown in the offing.
Where prices are concerned, which is, of course, what homeowners are watching closely, CMHC projected gains both this year and next.
CMHC now forecasts Multiple Listing Service prices of between $394,700 and $405,700 this year, and $396,500 and $416,900 in 2015.
The so-called point forecast, then, is for a 4.5-per-cent increase to $399,800 in 2014 and a 1.8-per-cent gain to $406,800 next year.
It expects resales of 463,600 this year, and 474,300 next year, with housing starts of 184,800 and 183,100, respectively.
“Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals,” said CMHC’s chief economist, Bob Dugan.
“However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction.”
House prices rise
Separately today, the Teranet-National Bank home price index showed house prices in Canada climbing 1.1 per cent July from June, and 4.9 per cent from a year earlier.
Notably, the group said, July marked the first time in five months that the monthly move eclipsed the historical average.
Not only that, prices climbed in 10 of the 11 markets measured, with Winnipeg lagging, The Globe and Mail's Tara Perkins reports.
On a year-over-year basis, Calgary led the way, with a price gain of 8.2 per cent, followed by Hamilton at 7.1 per cent, Toronto at 6.6 per cent and Vancouver at 6.1 per cent.
“Unsurprisingly, the resale market in these four urban areas is balanced or even tight,” said the group.
Edmonton scored a gain of 3.7 per cent, Victoria of 2.5 per cent and Montreal of 1.5 per cent. Prices in Winnipeg slipped 0.1 per cent. Prices were also down on the year in Quebec City, Halifax and the Ottawa region.
“The softness of prices in markets east of Toronto over the last 12 months is consistent with the oversupply prevailing the resale markets of these metropolitan areas,” the group said.
Japan's economy hit
Abenomics took another hit today as fresh numbers showed Japan’s economy contracting markedly in the second quarter of the year.
A setback had been expected, given a hike in the sales tax and other issues, but the reading will still no doubt lead some to again question the economic program launched by Prime Minister Shinzo Abe.
Japan’s economy shrank in the quarter at an annual pace of 6.8 per cent, a better showing than expected, but not by much, as consumers held back after the April tax hike.
“The three-percentage-point sales tax hike which took effect in April clearly weighed heavily on activity,” said BMO’s Mr. Reitzes.
“Unfortunately, Q1 growth was trimmed to 6.1 per cent from 6.7 per cent, so average first-half growth is slightly negative, and it looks as though there were some other downward revisions,” he added.
“While the huge drop was entirely expected, they highlight the challenge that the Bank of Japan and the government face in pushing the economy out of deflation. The recent data have been on the softer side, and if that continues, we could see more easing from the BoJ and potentially more fiscal stimulus.”
- Japan suffers biggest economic slump since 2011 tsunami
- Bank of England links rate hike to wage growth
- China's July economic data point to further softness
- U.S. retail sales flat in July on auto industry decline
- Unexpected drop in euro zone output clouds recovery hopes
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