These are stories Report on Business is following Wednesday, April 23, 2014.
Statistics are one thing, life in the office or on the factory floor something else entirely.
I suspect that many Canadians may well have raised their eyebrows, as did I, on hearing that our middle class is now among the world’s richest, the richest among big countries studied by The New York Times based on data from the Luxembourg Income Study Database.
To recap, the study found that median per-capita income in Canada, after tax, matched that of the American middle class in 2010, the equivalent of $18,700 (U.S.), and has likely climbed since. That means the Canadians have overtaken their southern neighbours.
You can quibble with the fact that certain countries were left out of the still in-depth report, but the trend is certainly clear, and, according to economists, bang on.
So why aren’t many of us feeling it?
First, it’s not that Canada is doing so well. It’s that the Americans, which suffered a far harsher recession, are doing so poorly.
As deputy chief economist Benjamin Tal of CIBC World Markets noted, what we’re seeing now is the reverse of the post-recession period of the 1990s in Canada and the United States.
“Back then we had the jobless recovery and their job market was fine,” Mr. Tal said. “As a result, by 1997 their median income was 10-per-cent higher than ours.”
Now we have the flip side, with the U.S. in a “jobless recovery” and Canadian median income superior to the tune of almost 10 per cent, even when adjusted for fluctuations in currency.
“My point, however, is that it is not that we are doing great, but that they are doing very badly when it comes to a widening income gap,” Mr. Tal said.
“When you look at Canada over the past 15 years, what’s interesting is that the two groups that have seen the most significant growth in income were the bottom 20 and the top 20,” he added.
“The middle has seen its income growth lagging (and here we can discuss the quality of employment, job market mismatch and many other factors. So the bottom line is that the fact that we are doing better than the U.S. is no cause for a celebration … In absolute terms, I don’t think that we do well.”
Consider this post-crisis era: Tepid pay increases for many. Unemployment that, while better than in other countries, remains high at 6.9 per cent. Kids who can’t find jobs.
True, household net worth in Canada is now at a record $7.7-trillion, or $218,000 on a per-capita basis. Stocks are rising, and home prices surging. But how much do you feel that asset growth, unless you happen to be selling?
And, remember, many Canadians are still carrying troublesome levels of debt, which, when measured against disposable income, is near a record at just shy of 164 per cent.
According to the New York Times report, median income in Canada rose by almost 20 per cent between 2000 and 2010.
That’s on a national basis, of course, and thus hides the regional and income-group disparities.
Statistics Canada numbers show that average weekly earnings in Canada, while having climbed steadily since the depths of the recession, rose last year by 1.8 per cent, to $910.74.
Again, that’s national. It’s not like everyone lives in Alberta, the Northwest Territories or Nunavut, where that pay tops $1,000.
The New York Times study also ends at 2010, and, noted chief economist Douglas Porter of BMO Nesbitt Burns, many other economies have “played catch-up” with Canada since.
“Real wage growth has been modest at best in recent years,” Mr. Porter said, also noting that unemployment has not yet eased to its pre-slump level.
And while borrowing costs are low, and debt servicing easier at these levels, the fact is that you’ve still got to service that debt.
Add to all this the high cost of housing, which, as Toronto-Dominion Bank economist Diana Petramala pointed out today, is high. Indeed, when prices are measured against income, according to The Economist, Canada ranks among the highest in the world.
Americans, Ms. Petramala said in a recent report, get “more bang for their buck,” paying less for many consumer goods.
Just as an example, we spend the equivalent of $1,200 more on food and drinks, on a per capita basis, than Americans.
(Note this: We spend almost three times more on beer and wine in 2012.)
“Americans appear to be more prolific in their spending, but their money goes further,” Ms. Petramala said.
“Canadians have a stronger focus on homeownership, which constrains spending on other items, except apparently alcohol.”
Like Mr. Tal, Mr. Porter believes that, over all, some of Canada’s showing is “winning by subtraction” as it’s compared to other nations.
- Canada’s middle class richest in study of big nations
- Joe Friesen: A new high for middle incomes
- Campbell Clark in Politics Insider (for subscribers): Just how well Canada’s middle class is doing is a matter of perspective
- Rob Carrick: If I had a million dollars … would I be rich?
Apple in stock split
Apple Inc. unveiled several investor-related moves after markets closed today, including a seven-for-one stock split, a quarterly dividend hike of about 8 per cent, and an increase in its stock buyback program to $90-billion (U.S.) from $60-billion.
Apple shares surged about 7.5 per cent in after-hours action.
This came as the tech giant posted a second-quarter profit of $10.2-billion, or $11.62 a share, up from $9.5-billion or $10.09 a year earlier.
Revenue rose to $45.6-billion from $43.6-billion.
Apple also projected third-quarter revenue of between $36-billion and $38-billion.
“We’re confident in Apple’s future and see tremendous value in Apple’s stock, so we’re continuing to allocate the majority of our program to share repurchases,” said chief executive officer Tim Cook.
“We’re also happy to be increasing our dividend for the second time in less than two years.”
Facebook profit surges
Facebook Inc. today posted sharp gains in profit, revenue and users sending its stock higher in after-hours action.
The stock was up about 4.5 per cent after regular trading.
Profit climbed in the quarter to $642-million (U.S.), or 25 cents a share, from $219-million or 9 cents a year earlier.
Revenue rose to $2.5-billion from $1.5-billion, while the number of daily active users rose to a March average of 802 million, up 21 per cent.
Most importantly, the folks who use Facebook via mobile devices daily rose 43 per cent to 609 million.
And, Facebook said as it released its results after markets closed, ad revenue rose 82 per cent, to $2.3-billion.
Notably, mobile ad revenue now accounts for 59 per cent of that total, well up from 30 per cent a year ago.
"We've made some long term bets on the future while staying focused on executing and improving our core products and business,” chief executive officer Mark Zuckerberg said in a statement.
“We're in great position to continue making progress towards our mission."
Retail sales rise
Canadian shoppers ventured out again in February, but only just, as memories of those chilly December days faded.
Retail sales across the country rose 0.5 per cent, Statistics Canada said today, a showing that wasn’t as strong as January’s but a continued pick-up from December’s slump. January's showing was also revised down today.
When you strip out gas stations and the auto sector, sales rose 0.8 per cent. In straight volume terms, though, sales eked out a gain of just 0.1 per cent.
Sales rose in seven of the 11 sectors measured, accounting for about 56 per cent of the total.
In dollar terms, health and personal care shops did the best, up 2.6 per cent, primarily pharmacies and drugstores.
FedEx strikes deal
FedEx Express is going after a bigger piece of the burgeoning online shopping market by expanding its retail presence in Canada through a deal with Home Hardware Stores Ltd., The Globe and Mail's Bertrand Marotte reports.
Federal Express Canada Ltd. says it has reached an agreement with Home Hardware that will allow the home-improvement chain’s dealer-owners to house full-service FedEx shipping centres within their stores.
Streetwise (for subscribers)
ROB Insight (for subscribers)
- Gas prices in record territory for Canadian motorists
- Boeing boosts full-year forecast
- Chinese factories stalling as euro zone business picks up
- Procter & Gamble profit rises on home care sales
- Mega Brands shareholders approve $460-million Mattel takeover
- Greece qualifies for new debt relief after 2013 budget surplus