These are stories Report on Business is following Tuesday, July 16, 2013.
OECD warns on jobs
Long-term unemployment in Canada remains a blight in the post-crisis era, the OECD warned today as it urged governments to provide “targeted assistance” to help those workers find jobs.
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 a new forecast today, the Organization for Economic Co-operation and Development projects 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.”
The OECD called on governments to target that group with aid to help them find jobs or be retrained.
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.”
One of the issues, according to the OECD, is that employment protection laws in Canada are among the weakest across the group’s members.
Regulations governing layoffs of permanent workers are softer only in New Zealand and the United States, according to the organization, while Canadian rules for temps are the lightest in the entire group.
“Lower levels of employment protection help ensure that labour markets respond more flexibly to economic change, but also create the risk that some workers will experience significant losses.”
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
- 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
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.”
Streetwise (for subscribers)
ROB Insight (for subscribers)