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Bank of Canada Governor Mark Carney says 'European authorities must create time to re-found their monetary union based on credible fiscal arrangements and more flexible economies,' (Peter Power/The Globe and Mail)
Bank of Canada Governor Mark Carney says 'European authorities must create time to re-found their monetary union based on credible fiscal arrangements and more flexible economies,' (Peter Power/The Globe and Mail)

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Mark Carney's warning: 'This is not an average recovery' Add to ...

These are stories Report on Business is following Tuesday, Sept. 20. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Carney sees no new recession Bank of Canada Governor Mark Carney summed it up perfectly today, telling a business audience in Saint John that "this is not an average recovery."

The central banker admitted that the threat of another U.S. recession is on the rise, The Globe and Mail's Jeremy Torobin reports, but Mr. Carney still doesn't see that happening.

He cited the threat from Europe's fiasco, saying the direct hit is relatively modest while the impact on the markets and confidence could be much greater. More troubling is the effect of the slowing U.S. economy, which has hurt key Canadian sectors like autos and housing.

"To put this into perspective, consider that if this had been an average U.S. recovery, U.S. GDP would be 2.5 per cent higher and Canadian exports would be 6.5 per cent greater, equivalent to $30-billion in additional sales," Mr. Carney said, according to a text of his speech.

"But this is not an average recovery and, now, the considerable external headwinds our economy has faced in recent years are blowing harder. Net exports are now expected to remain a major source of weakness, reflecting more modest global demand and ongoing competitiveness challenges, in particular the persistent strength of the Canadian dollar."

IMF cuts Canadian outlook Canada’s jobless rate will tick higher this year and next as the global economy enters a “dangerous new phase,” the International Monetary Fund said today as it chopped its forecast for the country.

The IMF now sees Canada’s economy growing 2.1 per cent this year and just 1.9 per cent next year – much weaker than its April forecast of 2.8 per cent and 2.6 per cent, growth respectively, The Globe and Mail's Tavia Grant reports.

How Canadians fared It may not feel like it to the more than 7 per cent of Canadians still without jobs, but workers in Canada came through the last recession somewhat better than those who suffered through the slumps of the early 1980s and early 1990s.

A study released today by Statistics Canada found that, on a monthly basis, 2 per cent of employees were temporarily or permanently laid off between October 2008 and December 2010. That was better than the 2.9 per cent of the early '80s and the 2.7 per cent of the early '90s, the agency said.

Those hit by the latest slump were also more likely to find a job in the short term, it said.

"The last recession was also of shorter duration in terms of employment," Statistics Canada added.

"Total employment on a seasonally-adjusted basis took 27 months to return to its pre-downturn level. This compares with 53 months during the early 1990s and 40 months during the early 1980s," according to the study.

"On average, employees who were laid off during the most recent downturn and who found a job in the short term saw their average weekly wages drop from $734 to $703. Among these employees, one-quarter saw their weekly wages decline by 23 per cent or more, while another one-quarter saw increases in weekly pay of at least 18 per cent."

The human toll Markets may be focused on Europe's struggle to bring its debts under control, but on the streets there's a struggle to survive.

The financial crisis, recession and, now, harsh cutbacks have led to despair amid wretched levels of unemployment and ever greater austerity measures in the Old World. Pushed by markets and ratings agencies, governments are demanding more and more from their people. Consider that:

  • Reported suicides in Greece have just about doubled during the country's crisis, The Wall Street Journal notes today.
  • Greece is hobbled by a jobless rate of about 16 per cent, Spain by about 20 per cent.
  • According to reports last week, some drugs, including those used to fight cancer, have been withheld from some Greek hospitals that are late in their payments.
  • Emigration, oft cited as the blight of Ireland, is rising sharply, according to the country's Central Statistics Office.

This comes as Athens pledges again to cut even deeper in a bid to win the support of its lenders and avert bankruptcy. Greek officials held another teleconference today with the European Union, International Monetary Fund and European Central Bank, which are reviewing the country's plans. The EU said good progress was made, and talks will continue.

Italy fights back It's no surprise, but S&P's downgrade of Italy has raised some hackles.

Late yesterday, the ratings agency cut Rome's rating by one notch, to A from A-plus, citing the usual culprits of fat debts and a deteriorating outlook.

Prime Minister Silvio Berlusconi wasted little time at slamming the agency for a move he said appeared to be dictated more by media reports than reality. And, ouch, a move that "seems contaminated by political considerations."

Italy boasts the second-highest debt level in the 17-member euro zone, at 120 per cent of gross domestic product.

This hasn't hit the markets at all, probably because Italy's troubles don't appear that bad given that Greece is sinking into the sea.

Slovenia's impact Slovenia is a tiny country - two million people on about 20,000 picturesque square kilometres - nestled among Italy, Austria, Croatia and Hungary. But while small, it could yet play a big role in the future of the embattled euro zone.

Prime Minister Borut Pahor's government lost a confidence vote today that threatens to hold up the ratification of a bigger bailout fund for the 17-member monetary union, which, God knows, it's going to need. Observers now expect an election some time in December. Its parliament is still supposed to vote on the bailout fund, known as the EFSF, later this month, but anything could happen.

And it's worth noting that one of the ruling parties, according to Bloomberg News, already doesn't like the idea of a fatter rescue fund.

"It could delay the final ratification of the EFSF into 2012, as all member countries have to ratify the changes, so won't help in respect of speeding up the political process," said CMC Markets analyst Michael Hewson.

"If they don't agree to the changes agreed at the July 21 meeting in a speedy and timely manner it will mean that the ECB will have to continue buying Italian and Spanish bonds for awhile longer and increase the anxiety amongst opponents of the bond buying program, not only on the ECB board but also in countries like Germany, Holland and Finland."

Bombardier cuts CRJ Canada's Bombardier Inc. plans to cut production of its CRJ aircraft, but layoffs aren't expected.

"Although several sales campaigns for our CRJ aircraft are making progress and the long-term prospects for the CRJ program remain positive, the reduced pace of orders has made a review of our production plans necessary," Guy Hachey, the chief of Bombardier Aerospace, said in a statement today.

"For these reasons and after careful consideration, a CRJ aircraft production decrease is warranted in the short term. However, thanks to the support and collaboration of our union representatives, we do not anticipate that the rate reduction will have an impact on our work force."

Employees affected will be transferred to other Bombardier operations, the company said. It didn't specify the size of the production cut but said it still expects 90 commercial aircraft deliveries this year.

U.S. housing news mixed The news on the U.S. residential construction front is mixed today.

Housing starts fell in August, for the second month in a row, by 5 per cent to 571,000 on an annualized basis, worse than economists had expected. It's lower, senior economist Jennifer Lee of BMO Nesbitt Burns notes, but still above the April 2009 depths of 478,000. Having said that, the level is also 75 per cent below the peak.

Building permits, on the other hand, surprised markets by rising 3.2 per cent to an annual rate of 620,000. That's the best showing since December, and, Ms. Lee says, a good indicator of what's to come.

"This report wasn't all negative and contained some encouraging morsels," she said in a research note. "But the sector has yet to turn the corner towards recovery. Don't place high hopes for September's report, given that there may be some negative impact from Hurricane/Tropical Storm Irene."

Canadians hitting the U.S. malls? Are Canadians not only enjoying the pleasures of the United States, but also what their stronger dollar can buy?

Overnight trips by Canadians to the United States increased 2.2 per cent in July from June, marking the heaviest travel to south of the border since Statistics Canada began tracking such travel in 1972, the federal agency said today.

Overnight plane travel rose 2.8 per cent, also the most on record, while overnight car trips climbed by 1.8 per cent. Same-day car travel fell by 2 per cent.

Going the other way, travel by Americans to Canada slipped.

Finding where to cut: Here's a tip Maybe it's not only the Europeans and Americans who do dumb things.

According to The Canadian Press today, the Harper government is paying Deloitte Inc. $90,000 a day (that's about $20-million by the time the contract expires) to find ways to cut, cut, cut and wipe out the deficit by 2014.

I know just where to to start.

In Economy Lab There's one area where China still lags desperately behind even the poorest nations, and that's gender balance, Carolynne Wheeler writes from Beijing.

In International Business Securities regulators have sent subpoenas to hedge funds and other trading firms as it probes possible insider trading before the U.S. government’s long-term credit rating was cut last month, Reuters reports, citing The Wall Street Journal.

In Globe Careers Experts agree that in the current employment climate, bad behaviour is becoming less and less something employers tolerate. Meghan Casserly of Forbes.com examines the issue.

In Personal Finance Investors who can weather the ups and downs should be able generate 6-per-cent average annual earnings.

From today's Report on Business

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