These are stories Report on Business is following Friday, May 9, 2014.
Admittedly, my math is the back-of-the-envelope variety, but I think Tim Hudak just laid out why he now needs a 1.1-Million Jobs Plan.
Here’s how it works: The Ontario Tory leader came into the provincial election campaign with a “Million Jobs Plan” that would create that many positions over eight years. Today, as The Globe and Mail’s Adrian Morrow reports, he vowed to slash Ontario’s public sector by 100,000 positions over two years. Which means he has to make up an additional 100,000 jobs over the following six years, or change it to the 900,000 Jobs Plan.
Mr. Hudak proposes doing this via corporate tax cuts aimed at spurring on business investment and hiring, along with other measures such as bringing down inter-provincial trade barriers. He would also try to cut electricity costs for businesses by eliminating wind and solar energy subsidies.
What this all shows – and, yes, this is an election campaign with traditional promises, promises – is that you shouldn’t throw numbers around.
Because what Mr. Hudak suggests is near impossible. He’s no more likely to slash 100,000 jobs than he is to create 900,000 more.
As our chief political writer Campbell Clark notes, there actually has been an eight-year period when Ontario saw employment grow by almost 1 million, from 1998 to 2006. And that period, of course, while it had its ups and downs, was nothing like what we face in this rather dismal post-crisis era.
The forecasts of private sector economists don’t go out eight years, but projections for the next two alone might give Mr. Hudak some food for thought.
Just last week, senior economist Robert Kavcic of BMO Nesbitt Burns forecast that Ontario’s economy would expand by 2.2 per cent in 2014 and 2.4 per cent in 2015, below the national average in each year.
He predicts employment will grow by just 0.7 per cent this year, with a jobless rate of 7.3 per cent, and by 1.3 per cent in 2015, with unemployment still high at 7 per cent.
“Ontario’s labour market performance has softened, with employment up a modest 0.7 per cent year-over-year in Q1,” Mr. Kavcic said of the first quarter of this year.
“While public-sector employment has fallen in the past year, the private sector has picked up the slack. The jobless rate sat at 7.3 per cent in March, matching a cycle low, but little changed from two years ago.”
The latest reading of the Ontario labour market, released today by Statistics Canada, only serves to reinforce the long road ahead for the province’s 556,000 unemployed, and the tough task for whoever becomes the next premier, regardless of whether they have a catchy name for a jobs plan.
Unemployment in Ontario nudged up in April to 7.4 per cent, with employment levels little changed. Job gains over the course of a year have amounted to 74,000, or 1.1 per cent, and most of that was at the beginning, not the end, of that period.
My colleague David Parkinson, who writes for ROB Insight, notes that Ontario averaged annual economic growth of 3.4 per cent in those eight years, something this province hasn’t seen in quite some time.
And he calculates that it would take compounded growth of 1.7 per cent to get from 6.9 million jobs now to 7.9 million in the next eight years.
Funny enough, that was the average pace of growth in the years leading up to the latest recession. Since the recovery began, though, growth has only averaged 1.4 per cent.
As Mr. Parkinson sees it, and based on BMO’s assumptions, employment growth would have to run at a pace of at least 1.9 per cent annually from 2016 on to meet Mr. Hudak’s target. And it hasn’t done that in a decade.
While a stronger U.S. economy and a weaker Canadian dollar would both work in Ontario’s favour, BMO's Mr. Kavcic pointed out other factors.
“While the cyclical environment is improving, the longer-term story remains a cautious one for exports and manufacturing,” Mr. Kavcic said.
“Relatively high labour costs continue to pose challenges for the auto sector versus Mexico and the southern U.S.”
I’m not picking on Mr. Hudak here. We’re going to get a lot of promises from the others before June 12. But the other party leaders may learn from the Tories that they should stay away from a catch-phrase with a number they can’t deliver.
(By the way, when it all gets going, I’ll be the first to know. I signed up via the Internet to find about the Million Jobs Plan, and, after asking me to “like Tim on Facebook,” make a donation and volunteer, I got from the Tories in my inbox: “It's time to create a million new jobs in Ontario, make energy more affordable, increase take-home pay and fix our economy. You will be the first to know when the Million Jobs Plan launches.”)
- Adrian Morrow: Hudak vows to cut 100,000 public sector jobs if Tories win election
- Bill Curry: Ontario Tory leader Hudak promises ‘laser-like’ focus on job creation
- Adrian Morrow: Ontario Tories propose corporate tax cut, freezing civil servants’ pay
- David Parkinson in ROB Insight (for subscribers): Wynne, Hudak fiddle while Ontario’s deficit burns
- Campbell Clark in Politics Insider (for subscribers): Ontario Tories’ million-job pledge is an act of hubris from Hudak
If you think you’re not doing that much better than inflation when it comes to your pay, it’s because you’re not.
And at some point, that could become an issue for the economy.
Statistics Canada’s jobs report today shows that pay gains among Canadian workers slowed last month to an annual rate of 1.8 per cent, compared to 2.2 per cent in March.
I’m comparing two different months here, but the annual pace of inflation in March was 1.5 per cent, which puts April’s wage growth only slightly ahead.
Royal Bank of Canada’s Ian Pollick says a more important measure is one that looks just at permanent workers. And in that case, the slowdown is even more extreme, with the annual pace of pay gains slowing to 1.7 per cent in April from 2.4 per cent a month earlier.
Mr. Pollick, senior fixed income strategist at RBC Dominion Securities, notes that one month does not a trend make, but it could raise concerns over consumer spending, particularly given that debt levels among Canadian households are so high.
“Household income gains will also likely be kept in check by continued softness in wages,” added deputy chief economist Derek Burleton of Toronto-Dominion Bank.
So it's worth remembering now all those caveats we mentioned last month when The New York Times reported that Canada's middle class is among the world's wealthiest: It's not that we're doing that well. It's that others, notably the Americans, are faring far worse.
Wage growth in Canada has been tepid, to say the least. Over the course of last year, average weekly earnings in Canada rose just 1.8 per cent.
There's another reading to keep in mind, too, one that measures total hours worked, which tumbled 1.9 per cent from March, marking the fastest decline in more than 10 years.
But, as chief economist Douglas Porter of BMO Nesbitt Burns noted, that takes into account the Good Friday holiday, which may have distorted the entire report.
Canada loses jobs
That Statistics Canada report showed that the labour market continued its see-saw ways last months, with a loss of almost 29,000 jobs.
The unemployment rate held at 6.9 per cent, however, amid a hefty drop in the number of people looking for work, The Globe and Mail’s Tavia Grant reports.
Notably, the participation rate slipped to just above 66 per cent, its lowest since late 2001, according to Statistics Canada data released today.
The country’s jobs market has been up and down for some time now, but the bottom line, according to the federal agency, is that there has been little in the way of gains since last summer.
“The loss in jobs came despite a rise in self-employment, and was pretty broad based between goods and service sectors,” said Nick Exarhos of CIBC World Markets.
“The six-month average in job gains now stands at a paltry 3,000, well below what we would expect given recent GDP growth.”
The number of full-time jobs plunged last month- by almost 31,000 – while some 2,000 part-time positions were created.
Jobs were lost in both the public and private sectors, but more so in the latter.
“The drop in private sector and full-time employment is bad news, although we’ll wait for more data before concluding that this isn’t just a giveback after the prior month’s massive gains,” said senior economist Krishen Rangasamy of National Bank.
“Despite the weak April [labour force survey] report, we remain optimistic. Canada’s employment prospects are good given the expected pick-up in the pace of growth on both sides of the 49 parallel after a weather-related slowdown in Q1. Improving corporate profits also bode well for hiring.”
There are now more than 1.3 million Canadians who can’t find work.
- Tavia Grant: Canadian economy loses nearly 29,000 jobs, jobless rate unchanged
- David Parkinson in ROB Insight (for subscribers): Bleak Canadian employment report reveals job-quality erosion
Well, that didn't last long.
The Canadian dollar tumbled after that weak report on the country's labour market, pulling back from what had been a recent pick-up.
The loonie, as Canada's dollar coin is known, hit a high point of almost 92.5 cents (U.S.) today, but sank fast after Statistics Canada reported that the country lost almost 29,000 jobs last month.
The currency was at about 91.8 cents late today.
While the Bank of Canada won't be applauding the dismal jobs showing, it will be pleased by the decline in the currency.
Indeed, as the loonie hit its earlier high, some questioned how of a gain central Bank Governor Stephen Poloz would tolerate. That's still an issue, given that the currency remains near the 92-cent level, and could easily top that mark again.
The loonie has gained markedly since the days of the 88-cent range not that long ago.
And if it were to move significantly higher, said chief currency strategist Camilla Sutton of Bank of Nova Scotia, there could be some “pushback” from central bank Governor Stephen Poloz.
That could come within another penny or so, she added, and would likely take the form of the Bank of Canada chief publicly highlighting the importance of a weak loonie for the economic recovery.
Comments from Mr. Poloz have driven down the currency before. The central bank denies it has attempted to “talk down” the dollar, though some economists believe otherwise.
- Oops, he did it again: Stephen Poloz knocks down the loonie
- How speculators made a killing on the Canadian dollar
- Video: Did Poloz engineer a lower loonie?
CFIB on TFW program
Canada’s small business lobby is ramping up its campaign in support of the Temporary Foreign Workers program.
The Canadian Federation of Independent business today released the results of a survey taken last fall, which it says is meant to correct several myths about the controversial scheme.
The program is at the centre of a storm amid allegations of abuse, concerns over low wages and a jobless rate of 6.9 per cent.
The CFIB says there is indeed a labour shortage, small businesses in fact look first to fill their jobs with Canadians, temporary workers are more expensive than Canadians, and foreign temps actually help preserve Canadian jobs.
Its members also believe that abuse of the program should not be tolerated, it said.
The group, however, did not mention what I believe is also a CFIB myth, that Canadian workers are unreliable and rude.
Talk about mad men. As in angry.
As The Globe and Mail’s Susan Krashinsky reports, a planned merger is in tatters today after the two companies couldn’t agree on who would control the ad world’s biggest agency.
“I have not been able to convince John that balance is balance,” Maurice Levy, the chief executive of Paris-based Publicis Group SA, told Reuters.
He was referring to John Wren, the chief of New York’s Omnicom Group Inc., in the wake of the death of the proposed $35-billion (U.S.) deal.
“Omnicom wanted their people to fill the CEO, CFO and general counsel jobs,” Mr. Levy told the news agency.
“I thought that went too far. I was not ready to cede on this point.”
Mr. Wren, in turn, said there was no one issue that killed the deal, but rather several complex matters.
Streetwise (for subscribers)
ROB Insight (for subscribers)