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business briefing

Briefing highlights

  • Key jobs number ‘almost meaningless’
  • BMO boosts dividend as profit climbs
  • Canada's trade deficit shinks
  • Fears mount over Italian banks

Jobs number questioned

As Paul McCartney so famously asked, will you still need me when I’m 64?

Perhaps not for Statistics Canada’s labour force measure, which Bank of Montreal’s chief economist says is being skewed by my generation and has thus become “almost meaningless.”

Douglas Porter was referring to Friday’s labour force survey, the Statistics Canada monthly report that is so widely watched.

As The Globe and Mail’s Rachelle Younglai reported, the latest reading showed unemployment dipping to 6.8 per cent in November from 7 per cent a month earlier.

The federal agency and economists noted that the jobless rate declined as fewer people went hunting for work. When that happens, they’re not counted as part of the labour force. Friday’s U.S. jobs report showed much the same thing.

“While technically true, we would point out that the labour force measure is rapidly becoming an almost meaningless number, because it includes all adults,” Mr. Porter said in a research note.

“It includes the rapidly growing population above the age 64 – why, even Sir Paul McCartney is now above that age (well above, in fact),” he added, referring to the former Beatle’s When I’m 64 on the classic 1967 album Sgt. Pepper’s Lonely Hearts Club Band.

Mr. Porter added that the share of “the typical working age cohort,” the 15 -64 age group, is “either: a) holding steady near all-time highs (in Canada), or b) slowly but surely rising again (in the U.S.).”

He noted that the prime participation rate in Canada, which has held relatively steady for several years, as this chart shows, stands well above that of the United States.

Mr. Porter wasn’t saying the numbers are wrong. Nor was he suggesting that Canada’s unemployment rate isn’t elevated.

As baby boomers retire, Mr. Porter said, growth in the labour force slows, and this is going to continue.

Only people who are either working or looking for work are considered part of the labour force. And there are different ways of looking at what's happening, said Andrew Fields of Statistics Canada's labour statistics division.

"Recent trends in the total participation rate reflects the aging of the population in Canada," Mr. Fields said.

"This indicator has many uses including the measurement of total productivity. It can also be controlled for age in order to take population aging into account."

As well, because the jobless rate only takes in those who are counted as part of the labour force, it's not affected in the same manner as the participation rate by the aging population, Mr. Fields said.

"The unemployment rate excludes those in the population who are retired and not searching for work, for example," he added.

"The unemployment rate for the population aged 65 and over is lower than that of the national average. Unemployment for this age group slightly lowers the overall unemployment rate."

BMO profit climbs

Bank of Montreal boosted its dividend as it capped the latest round of Canadian bank earnings with stronger profit in the fourth quarter.

BMO profit rose to $1.35-billion, or $2.02 a share, from $1.21-billion or $1.83 a year earlier.

Adjusted profit rose to $1.4-billion or $2.10 from $1.3-billion or $1.90.

BMO’s first-quarter dividend rises by 2 cents to 88 cents a share.

“As we mark the start of our 200th year in business, we have never been better positioned,” said chief executive officer Bill Downe.

Canada's trade deficit shrinks

Canada’s trade deficit is now at its narrowest in almost a year.

Canadian exports climbed 0.5 per cent in October as imports slumped 6.3 per cent, cutting the trade gap to $1.1-billion from September’s record $4.4-billion, Statistics Canada said.

That’s the smallest since January, according to the agency.

Having said all that, export prices rose 1.2 per cent, while volumes slipped 0.7 per cent.

Statistics Canada also noted that imports were particularly high in September because of a big shipment to the Hebron oil project.

October’s export gains were led by energy, autos and auto parts.

Italy's banks in focus

The world’s oldest bank could be headed for a government bailout as anxiety mounts over the fate of Italy’s banks in the wake of Sunday’s referendum and the resignation of its prime minister.

Bondholders have agreed to a partial debt swap but, reports say, a rescue plan for Banca Monte dei Paschi di Siena has already been drawn up in case it’s needed.

“One of the biggest worries surrounding the referendum was the impact it could have upon the nation’s banking system, with the likes of Unicredit and Monte dei Paschi in the midst of a recapitalization and bank rescue plan,” said IG market analyst Joshua Mahony.

“Plans to raise substantial funds at Monte dei Paschi have hit the buffers after the ‘No’ vote, and while a likely government bailout may not be the ideal outcome for the bank, it will mitigate the risk of a collapse and contagion in the region, hence the widespread gains across the financial sector today.”

Italy’s overall problems may be “no more or less serious” now than they were before the Sunday vote, said CMC Markets chief analyst Michael Hewson, but Mr. Renzi’s resignation complicates things because of the uncertainty.

“No one in their right mind is likely to invest in a bank that has already been bailed out three times in the last few years against such an uncertain political backdrop,” Mr. Hewson said.