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(Deborah Baic/Deborah Baic/The Globe and Mail)
(Deborah Baic/Deborah Baic/The Globe and Mail)

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Job quality: Will 2011's new positions match this year's? Add to ...

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The outlook for higher paying jobs Canada has recouped the hundreds of thousands of jobs lost to the recession, though some people have questioned whether what was regained matched what disappeared in terms of quality of the work. CIBC World Markets economists quantify that somewhat in a report today, but warned it probably won't be the same next year. Many of the jobs created were tied to stimulus spending and the construction industry, which boasts higher-paying employment.

"Note that the public sector accounted for no less than 10 per cent of all jobs created in the economy during the recovery versus less than 1 per cent in other recoveries," said economists Benjamin Tal and Krishen Rangasamy. "And the construction industry, spurred in part by stimulus money, single-handedly added a quarter of all jobs since the recovery started, with growth of 10 per cent versus negative growth at this stage in previous recoveries."

Together, government stimulus and construction accounted more than a third of all the jobs created, which the economists said explains the increase in CIBC's Employment Quality Index. But, they said, as fiscal stimulus winds down and the housing market cools, so too will job creation from those two areas. "And it's unlikely that the new jobs created in 1011 would be of the same high quality - limiting the upside potential in personal income."

There will be other pressures as well, they said, noting that house prices and consumer credit are "revisiting recessionary trends," which will dampen consumer spending that is so key to the economic recovery. "It's no secret that house prices have been falling recently, but less noted is that the performance of the housing market is already approaching levels seen during the recession," the economists said. "... Even a modest 5-per-cent additional drop in average price in 2011, on top of the 6 per cent it already shed from its peak, will lead to a negative wealth effect of $10-billion, stripping growth in consumer spending by more than a full percentage point."

Their outlook is equally bleak for consumer credit, which has driven spending and is also "mimicking recessionary trends" on a month-to-month basis. Growth in consumer credit will dip to 3.5 per in the next 12 months, on an annualized basis, compared to 6 per cent, also annualized, in the first half of the year.

"Not surprisingly, the Canadian recovery didn't play out as advertised," they wrote. "While we did see a spike late last year and early 2010, the momentum has faded lately, largely as a result of a strong [Canadian dollar]and a softening U.S. economy."

CIBC World Markets economists believe that fears of a double-dip recession "look overdone." But in an overall global forecast, Avery Shenfeld noted that "the Great Recession that shattered global growth in 2008-09 is now water under the bridge, but the Great Disappointment of a subpar global recovery will be with us for a good while longer." Among other highlights of the report:

  • Global GDP growth will run "well below" the 5-per-cent pace of the prior expansion.
  • Emerging Asian economies still have room to grow but will feel some of the chill.
  • Canada's trade sector will underperform the domestic economy this year and next.
  • The recent improvement in business investment in Canada won't last.


U.S. dollar takes it on chin The outlook for the U.S. dollar appears grim today in the wake of yesterday's policy decision by the Federal Reserve. The Federal Open Market Committee painted a grim picture of the U.S. recovery as it held rates steady yesterday, and signalled it is troubled by low inflation readings. It also said it stood ready to take new measures, should developments warrant that. Markets had speculated over whether the U.S. central bank could unveil some new measures - dubbed QE II by economists, meaning another round of quantitative easing - but it came up short.

"The Fed did push the door further ajar to the prospect of further stimulus for the economy by drawing attention to concerns about the benign level of inflation, and indicated that they stood ready to act as necessary, in the event that inflation continued to remain benign and economic conditions failed to improve," said CMC Markets analyst Michael Hewson. "It would appear that it is now the dollar's turn to become the whipping boy of the currency markets again."

Here's what Scotia Capital currency strategist Sacha Tihanyi had to say today:

"The FOMC decision to bring inflation into the discussion as justifying the potential for further policy action weighs heavily in the [foreign exchange]market today. Now that policymakers consider underlying inflation (core trends) to be currently at levels 'somewhat below' those judged most consistent with their dual mandate of price stability and maximum employment, a new dynamic for the [U.S. dollar]has entered the picture. This reflects the general concern that disinflationary pressures may gain traction, risking the chance that a very undesirable deflation dynamic takes hold. Indeed, the statement emphasized that the Fed is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation to levels consistent with its mandate.

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