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business briefing

These are stories Report on Business is following Wednesday, June 18, 2014.

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Job for life?
Job stability isn't a "thing of the past," but rather is stronger now than ever before, a new report finds.

Indeed, says the study by Canadian Imperial Bank of Commerce, the number of Canadians who have been with the same employer for at least five years is now at a record level.

"The stable and boring job market is the complete opposite of what was envisioned not too long ago," Benjamin Tal, CIBC's deputy chief economist, said today as he released the report.

"The job market of the 'new economy' was supposed to permanently alter employer-employee relationships and workers were seen as becoming increasing disposable, with the implication that job stability would tumble," said Mr. Tal, who conducted the study with his colleague Nick Exarhos.

Having said that, of course, Canada is home to more than 1.3 million unemployed, with a jobless rate of 7 per cent.

Here's what their study found, and some points are worrisome:

  • The “likelihood of maintaining employment from one year to another,” at over five years, tops 90 per cent.
  • As a share of total employment, those with the same employer for at least five years is more than 50 per cent.
  • The “probability of maintaining employment beyond first year” is now greater than 60 per cent, and the highest since at least 1977.
  • But employment growth in Canada “doesn’t look good,” with a six-month moving average showing the month-over-month change down sharply from last year.
  • At the same time, the number of those without work for at least 27 weeks is still “elevated,” which means “the sticky unemployment rate of the past couple of years is largely due to stagnation in long-term unemployment as opposed to an increase in the number of newly unemployed.”
  • And troubling, indeed, for those hunting for jobs: “The abnormal relationship between recent vacancy rates and unemployment suggests that large swaths of those unemployed are not what employers are seeking.”

Almost six years after the onset of the financial meltdown, there are strong reasons why workers aren't job-hopping, both on the employer and the employee sides.

"Rising survival rates between years of employment and increased stability … makes sense in a world where there is a low supply of newly unemployed – and presumably still qualified – individuals," said Mr. Tal and Mr. Exarhos.

"The situation today keeps employers motivated to keep workers they have," they added.

"At the same time, a large overhang of long-term unemployed reduces the motivation of lower-skill employees to branch out."

TSX at record
Canada's benchmark index climbed to a record high today, capping a five-and-a-half year recovery from its bear market low during the financial crisis, The Globe and Mail's David Berman writes.

The S&P/TSX composite index closed at 15,109.25, up 53.36 points or 0.4 per cent. Its previous highest close was 15,073.13, on June 18, 2008.

The move trails by more than a year the S&P 500's first record-high since the financial crisis. It has since surged another 25 per cent more after hitting a series of new records over the past year, including another one on Wednesday.

"In some ways, the TSX has been late to the party," said Douglas Porter, chief economist at BMO Nesbitt Burns.

"We've been a bit slow to come around, in stunning contrast to how the underlying economy was one of the world's first to rebound" following the financial crisis, he said.

Fed cuts forecast
The Federal Reserve today pushed its forecast for a return to a pre-crisis pace of economic growth into 2015, and left its inflation outlook largely unchanged, bolstering expectations that the central bank will leave interest rates at zero until well into next year.

At the end of a two-day meeting, the Fed's policy committee released a statement on the economy that was little different than the one it published at the end of April, our Washington correspondent Kevin Carmichael reports.

Policy makers observed that "economic activity has rebounded in recent months," suggesting the Fed is satisfied weaker economic growth at the start of the year was the result of unusually severe weather.

Still, those difficult winter months resulted in lost sales and production that officials were counting on to increase economic output by at least 3 per cent this year for the first time since 2005. That is unlikely to happen now, as the Fed now expects economic growth of between 2.1 per cent and 2.3 per cent in 2014. It left its forecast for growth in 2015 unchanged at 3 per cent to 3.2 per cent.

Twelve of 16 committee members said he or she thought the Fed would raise the benchmark rate from zero sometime in 2015.

All that glitters
The gold industry is coming together to look at how to reform a century-old benchmark.

Of course, regulators are already looking closely at what is known as the London gold fix and other benchmarks.

Today's decision by the World Gold Council, and the probes by regulators, are important developments in Canada, home to huge gold miners and one of the banks that set the benchmark.

"The fixing process was established almost a century ago, so it is not surprising that it needs to change to meet today's market expectations for enhanced regulation, transparency and technology," said Natalie Dempster, the World Council's managing director of central banks and public policy.

"Modernization is imperative in order to maintain trust across the industry," she said in a statement.

Ms. Dempster and her colleagues at the industry body announced they are striking a forum to "explore reform" the London gold fix, which is set twice a day by a handful of major banks, including Canada's Bank of Nova Scotia.

The first meeting is set for early July in London. At the forum will be officials of the banks, refiners, industry groups, central banks and miners. Britain's Financial Conduct Authority will be there to observe, the group said.

"Our objective in convening this forum is to ensure that the full range of analysis and market perspectives from all parts of the gold supply chain are debated, understood and brought to bear on any potential changes," said Ms. Dempster.

Which means, of course, that the industry wants its say if others, like regulators, move to reform the system first.

The council cited five areas it said are "highly desirable" for a new process to replace the one that began in 1919:

  • The benchmark should be based on executed trades, rather than quote submissions.
  • It should be a “tradeable price,” rather than a referency.
  • The data involved should be “highly transparent, published and subject to audit.”
  • The fix should be “calculated from a deep and liquid market,” involving a “significant volume of gold flows.”
  • It should represent a “physically-deliverable price,” given that many want physical delivery.

The group said it has already spoken to many in the industry, and that's how it came up with those five points.

As The Globe and Mail's Rachelle Younglai has reported, the benchmark is used by governments, mining companies and brokers to trade gold and derivatives.

Five banks had set the benchmark – along with Scotiabank, the others included Barclays, HSBC, Société Générale and Deutsche Bank – though the German bank gave up its spot.

The London silver fix, also a century-old benchmark, will end this summer.

Why Canada had no choice
In the end, analysts say, the Canadian government had little choice but to approve Enbridge Inc.'s proposed Northern Gateway pipeline.

"I don't think the government had much of a choice but to effectively approve the project because of the impact on the Canadian economy," said Patricia Mohr of Bank of Nova Scotia, one of the country's leading commodities analysts.

Getting western Canadian crude to Asia-Pacific markets, she said in an interview, is "critical."

As The Globe and Mail's Shawn McCarthy, Steven Chase and Brent Jang report, the government approved the $7.9-billion project after markets closed yesterday.

Enbridge still must meet more than 200 conditions, and key will be discussions with Canada's First Nations, and the government of British Columbia, the country's westernmost province.

Northern Gateway would move more than 500,000 barrels a day of diluted bitumen to Kitimat, B.C., on the way to tanker transport to those key markets.

The biggest risk to Canada now, said Ms. Mohr is that the U.S. market for Canada's exports is "quite finite." While Texas refineries want heavy oil, she added, the threat is to Canadian light crude, which is in abundance in Alberta and Saskatchewan and must find a market.

Northern Gateway could also carry light oil, Ms. Mohr added.

Economist Josh Nye of Royal Bank of Canada agreed that Northern Gateway would give Canada access to Asian market that are growing in importance. Not only that, there would be the "bonus" of stronger international oil prices with diversification.

"It could also provide some relief in terms of the glut of Canadian heavy oil in the North American market that has at times resulted in large discounts of [western Canadian oil relative to the U.S. benchmark," he said, though by the time Northern Gateway is operational, its capacity will "likely only barely keep up with expected production growth."

There's an app for that
BlackBerry Ltd. today announced a licensing deal with that will see more than 200,000 Android apps available with the launch of its BlackBerry 10.3 operating system in the fall.

"You will be able to access popular apps such as Groupon, Netflix, Pinterest, Candy Crush Saga and Minecraft – all available for direct download," the smartphone maker said on its blog.

The deal, it added, means users can access both the BlackBerry World app store, and the Amazon Appstore, The Globe and Mail's Omar El Akkad reports.

Rich get ... richer
The ultrarich are becoming uber-rich and high-net worth investors are watching their wealth soar, The Globe and Mail's Tim Kiladze writes.

Individuals with between $1-million (U.S.) and $5-million in investable assets – referred to as "millionaires next door" by Royal Bank of Canada, which just released its annual World Wealth Report along with Capgemini – saw their wealth jump 15 per cent in 2013, while ultra-high net worth individuals, or those with more than $30-million in investable assets, saw their wealth pop 12 per cent.

Both groups benefited from hot equity markets, particularly in the U.S. and Europe, as well as a global business landscape that turned it up a notch, allowing business owners to generate better earnings.

The report is the third of its kind to be released by RBC and Capgemini, and the findings showed the second highest rate of growth for the global high net worth population since the start of the century.

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