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New York Times: How the American dream became the Canadian dream

These are stories Report on Business is following Thursday, May 15, 2014.

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The Canadian dream
The New York Times today laments the erosion of the "American dream," noting how it has moved north.

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Columnist Nicholas Kristof's piece – It's now the Canadian dream – defines this as the quest for affluence and the opportunity to conquer issues such as social class.

"Yet today the American dream has derailed, partly because of growing inequality," Mr. Kristof writes in today's edition.

"Or maybe the American dream has just swapped citizenship, for now it is more likely to be found in Canada or Europe – and a central issue in this year's political campaigns should be how to repatriate it."

He refers to a recent study, in the same publication, that showed Canada's middle class is now probably wealthier than its American counterpart, and, indeed, now ranks among the world's richest.

"In fact, the discrepancy is arguably even greater," Mr. Kristof writes.

"Canadians receive essentially free health care, while Americans pay for part of their health care costs with after-tax dollars."

Among his other points:

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  • Americans work an average 4.6 per cent more hours than their Canadian counterparts.
  • “Their children are less likely to die than ours.”
  • Canadians live longer, again on average, than Americans.
  • “American women are twice as likely to die as a result of pregnancy or childbirth.”

Mr. Kristof, of course, doesn't live here, and his piece is more of a lament for America than a celebration of its northern neighbour.

So it's worth remembering that economists indeed believe Canadians are faring better than their cousins, but that's not because we're doing so well. Income growth remains modest, and unemployment is still almost 7 per cent.

Still, Canadians in fact are far better off than many others in this post-crisis era, which is a cause for celebration.

Roubini and Rosenberg
If you're having trouble reading the economic and market tea leaves, it's worth noting the recent comments of two well-known economists.

We're almost at the sixth anniversary of the collapse of Lehman Bros. and the onset of the meltdown, and the world is still a troubled and uncertain place. One need only look at today's economic scorecard from Europe to drive home that point.

But Nouriel Roubini and David Rosenberg sees reason for optimism, at least on some scores.

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Mr. Roubini, of course, is famously known as "Dr. Doom" for having predicted the crunch.

But yesterday, the chairman of Roubini Global Economics, who's also a professor at New York University, told a conference that Europe, Japan and the United States are on the mend.

Indeed, "the Fed's unconventional monetary policy has worked," he said, referring to the Federal Reserve's massive stimulus measures, according to Fortune.

"Next to him, you should call me Dr. Boom," Mr. Roubini said, talking about another one of the speakers at the Las Vegas hedge fund get-together.

He is, however, still worried about the outlook for China.

As for Mr. Rosenberg, the chief economist at Gluskin Sheff + Associates puts out a daily note to clients that, while pointing to the ups and downs in the global economy, certainly has had some strong points of late.

(Mr. Rosenberg was known in some circles as a "perma-bear," a label he says was wrong.)

Over the last several days, Mr. Rosenberg has pointed to an improving U.S. labour market, a loosening of the "purse strings" by U.S. banks, and better times for American consumers. Having said that, he also noted the "broad-based" weakness in first-quarter economic growth in the United States, and Statistics Canada's ugly reading of our labour market last Friday.

But comments such as these, of late, about the U.S. economy, are telling:

"Nattering nabobs of negativity – stop knocking yourself out. First, there are a host of reasons why I see inflation rising moderately, and the wage process is but one of them."

"There is a very interesting development taking place that is not garnering a lot of attention. The U.S. commercial banks are loosening their purse strings."

"As for the U.S. economy, it is looking as though Q2 real GDP growth will come in close to a 4-per-cent annual rate."

"Why I turned bullish on the U.S. consumer."

While several economies are still struggling – note the divergence in Europe – Andrew Kenningham of Capital Economics in London nonetheless noted the recoveries of some countries, underscoring what Mr. Roubini and Mr. Rosenberg have to say.

"GDP data published today show Japan joining Canada, the U.S., Germany and France in regaining their pre-crisis levels of output," he said.

"With the U.K. nearly there, too, Italy is the clear laggard among the G7."

U.S. inflation speeds up
Today's U.S. numbers certainly add weight to their views.

U.S. inflation accelerated last month, while the number of Americans seeking jobless benefits is trending lower, more evidence that the world's largest economy is gaining pace after a tough start to 2014, our Washington correspondent Kevin Carmichael reports.

The Labor Department's consumer price index increased 2 per cent in April from a year earlier, the fastest rate of annual inflation since July of last year. Annual inflation was 1.5 per cent in March.

Evidence of stronger prices will harden the Federal Reserve's resolve to stick with its plan to steadily pare its bond-buying program by the end of the year. The asset purchases, which stimulate economic activity by keeping downward pressure on the cost of credit, are an extraordinary form of monetary policy, and official at the Fed are anxious to swing back to normal as soon as economic conditions will allow.

Europe still in trouble
While Mr. Roubini and Mr. Rosenberg see generally better times, the economic numbers from Europe again highlight the different fortunes of the countries in the still-troubled region.

According to the Eurostat agency, economic growth in the nations that share the euro came in today below expectations, at just 0.2 per cent in the first quarter.

Across the wider European Union, the economy expanded by 0.3 per cent in the first three months of the year.

Germany is doing well, while others, such as France, Italy and Portugal, are faring poorly.

"Excluding Germany, the zone's output contracted for the first time in a year as major economies such as France, Italy and the Netherlands disappointed, while Finland, Cyprus remain stuck in recession," said senior economist Krishen Rangasamy of National Bank.

"Note that the euro zone's GDP is still 2.5 per cent below its 2008Q1 peak," he added in a research note.

"Excluding Germany, the zone's GDP is 4.9 per cent below its 2008 peak, contrasting sharply with other OECD economies … The stagnant economy explains why the zone's jobless rate remains near record highs and why the common currency area is having trouble getting rid of the threat of deflation."

Factories gain
Canada's factories have chalked up their sixth sales gain in seven months.

Manufacturing sales across the country increased 0.4 per cent in March, Statistics Canada said Thursday, pumped up by food and machinery shipments. Those gains were offset by sinking sales in the paper, oil and coal sectors.

Notable in the Statistics Canada report was a plunge of 19.9 per cent in new orders, however, which had been expected given a bounce in February related to defence orders.

Still, shipments climbed in 11 of 21 sectors measures, accounting for about two-thirds of industry.

At almost $51-billion, sales are now at a post-recession peak, seasonally adjusted.

"The second consecutive monthly gain in the volume of manufacturing sales in March is encouraging and suggests that activity in the sector continued to recover from weather-related weakness earlier in the winter," said economist Nathan Janzen of Royal Bank of Canada.

"In terms of implications for GDP growth, a slower pace of inventory accumulation in March suggests that sales growth was stronger than production growth in the month which points to the manufacturing component of March GDP remaining little changed after increasing 0.6 per cent in February … We continue to expect, however, that stronger U.S. demand and a weaker Canadian dollar will support increases in manufacturing activity while a further near-term rebound from weather-related weakness will contribute to a stronger 3-per-cent growth rate in Q2 GDP."

Air Canada deals blow to Bombardier
Air Canada has abandoned plans to replace 25 narrow-bodied airplanes, a blow to the Bombardier Inc. C Series, which was in the running for the order, The Globe and Mail's Greg Keenan reports.

The airline said today it will keep its remaining 25 Embraer 190 aircraft and not replace them as it will replace 20 Embraer 190 planes in the second half of 2015.

Air Canada also reported first-quarter results that were slightly better than analysts' expectations. It posted an adjusted loss of $132-million or 46 cents per diluted share, compared with $143-million or 52 cents a year earlier. The consensus estimate of analysts was an adjusted net loss of 48 cents a share.

The drop in the value of the Canadian dollar led to a foreign exchange loss of $161-million in the quarter.

Air Canada's net loss came in at $341-million, or $1.20 a share, fatter than the loss of $260-million or 95 cents a year earlier.

Home prices up
Canadian home prices continued their ascent in April, while the number of existing homes that changed hands came in slightly lower than a year ago, The Globe and Mail's Tara Perkins writes.

Sales of homes over the Multiple Listing Service last month were 0.3 per cent below those in April 2013, the Canadian Real Estate Association said Thursday.

On a seasonally-adjusted basis, sales were up 2.7 per cent from March, it said.

The average sales price across the country rose 7.6 per cent from a year earlier. Averages can be distorted by changes in the types or locations of homes that are selling. The MLS Home Price Index, which attempts to give a more apples-to-apples comparison of price increases, rose 5 per cent.

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