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Spare a thought for our unemployed, underemployed youth

These are stories Report on Business followed this week.

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Youth jobless levels a sore spot
Spare a thought for the nation's youth.

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Over the course of the past year, men 25 and older have gained almost 175,000 jobs, and women in the same age group almost 147,000.

But young people, counted by Statistics Canada as 24 and under, have lost 10,000 cherished positions.

Or, look at it the other way. Unemployment is 6 per cent for men 25 and up, and 5.8 per cent for women in that age group. For young people, it's 14.1 per cent.

Many of our young people are unemployed and underemployed at a crucial point in their lives, just as they're trying to launch their careers.

Youth aside, according to the latest numbers released Friday, the labour market is faring much better than expected.

The economy churned out almost 40,000 jobs in December, compared to an expected 5,000, and the unemployment rate dipped to 7.1 per cent.

For the year, employment in Canada rose by 1.8 per cent, or 312,000 jobs, and full time at that.

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Private sector employment rose by 2.2 per cent, and public sector jobs at 2.6 per cent. The ranks of the self-employed were little changed.

Vancouver, Toronto coming back to earth
The air is fast going out of the Vancouver and Toronto real estate markets.

The real estate boards in both cities, the ones in the spotlight as Canada's housing market cools, this week reported disappointing sales numbers for December.

In Toronto, home sales plunged by 19.5 per cent, bringing the 2012 decline to 3.8 per cent. Average prices, though, were up almost 7 per cent on the year, to $497,298.

In Vancouver, sales tumbled almost 23 per cent, while prices also edged down.

"Some prospective sellers don't have confidence that they will be able attain their price," said Eugen Klein, president of the Real Estate Board of Greater Vancouver.

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"Rather than reducing their price expectations, they aren't putting their homes on the market."

Averting the 'cliff' fiasco
Consider the "fiscal cliff" deal in the United States just a reprieve.

Warring politicians may have eased market angst, at least temporarily, as they cobbled together a New Year's budget solution that averted a combination of tax hikes and spending cuts threatening to plunge the country back into recession, but have left key issues to play out over the next couple of months.

Still hanging over the markets are cuts of more than $100-billion (U.S.) that will rear their ugly head again in two months, as will the fact that the U.S. will have to raise its borrowing limit.

The centrepiece of the deal raises tax rates on those earning $400,000 or more, $450,000 for households, while leaving the issue of those additional cuts for another day.

"The tax hikes and spending cuts that will occur create a net fiscal drag of about 1.4 per cent of nominal GDP for 2013," said senior economist Michael Gregory of BMO Nesbitt Burns.

"Nearly half of this restraint reflects the increase in payroll taxes, one-third represents the delayed automatic spending cuts and the remainder reflects all other measures including higher tax rates for those making more than $400,000," he said in a research note.

"Although the fiscal cliff was averted, further fiscal crises cannot be ruled out in the months ahead," Mr. Gregory added.

"Congress must now come up with a new spending reduction package by March 1 to replace the sequestered cuts. And, just about this time, the Treasury will start running out of manoeuvring room if the debt ceiling (which was technically hit on Monday) is not raised. Also, although 1.4% of GDP worth of fiscal restraint in 2013 is significant, it will have to be followed by additional restraint in 2014 and beyond if the U.S. fiscal house is to be put back in order and U.S. credit worthiness put back on an AAA trajectory."

The U.S. fiscal follies have been a concern in Canada, as well, and observers are still waiting to see the ramifications of the final cutbacks.

"All said, when Congress finally pens a deal on spending cuts, the expected total impact of U.S. fiscal drag on the Canadian economy should shave roughly 0.5 percentage points from real GDP growth this year," said economist Francis Fong of Toronto-Dominion Bank.

"But while we may be starting the year on weak footing, we continue to anticipate a moderate pace of economic growth, averaging around 2 per cent on a quarterly annualized basis, driven by the export sector, business investment, and a resilient domestic economy."

Fed eyes QE's end
The Federal Reserve is looking ahead to winding down its quantitative easing program after years of trying to juice the economy through buying financial assets.

The U.S. central bank surprised many observers Thursday when it released the minutes of its December meeting, showing policy makers were divided on whether to end the program at the end of the year or well before.

Members of the policy-setting panel, the Federal Open Market Committee, have become increasingly concerned over the hefty size of that portfolio of assets, as The Globe and Mail's Kevin Carmichael reports.

The latest program, known as QE3, has been aimed at driving down borrowing costs. The Fed's benchmark rate is at an emergency low near zero, and the central bank has pledged to hold it there at least until unemployment eases to 6.5 per cent, provided inflation doesn't get out of hand.

"Keep in mind that the FOMC is projecting that QE3 will be effective in fuelling housing-led, above-potential economic growth by the end of this year, which will substantially improve the labour market outlook," said senior economist Michael Gregory of BMO Nesbitt Burns.

"This is why there is a waning desire to keep QE3 running deep into this year. However, the FOMC's forecast track record has not been stellar."

Exxon outlines Hebron plans
Exxon Mobil Corp. has outlined its plans for the Hebron oilfield off the east coast of Canada, plans that involve spending an estimated $14-billion (U.S.) to develop a project expected to yield 700 million barrels.

That's up from an earlier estimate, and the oil giant expects to begin producing by the end of 2017. It's looking at daily production of 150,000 barrels at the project, which has already been approved by the governments of Canada and Newfoundland and Labrador.

The company said it will use a gravity-based platform that would stand against sea ice, icebergs and other poor conditions. It plans a structure that can store some 1.2 million barrels, and house workers.

Construction has already begun.

The field is some 350 kilometers southeast of St. John's and just about 30 kilometers away from its Hibernia project. Exxon holds a 36-per-cent stake in the project, along with Chevron Canada, at 2.67 per cent, Suncor Energy, at 22.7 per cent, Statoil at 9.7 per cent and Nalcor Energy Oil and Gas at just shy of 5 per cent.

"Hebron is one of several large-scale oil developments that Exxon Mobil will bring on stream in the next five years," said Exxon Mobil Development Co. chief Neil Duffin. "Exxon Mobil will employ its expertise in Arctic development and project execution to develop this world-class resource in challenging operating conditions."

Hebron will put $23-billion (Canadian) in the province's treasury thanks to royalties and the government's stake in the project, The Globe and Mail's Carrie Tait reports.

Five things
1. A report in the Journal of the American Medical Association suggests that, as Bloomberg News puts it, folks who are "pleasantly plump" may be less at risk than those who are the "ideal weight" or, of course, obese.

2. That's the good news from JAMA. A separate study in JAMA Psychiatry, Bloomberg notes, indicated that people born in the recession of the early 1980s were at higher risk of using pot, drinking and partaking of other "delinquent" behaviour in their teens.

3. In the no-need-to-thank-me category, President Demetris Christofias of Cyprus slammed the austerity measures demanded by euro zone members of countries seeking bailouts. Countries like Cyprus.

4. Brigitte Bardot is threatening to follow French actor Gérard Depardieu in applying for Russian citizenship. The difference is that Mr. Depardieu has issues with French government plans on taxing the rich, while Ms. Bardot is trying to rescue two sick circus elephants under a death sentence by officials in Lyon.

5. Sugar and McDreamy with your coffee? Grey's Anatomy star Patrick Demsey won an auction to buy an ailing, Seattle-based coffee chain out of bankruptcy protection. The Tully's chain employs about 500 people.

Required reading
Led by a steep drop in natural gas wells, the number of drilling rigs at work in North America's energy sector is falling and is headed for a further decline in 2013, Carrie Tait reports.

It was a bumpy year for the Canadian economy, dogged by Europe's debt crisis and uncertainty over the "fiscal cliff" in the United States. Tavia Grant talks to two economists about what to expect this year.

As the front man for the federal government's resource development plan, Natural Resources Minister Joe Oliver enjoyed some key victories in the past year, but the continental battle over proposed pipelines rages on and the economic health of the Canadian oil industry is far from assured. Shawn McCarthy reports.

Personal finance writer Rob Carrick seeks to wise people up to the fact that house prices in Canada have fallen hard before, and taken years to rebound.

Canadians ignored the anemic economic recovery and warnings about mushrooming household debt to drive 1.676 million vehicles off car dealers' lots in 2012, with favourable financing conditions propelling the industry to the second-highest sales year on record. Greg Keenan reports.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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