O'Leary vs. Notley
The best course of action for Alberta Premier Rachel Notley would obviously be to just ignore Kevin O’Leary.
His comments last week were so off-base that someone has to address them. Since Ms. Notley shouldn’t waste her time doing it, I will.
The Globe and Mail published a piece by Mr. O’Leary last week that was billed as an open letter to Ms. Notley and blamed her for tens of thousands of job losses and for helping to crush the Canadian dollar.
Here’s what he said. And what I say. And since he won’t care what I say, here’s what learned people say, too.
On the loonie:
Mr. O’Leary: “The fall in the dollar and a lot of the job losses have your name all over them.”
Me: Ms. Notley had little more to do with the dollar’s collapse than she did with the recent rally that Mr. O’Leary failed to mention. The loonie stood at about 83 cents (U.S.) after Ms. Notley’s government was elected, and now stands at above 75 cents. That, though, is a remarkable recovery from its depths near 68 cents. Several things affect the loonie, among them oil prices, the fortunes of the U.S. dollar, the economic outlook, and speculation over the future course of monetary policy in Canada and the U.S. Other commodity-linked currencies have also been whacked.
CIBC World Markets December, 2015, forecast: “The latest fall in oil prices coupled with a weak near-term economic outlook underscores our belief that near-term risks to the loonie remain skewed toward additional depreciation rather than a rebound.” (It didn’t mention Ms. Notley.)
Shaun Osborne, Bank of Nova Scotia’s chief foreign exchange strategist, last week: “The [Canadian dollar’s] rally has been helped by a stabilization in energy prices on the one hand and improvement (narrowing) in U.S.-Canada short-term interest rate spreads on the other.” (He didn’t mention Ms. Notley.)
On the loonie’s impact:
Mr. O’Leary: “A weak dollar is bad for Canada.”
Me: Oops, Mr. O’Leary. Statistics Canada reported Friday that our exports to the U.S. climbed 2.6 per cent in January, widening the country’s trade surplus with America to $3.7-billion. It’s true that import costs are rising as a result of the low dollar, that it’s more expensive for Canadians to vacation in Florida, and that domestic companies have to pay more to bring in new equipment. But ...
Bank of Canada Governor Stephen Poloz, Jan. 7: “Movements in exchange rates are helping economies, including ours, make the adjustments that must take place. This is exactly why countries choose to have flexible exchange rates.” (He didn’t mention Ms. Notley.)
CIBC economist Nick Exarhos, Friday, noting that the trade report showed a surge in exports of consumer goods and autos, which have climbed about 40 per cent from a year ago: “That supports our argument that a weaker currency has a quicker impact in making final goods categories more competitive on global marketplaces.” (He didn’t mention Ms. Notley.)
On Alberta’s marked job losses:
Mr. O’Leary: “Let’s talk about the 73,000 lost jobs. A lot of the blame for this falls on your shoulders ... You should have leaped into action.”
Me: Actually, she did. Which is more than Mr. O’Leary can say for the Conservatives, who at the federal level were more concerned with balancing the budget than in dealing with an oil shock of crisis proportions in what had been Canada’s economic engine. Which, presumably, is why you now have an NDP government in Alberta and a Liberal one in Ottawa. That number refers to the more than 73,000 private-sector jobs lost in Alberta in 2015, according to one measure by Statistics Canada. When you factor in the surge in public-sector employment, it netted out at about 20,000 in lost jobs, which seems low given the spike in the unemployment rate. But Ms. Notley wasn’t even premier until the second half of the year, by which point the oil patch had already gutted its work force. In a recession, which Ms. Notley inherited, companies will cut jobs and governments will counter with measures aimed at spurring employment. Her government’s budget was brought in at the end of her fifth month in power, complete with job-boosting measures. For the record, a different Statistics Canada measure, which shows about 66,000 jobs lost in Alberta last year, shows an actual small gain in employment in the two months after her budget.
Encana, Feb. 24: “Financial resilience in a low-price environment ... Encana’s expected overhead cost savings include an approximate 20-per-cent work force reduction, bringing total work force reduction since 2013 to over 50 per cent.” (It didn’t mention Ms. Notley.)
RBC economist Laura Cooper, December, 2015: “The Alberta government tackled the harsh economic realities facing the province with the release of its provincial 2015 budget on Oct. 27, 2015 ... Infrastructure spending to the tune of $34-billion is planned for a five-year period and is expected to provide an incremental boost to economic activity beginning in 2016 and 2017.” (She didn’t mention Ms. Notley by name, but it’s her government.)
On the rest of Canada:
Mr. O’Leary: “It must frustrate you that a guy from Ontario is holding your feet to the fire this way. Unfortunately, Alberta is such a large part of the Canadian economy that when it catches a cold, the country gets sick. And right now, Alberta has influenza.”
Me: First, it's true that Alberta’s troubles are rippling out. But, some other provinces aren’t faring too badly, at all. The most recent forecast, from Bank of Nova Scotia, projects economic growth of 2.3 per cent this year and 2.7 per cent in 2017 in each of B.C. and Ontario. Obviously, the forecasts for the energy provinces are bad.
Scotiabank deputy chief economist Aron Gampel, March 2: “An important rebalancing is under way towards B.C. and the central provinces which are collectively benefiting from much more diversified economies in manufacturing, services, retail/wholesale activity, residential construction, in addition to non-energy resources. Many of these sectors are expected to continue to leverage their increased currency and export competitiveness to take advantage of further advances in U.S. domestic demand.” (Among them would be Ontario, Mr. O’Leary’s home, and which Scotiabank’s forecast suggests should be thanking Ms. Notley for knocking down the loonie.)
By the way, Mr. O’Leary, please don’t write me an “open letter” back. That format is so passé.
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