Skip to main content

The Globe and Mail

Why provinces have little to show for two years of ‘painful’ restraint

These are stories Report on Business is following Tuesday, Jan. 14, 2014.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Canadian finances: The good and the bad
Canadian governments have gone a long way to bringing down their combined deficits, but it's largely due to the federal showing, with many provinces still struggling, a new study shows.

Story continues below advertisement

Indeed, CIBC's Warren Lovely said in today's look at government finances, "slow growth and some exceptional pressures have collectively left the provinces with nothing to show for two years of painful core spending restraint."

Half of Canada's provinces, he added, have "now been forced to push back their original timeline for deficit reduction."

Here's how it breaks down, according to Mr. Lovely, an executive director: The combined federal-provincial deficit is now 1.7 per cent of gross domestic product, or one-third of where it stood in the wake of the global crisis.

"But credit for this fiscal improvement goes to the federal government. Ottawa has erased a cumulative $12-billion from its 2012/13 and 2013/14 deficits relative to [estimates in] March … bringing an end to the federal deficit era ever closer."

But for the provinces, not so fast: "Roughly $3-billion has been tacked on to the total provincial budget deficit for 2013/14, more than undoing the prior year's progress."

At this point, Mr. Lovely added, "the aggregate provincial deficit of $17.8-billion is every bit as large as it was in 2011/12."

That obviously masks the differences among the provinces as "superior economic growth potential" will mean strength in the West, though possibly widening the "already yawning gap between the low-debt western provinces and the rest of the country."

Story continues below advertisement

Toronto the Good
One wonders if unemployment is on the radar at a Toronto city hall gripped by scandal.

According to Statistics Canada, the city's jobless rate has climbed steadily from a three-month moving average of 7.8 per cent in the summer, through 8 per cent to 8.2 per cent in November, and, finally, 8.4 per cent last month.

But few have been talking about the unrelenting rise in unemployment to the second-highest level in Canada, held spellbound instead by the months of revelations, the antics at city hall and the endless jokes on late-night television.

Bank of Montreal's chief economist noted the troubling increase in unemployment in a research note, though he made no reference to how the city has been sidetracked by the Rob Ford saga.

"Perhaps the quirkiest stat in the brutal Canadian employment report for December was the fact that Toronto's unemployment rate moved above Windsor's for the first time in a decade," Douglas Porter said, referring to Friday's disappointing report from Statistics Canada that showed the country lost 46,000 jobs last month as the national unemployment rate climbed to 7.2 per cent.

Toronto now stands well above the national average, second only to Ontario's St. Catharines, and is home to almost 290,000 people who can't find work.

Story continues below advertisement

That's up by almost 11,000 people, an increase of close to 4 per cent, from a year ago.

"(Prior to the loonie's steep ascent 10 years ago, it actually wasn't rare at all for Toronto to have a higher jobless rate, but it's been no contest since)," Mr. Porter said.

"Sadly, this is not really a story about a great comeback in Windsor, although a recover in the auto industry is helping give a small life to employment there," he added.

"Instead, the bigger story is the relative deterioration in Toronto … A slowdown in home building, provincial budget restraint, manufacturing and ongoing robust population inflows have all played a part in pushing up the local jobless rate versus the rest of the country."

Ontario's jobless rate stands at 7.9 per cent.

According to the latest report from the Conference Board of Canada – keep in mind that it's from the fall – Toronto's economy is projected to expand by 2.7 per cent this year, 3.3 per cent next year, 2.9 per cent in 2016 and 2.4 per cent in 2017.

The same forecast calls for a jobless rate of 8 per cent this year before a gradual decline.

JPMorgan profit slips
To borrow a literary phrase, he haunts us still.

In this case, the he is Bernie Madoff. And the haunting is of bank earnings in the United States.

JPMorgan Chase & Co. today posted a hefty drop in fourth-quarter profit to $5.3-billion (U.S.) or $1.30 a share from $5.7-billion or $1.39 a year earlier.

Several factors affected the latest quarter's showing, including a multibillion-dollar settlement of claims related to the convicted fraudster.

Legal expenses, including those related to Mr. Madoff, hit the Wall Street giant to the tune of $1.1-billion after tax, or 27 cents a share.

"We are pleased to have made progress on our control, regulatory and litigation agendas and to have put some significant issues behind us this quarter," said chief executive officer Jamie Dimon.

"We reached several important resolutions - Global RMBS, Gibbs & Bruns, and Madoff. It was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward."

Wells Fargo & Co., in turn, posted a jump in fourth-quarter profit to $5.6-billion, or $1 a share, from $5.1-billion or 91 cents, prompting chief executive officer John Stumpf to cite "another outstand year in 2013, including strong growth in loans and deposits, and double-digit growth in earnings."

Home prices rise
Canadian home prices are back at a record high.

Prices rose 0.1 per cent in December from November, according to the Teranet-National Bank house price index, effectively bringing national prices back to their October highs.

Here's how prices compare, according to the index released today.

  • Calgary, down 0.3 per cent on the month and up 6.5 per cent from a year earlier.
  • Edmonton, up 0.6 per cent and 3.6 per cent.
  • Halifax, down 1.2 per cent and up 0.4 per cent.
  • Hamilton, down 0.6 per cent and up 3.7 per cent.
  • Montreal, down 0.6 per cent and up 0.4 per cent.
  • Ottawa, down 0.3 per cent and up 1 per cent.
  • Quebec City, down 0.4 per cent and up 1.5 per cent.
  • Toronto, up 0.4 per cent and up 4.9 per cent.
  • Vancouver, up 0.6 per cent and up 5.5 per cent.
  • Victoria, down 1.7 per cent and down 4 per cent.
  • Winnipeg, down 0.1 per cent and up 3.4 per cent.

Vancouver, the index showed, as the only centre to hit a new high, while prices in Toronto are close to their peak of last summer.

But all is not as it seems at first blush, The Globe and Mail's Tara Perkins reports.

The index closed out last year with a price rise of 3.8 per cent, compared to 3.1 per cent in 2012.

"But this pick-up comes from only three regions (namely, Calgary, Vancouver and Toronto) where price increases in 2013 exceeded the national average," said senior economist Marc Pinsonneault of National Bank.

"For the eight other regions covered, the overall price increase was just 1.2 per cent in 2013."

Indeed, he cited "price weakness" in Victoria, Ottawa, Montreal, Quebec City and Halifax, with no real improvement in store this year.

"Furthermore, affordability has decreased in Canada due to higher mortgage rates," he said. " …For these reasons, we believe that over all in Canada, house price increase in 2014 will barely cover CPI inflation (about 1.5 per cent).

In brief
Canada's banking watchdog will replace one of its key capital calculations with a global leverage ratio to meet new international standards.

Canada's Corus Entertainment Inc. hiked its annual dividend by 7 cents as it boasted stronger first-quarter results. Shaw Communications Inc. also boosted its dividend.

Google Inc. shares climbed today after its $3.2-billion (U.S.) deal late yesterday for Nest Labs. Inc.

As did shares of Time Warner Cable Inc. after it rejected a massive bid by Charter Communications Inc. yesterday.

Streetwise (for subscribers)

Economy Lab

ROB Insight (for subscribers)

Business ticker

Report an error Licensing Options
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


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Please note that our commenting partner Civil Comments is closing down. As such we will be implementing a new commenting partner in the coming weeks. As of December 20th, 2017 we will be shutting down commenting on all article pages across our site while we do the maintenance and updates. We understand that commenting is important to our audience and hope to have a technical solution in place January 2018.

Discussion loading… ✨