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Friday job numbers may tell tales GDP missed: Don Pittis
Stats could show if slump is over and whether there is a rebound outside the oil industry
Opponents in the battle over whether the Canadian economy is collapsing or clawing its way back to recovery will get more ammunition on Friday. That’s when we learn the latest figures on job creation and unemployment.
Statistics Canada’s GDP data that we got earlier in the week is useful, but in several ways, the labour force survey is even better.
“I’d personally put more weight on labour market figures than the GDP,” says Mike Veall, professor of economics at McMaster University. Veall’s specialty is econometrics, reading economics through math and statistics.
Two months late
One of the problems with gross domestic product is that it’s not a simple figure, he says. It is more of a statistical construct estimating the total activity of the entire Canadian economy.
The owner of a Nova Scotia roofing company says he is finally getting his choice of good employees as workers return from Alberta. He says returning oil patch workers have been well trained in safety. (CBC)
One result of that lack of simplicity is a lengthy delay getting a reading of the data. Another is month-to-month inaccuracy.
The long and technical process of gathering all the components that go into creating those GDP calculations takes time. That means we don’t get a reading on each month’s economic growth until months after it happened.
Even then, new data can alter the calculations, resulting in revised figures. This week, for example, Statistics Canada told us the economy had actually shrunk by 0.8 per cent in the first three months of the year after previously telling us it had shrunk only 0.6 per cent.
“The main advantage of jobs numbers is their currency,” says Veall. “They’re more up to date.”
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Recession confirmed as Canada’s GDP shrank in 2nd quarter
Recession confirmed as Canada’s GDP shrank in 2nd quarter
Canada’s economy expanded in June but declined by 0.1 per cent for the second quarter as a whole, meeting the bar of what is legally defined as a recession.
The economy expanded by 0.5 per cent in June, Statistics Canada said.
But that slight monthly uptick wasn’t enough to offset the contraction in the previous two months, which means for the second quarter as a whole, the economy shrank.
- Recession? Knowing if we’re in one matters: Don Pittis
- Alberta has lost 35,000 oilpatch jobs, petroleum producers say
- How a recession would shake up the election campaign
The economy also shrank in the first quarter, which means Canada’s economy has met the bare minimum required before a recession is declared — two consecutive quarters of decline.
On an annualized basis, the economy shrank by 0.5 per cent in the April-to-June period, after contracting at an 0.8-per-cent annual pace in the first three months of 2015. For comparison purposes, the U.S. economy expanded by 3.7 per cent during the same period, the data agency noted.
The ‘R’ word
Statistics Canada’s gross domestic product figures released today show the economy expanded in June, but declined by 0.1 per cent for the second quarter, meeting the bar of what is considered a recession. (Jacques Boissinot/Canadian Press)
The numbers bring an end to what had been a contentious issue during the current federal election campaign.
While most economists would agree that a recession is a more complex beast than merely pegging it to two quarters of negative growth, most agree it’s as good a place to start as any.
Indeed, the federal government’s recent legislation on balanced budgets defines a recession as “a period of at least two consecutive quarters of negative growth in real gross domestic product for Canada, as reported by Statistics Canada.”
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GDP figures from Statistics Canada expected to show second-quarter contraction
Lower loonie expected to boost economy in third quarter
Economists say data out this week is likely to show that Canada slipped into a technical recession in the second quarter, but the contraction should be short-lived.
“A number of positive elements are coming through,” said TD Bank chief economist Beata Caranci. “Even if, like we’re expecting, we get a contraction in the second quarter, the consumption numbers are likely to be fairly healthy.”
According to Thomson Reuters, economists expect Statistics Canada to report that the economy contracted at an annualized rate of 1.0 per cent in the second quarter.
- Recession? Knowing if we’re in one matters: Don Pittis
- Alberta has lost 35,000 oilpatch jobs, petroleum producers say
- How a recession would shake up the election campaign
- Stephen Harper avoids recession label on eve of GDP numbers
Among other data expected from Statistics Canada this week are July trade figures on Thursday and the jobs report for August on Friday.
The Bank of Canada cut its key interest rate by a quarter of a percentage point to 0.5 per cent in July amid concerns about the impact falling oil prices and weak exports on the economy.
In its July monetary policy report, the central bank estimated the Canadian economy contracted at an annual pace of 0.5 per cent in the second quarter, but predicted things would pick up in the second half of the year.
Caranci says the benefit of the lower loonie to Canada’s export sector should boost growth in the third quarter.
Although exports were supposed to see a boost sooner, Caranci says the sector’s sensitivity to the loonie has diminished over the past decade as the U.S. — Canada’s biggest trading partner — has been importing more from China and Mexico.
“For every percentage point of deprecation you get to the Canadian dollar you’re getting less of a lift to exporters,” Caranci said. “You’re getting not only less sensitivity but also a more delayed response, so it’s coming in much later than we had been forecasting.”
Alberta has lost 35,000 oilpatch jobs, petroleum producers say
With cuts more likely to come in the fall.
Less than a year ago, Alberta was still complaining of a labour shortage. Schools couldn’t find bus drivers, job vacancy rates were the highest in the country.
It’s no secret that the situation has changed.
The Canadian Association of Petroleum Producers says that 35,000 oilpatch jobs have been cut this year, 25,000 from the oil services sector and 10,000 from exploration and production. CAPP pulled the number together by canvassing its members, reviewing Statistics Canada numbers and working with the Canadian Association of Oilwell Drilling Contractors.
I have CEOs that have pulled free pop out of the office, because they can save $40,000 across the company and that’s half a job.”– Tim McMillan, CAPP
“This is tough, they’ve been struggling to get a workforce, that was always the challenge,” said Tim McMillan, chief executive of CAPP.
“Today they are laying off people that they view as very valuable. I have CEOs that have pulled pop, free pop out of the office, because they can save $40,000 across the company and that’s half a job.”
Meanwhile, other industries are picking up some of the slack. The monthly labour force survey shows that Alberta’s job growth has been largely flat this year, jobs that have been lost in the natural resource sector seem to have been created elsewhere.
- Alberta’s job market holding up, despite oil bust
- Got jobs? Not a lot of work to be had in the oilpatch
“There are definitely a lot of people from the oilpatch looking right now,”– Murray Glass, Southland Transportation
School bus company inundated with applications
After years of struggling to find drivers, Southland Transportation, which provides school buses to Calgary schools, has been inundated with applications this year, including some from engineers and geologists.
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2 days of gains push oil up 17%, TSX up 3.6%
Global stocks calmer after a week of volatility set off by doubts about China’s growth
After a week with wild swings in the values of stocks and commodities, oil futures ended up gaining 17 per cent in two days and the TSX was up 3.6 per cent in the same period.
That didn’t wipe out the damage done to the Toronto market in the last 10 days after China’s devaluation of its currency triggered global market turmoil. The TSX is down 5.2 per cent on the year and 2,7 per cent from its level before the Chinese currency crisis began last week.
Investors were cheered by oil’s rapid recovery and bought up Canadian energy stocks, pushing the TSX up 98 points to 13,865 on Friday.
The Dow was down 11 points today at 16,643, but it has recovered its week-ago level after a sharp rise yesterday.
The Dow has lost 6.6 per cent since the beginning of the year and is trading at the same level it was at last October.
The volatility triggered by China’s currency devaluation Aug. 18 lasted more than a week. But North American markets shook off the gloom by Wednesday, with a sharp recovery in the last two days.
TD economist Ksenia Bushmeneva attributed the relative calm in markets later in the week to a statement by New York Fed president William Dudley that prospects of a U.S. rate increase next month have dimmed amid rising concerns about the rest of the world.
West Texas Intermediate (WTI), the most important North American futures contract, finished Friday at $45.43 US a barrel, an increase of 6.7 per cent on the day or $2.87 and reverses the seven-week decline that had taken it below $38.
- Canada’s economy: 5 reasons not to panic
- Students, those approaching retirement more vulnerable to market swings
Brent oil was up $2.62 or 5.5 per cent to $50.18.
WTI at $60 US would improve the outlook for North American oil producers, but it hasn’t been that price since the end of June.
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RCMP planning mass arrests at pipeline protest camp, northern B.C chiefs fear
RCMP say they are just working to keep the peace
A dispute over energy projects and aboriginal rights is heating up at a pipeline protest camp in northern B.C. where First Nations leaders fear police are planning mass arrests.
Since 2009, Wet’suwet’en people, activists and environmentalists have been building a remote camp in northern B.C. to block several major pipeline projects. They include:
- Chevron’s Pacific Trail Pipeline.
- Enbridge’s Northern Gateway project.
- Shell’s TransCanada Coastal GasLink pipeline project.
Shell plans to build a 650-kilometre pipeline from B.C.’s gas-fracking region to a proposed LNG site in Kitimat.
Spokeswoman Shela Shapiro told CBC News the company supports the right to peaceful protest, but called the RCMP after Unist’ot’en protesters prevented workers from using a public road on Thursday.
The camp is about a two-hour drive southwest of Houston, B.C. on rough forest roads.
Shapiro said Unist’ot’en protesters have told TransCanada staff to leave the area “on a number of occasions.”
Yesterday afternoon, the Unist’ot’en Camp posted a message on its Facebook page.
“Coastal Gaslink crews showed up at Chisolm checkpoint. Threatened checkpoint crew that a police report will be filed as they do not have consent to enter the territory.”
‘Non-violent occupation’
Shapiro told CBC that TransCanada is “absolutely willing” to work with camp leaders, saying the company has made more than 90 attempts to speak with the hereditary chief and Unist’ot’en spokesperson.
The Unist’ot’en camp calls itself a “non-violent occupation” of traditional aboriginal land. Unist’ot’en camp protesters routinely stop traffic on remote forest service roads near the camp and turn back oil and gas crews.
Companies trying to use the area say they’re trying to use public roads to access Crown land, and some have ferried their crews to nearby worksites by helicopter.
Now, the Union of B.C. Indian Chiefs says top RCMP officials have told them a major police crackdown is imminent.
Canada’s economy: 5 reasons not to panic
Cheap gas, solid hiring and a strong housing market help Canadians weather the financial storm
A recent spate of frightening economic headlines paints a dire picture of the economy, but an examination of some basic gauges of Canadians’ financial health demonstrates it’s not all doom and gloom.
- TSX, Dow charge higher as market gloom over China dissipates
- Oil climbs above $42 US a barrel after stocks rebound
- Students, those approaching retirement more vulnerable to market swings
News of plummeting oil prices, the struggling stock market and a loonie that recently dipped below the 75-cent US level for the first time in more than a decade have Canadians on edge and fearful for their their futures, as economists debate whether this country is in a recession.
But already, things are looking up. The North American and global stock markets surged on Thursday, oil rebounded to above $42 US a barrel and the Canadian dollar recovered to above the 75-cent line.
While the effects of the economic downtown on Canadians should not be downplayed, there are plenty of reasons not to panic — hiring remains steady, home values are up, gas prices are down, people are generally managing their debt responsibly and most Canadians have nice nest eggs of savings and investments.
1. Most people are working
Hiring has remained steady in Canada despite a shrinking economy. (CBC)
The most recent job numbers from Statistics Canada show that employment in Canada is steady and job growth is modest.
In July, the economy created 6,600 additional jobs, and the unemployment rate remained at 6.8 per cent for the sixth straight month.
“Make no mistake, this is not a strong report … but it’s also not notably weak,” BMO chief economist Douglas Porter told CBC News at the time. “While many have been quick to label this year’s economic performance a recession, the job numbers just haven’t backed that up.”
As of July, Canada had added 100,000 jobs in 2015, despite a major downturn in the oil and gas sector.
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Federal election campaign’s phoney debate over deficits: Chris Hall
Answers on how parties plan to pay for campaign promises may not come for weeks yet
This federal election is supposed to be about the economy, an opportunity for voters to determine which party is offering the best plan to create jobs, open new markets for Canadian goods and services and to help this country withstand what is shaping up to be, at worst, another recession or, at best, another period of stagnant growth.
- Leaders trade shots on who will or won’t run deficit — and whether it matters
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But so far this week those important questions are secondary to a dispute over budget deficits — or more accurately, a debate over why one party is prepared to run a deficit in order to finance their campaign promises.
For now, it’s a phoney debate.
None of the parties have put out a fully costed plan, tallying up how much their promises will cost. Those platforms will come sometime in September when, if current forecasts hold, the Canadian economy will be technically in another recession.
- The CBC Election Pollcast, hosted by CBC poll analyst and ThreeHundredEight.com founder Éric Grenier, explores the world of political polls, their influence on the media and the trends they are showing. Subscribe to Éric Grenier’s Election Pollcast podcast
It’s also not clear whether the federal books are balanced, or if the government slid back into deficit this year because of the plunge in oil prices, with the subsequent loss in federal revenues and increase in employment insurance claims — particularly in Alberta where EI claims have risen eight months in a row through June, and Saskatchewan, where claims were up nearly five per cent that month.
Fracking triggered 2014 earthquake in northeastern B.C.
Quake one of world’s largest ever triggered by hydraulic fracturing
Fracking triggered a 4.4-magnitude earthquake in northeastern B.C. last year, CBC News has learned, making it one of world’s largest earthquakes ever triggered by the controversial process.
B.C.’s Oil and Gas Commission confirmed the cause of the earthquake in an email statement to CBC this week, saying it was “triggered by fluid injection during hydraulic fracturing.”
The 4.4-magnitude quake was felt in Fort St. John and Fort Nelson in August 2014. It was preceded by a 3.8-magnitude earthquake in late July, also caused by fracking.
B.C.’s Oil and Gas Commission told CBC that several companies were doing hydraulic fracturing in the area at the time, and several more were disposing of fracking waste.
But the commission says it was Progress Energy’s operations that were “associated with triggering this event.”
Hydraulic fracturing, often called fracking, is the process of injecting water, sand and chemicals at high pressure deep underground to break rock and free gas.
Since the 2014 earthquake, Progress Energy has been ordered to reduce the volume of fracking fluid being used, and the company has complied, according to the commission.
As well, new seismic equipment has been set up in the area. No new earthquakes have been detected in the immediate area.
Sign of things to come?
Progress Energy is owned by Petronas of Malaysia, which also owns Pacific NorthWest LNG, the firm planning to build a giant liquefied natural gas export facility near Prince Rupert, B.C. supplied by gas fracked in northeastern B.C.
Matt Horn, with clean energy advocate the Pembina Institute, calls the significant earthquake “another warning sign for what could be down the road.
“If B.C. goes down the LNG road in a big way, it’s really important when we’re debating LNG proposals, we’re eyes wide open…. to both the benefits and impacts. Increased earthquakes is one of those impacts.”
B.C.’s Oil and Gas Commission declined a taped interview, providing only background information by email.
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Enjoy Canada’s low dollar while you can: Don Pittis
There’s not much you can do about the low loonie, so just look on the bright side
The low Canadian dollar is hurting John Stiles at Calgary-based Planet Foods. His company distributes natural foods and healthy snacks across Canada.
The cost of his U.S. imports is going up, but he can’t even raise his prices. The large well-known chains he sells to, such as Mountain Equipment Co-op and SportChek, only allow price changes every four or six months.
Dollar dips below 75 cents for first time since 2004
China’s market problems could be Canada’s chance to ‘reset’ its economy
“Like with the dollar right now, we typically can’t do a price increase till January,” says Stiles, who is in charge of operations.
Waiting it out
According to Stiles, the only real answer is to wait it out. In the roughly 15 years Planet Foods has been operating he has seen three wild swings in the Canadian dollar.
“It’s going to take six months to a year to get that back to 90 cents,” he says.
Of course there are no guarantees that the loonie will bounce back so quickly. But Stiles offers us a useful reminder. The lower the loonie gets, the more likely it will climb back out of those lows.
While a rebound in Canada’s traditional industries may take years, the impact on tourism has been immediate with Banff “thriving.” (CBC)
The classic example of why the lower loonie helps the Canadian economy is that it is an advantage for Canadian exporters. But while we’re waiting, I thought it might be a good idea to imagine some other advantages, if just to make us feel better.
Unfortunately, there are signs a promised industrial rebound may be slow in coming. New export industries don’t grow overnight. There are some estimates that, like the effect of interest rate cuts, the wait for a currency-led change in the industrial economy must be measured in years.
Not so the tourism industry, where the rebound has been almost immediate.
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China’s market woes could be chance to ‘reset’ Canadian economy
Canada should ‘rely less on commodity growth and put the emphasis on other sectors,’ analyst says
China’s staggering economic growth has been, in many ways, a boon for Canada.
Put simply, China need lots of the things we have to offer like wood, metals, and potash. It also has a voracious appetite for oil. While we still send the vast majority of our oil south, China’s consumption had in part kept oil prices high, which benefitted our resource-based economy.
Yesterday’s stock plummet in Shanghai, however, could further rattle already struggling commodities markets – ultimately hitting at Canadian producers.
The sell-off and ensuing market chaos was also an indication that doubts remain about China’s ability to maintain its projections for growth amid historic internal reforms that could considerably lower demand for many of the things Canada is offering.
“We are a commodities producer that relies on global economic growth and for the past 10 years or so that growth has come largely from China,” says Ian Nakamoto, director of research at the Toronto investment firm MacDougall, MacDougall & MacTier.
- TSX, Dow, tank, then recover after China’s ‘Black Monday’
- 11-year low: Loonie at 75.36 US amid market turmoil
- Canadian oil stocks hit hard on markets
Throughout the 2000s, that growth coincided with a nationwide construction boom. The government poured money into infrastructure projects like high-speed rail, sprawling industrial parks and vast new roadways, formerly rural outposts developed into bustling urban centres.
But the focus and capital has now shifted from fuelling a commodities-dependent economy to establishing a consumer-driven one.
“It’s an impetus for Canadian policymakers and industries to rely less on commodity growth and put the emphasis on other sectors,” says Nakamoto.
Indeed, commodity prices are down across the board. The Economist magazine reported last week that the prices of all major commodities have fallen between 10 and 20 per cent this year, heralding the end of a so-called super-cycle that began in 2000.
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China share plunge drives selling in Asian, European markets
Benchmark Shanghai Composite Index is down 38 per cent from its June 12 peak
Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe. Wall Street was expected to suffer heavy losses on the open.
The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their 10 per cent downside limits. The benchmark closed at 3,209.91 points, meaning it has lost all of its gains for 2015, though it is still more than 40 per cent above its level a year ago.
Shanghai is now down 38 per cent from its June 12 peak.
China’s dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to staunch the hemorrhage appear to have done little to stabilize markets.
Asia’s gloom spread to European markets, where Britain’s FTSE 100 fell 2.7 per cent, Germany’s DAX 2.6 per cent and the CAC 40 of France 2.5 per cent. Dow futures were down over 2 per cent while the S&P futures were 1.8 per cent lower.
Japan’s Nikkei fell 4.6 per cent to 18,540.68, its worst one-day drop since in over two and a half years.
“It is a key moment for China. The equity market in free fall, the banking system increasingly starved of liquidity, rising capital outflows, and a rapidly slowing economy,” Angus Nicholson, a market analyst for IG, said in a market note.
“Global markets look set to continue their rout into the European and U.S. sessions,” he said, noting that the scale of the losses may have been exaggerated by the thin trading volumes typical of late August.
Document raises questions about Harper retirement policies
Finance Canada review of Canada’s retirement system says Canada scores poorly among OECD countries
Canada scores poorly among developed countries in providing public pensions to seniors, according to an internal analysis of retirement income by the federal government.
And voluntary tax-free savings accounts or TFSAs, introduced by the Harper Conservatives in 2009, are so far unproven as a retirement solution and are largely geared to the wealthy.
Those are some highlights of a broad review of Canada’s retirement income system ordered by the Privy Council Office and completed in March this year by the Finance Department, with input from several other departments.
The research, compiled in a 30-page presentation deck, was created as the government came under fire from opposition parties, some provinces and retiree groups for declining to improve Canada Pension Plan or CPP payouts through higher mandatory contributions from workers and businesses.
The CPP issue has already become acrimonious in the federal election campaign, with Conservative Leader Stephen Harper saying on Aug. 11 that he is “delighted” to be making it more difficult for Ontario to launch its own version of an improved CPP. The federal Liberals are hoping to use Harper’s clash with Ontario Liberal Premier Kathleen Wynne over pensions to win seniors’ votes in the province and beyond.
A heavily censored copy of the internal document was obtained by CBC News under the Access to Information Act.
The review acknowledges that Canada trails most developed countries in providing public pensions, and is poised to perform even worse in future.
Low among OECD countries
“In 2010, Canada spent 5.0 per cent of GDP on public pensions (OAS/GIS and C/QPP), which is low compared with the OECD (Organization for Economic Co-operation and Development) of average of 9.4 per cent,” it noted.
“The OECD projects that public expenditure on pensions in Canada will only increase to 6.3 per cent of GDP by 2050 – much lower than the 11.6 per cent of GDP projected for OECD countries on average.”
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TSX and Dow plunge again on fears of China-led slowdown
Dow in correction territory as investors hit ‘sell’ button
North American stock markets closed sharply lower again today, ending what was a dismal week for equities as fears about the global economy and falling oil prices had many investors selling.
The main benchmark index of the Toronto Stock Exchange sank to its lowest point in almost 18 months. It ended a busy trading day down 263 points, or 1.9 per cent, at 13,473. That followed a drop of almost 300 points on Thursday. Once again, the heavily weighted financial and energy groups led the declines.
“Everybody’s concerned about China,” said David Baskin, president of Baskin Wealth Management. ‘If there’s lower growth or even a recession in China, obviously that has a major impact because that’s, by most measures, the second biggest economy in the world.”
Much of the TSX’s slide stems from oil, which has now declined for eight straight weeks. That’s the longest losing streak for oil since 1986, a time when OPEC drove the price down as low as $10 a barrel. Oil settled Friday at $40.45 US a barrel, down 87 cents. At one point, it traded as low as $39.86, the first time it had dipped below $40 since 2009.
The Dow Jones industrial average plunged 531 points, or 3.1 per cent, to close at 16,460. With that drop, the Dow entered official correction territory, which refers to a drop of at least 10 per cent from its most recent high.
The broader S&P 500 index suffered its biggest daily percentage drop in nearly four years.
European concerns
European markets were also rattled by news that Greek PM Alexis Tsipras would step down and hold new elections on Sept. 20.
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Big oil that’s making a killing: Don Pittis
Don’t weep for the “downstream” part of the oil business, it’s booming
In business lore there is no better advice than “buy low, sell high.”
As markets keep hitting new lows, that’s pretty hard for the average investor these days, but in parts of the oil business, it’s exactly what they’re doing.
The news has been filled with headlines about Canada’s suffering oil industry, which might leave you thinking everyone in the sector is on the verge of going broke.
- TSX and Dow tumble on growth worries
- Oil prices dip to new six year lows
- Irving Oil announces $200M refinery maintenance project
But don’t weep for all of them. In certain sectors, business has never been so good.
Upstream vs. downstream
In oil lingo, although the principle applies to other sectors as well, the industry is divided, for practical purposes, into “upstream” and “downstream” portions.
In parts of southern Saskatchewan oil pumpjacks are thick along the roadside and crude is at six-year lows. That’s the upstream part of the business and it’s hurting.
The upstream part of the business is finding and gathering the resource — in this case, crude oil. Upstream includes the geologists using computer mapping and educated guesses about where oil might be. It includes seismic work where crews look deep underground for likely oil-producing rock formations.
It also includes oil drillers, bitumen miners and the smaller companies that support them with engineers, trucks, heavy equipment for making roads and berms, drilling mud, well testing, storage tanks and pumps. The upstream sector is huge and fragmented.
With oil now at a six-year low, it is this sector that has been devastated, because the dividing line between upstream and downstream is, give or take, crude oil.
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