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When It Comes To School, It May Pay To Delay

2011-10-04T14:25:25Z

Conventional wisdom holds that the most driven students generally proceed through school in a linear fashion, advancing seamlessly from high school to post-graduate studies -- and beyond -- without interruption.

But a new study suggests that, for a certain type of individual, it may pay to delay.

In a working paper released in September by the Canadian Labour Market and Skills Researcher Network, a pair of economists have found that depending on how students use their time off, taking a break before starting college or university can yield substantial, long-term earnings premiums.

According to University of Chicago economist Alicia Menendez, the motivation for the study she undertook with University of Calgary’s Ana Ferrer was to explore the effect of delaying education on the earning potential of the growing number of students who aren’t following the traditional trajectory.

“Around a quarter to a third of post-secondary students have been delaying for more than a year at some point, so it’s a substantial amount of the population that ends up graduating that did not follow that very linear, ‘I finish this degree and go to the next,’” she told The Huffington Post. “So we were looking at some of those numbers and saying, 'OK, what happens when you don’t do exactly that?’”

To answer that question, Menendez and Ferrer mined the 1995 National Survey of Graduates, which tracks the labour market outcomes of university, community college and vocational school grads from across Canada.

What they found was striking: compared to traditional graduates, non-university grads who delayed their post-secondary education earned three per cent more; university grads who took a break, meanwhile, enjoyed an earnings premium of eight per cent over their steady-as-you-go peers.

The earnings premiums for delayers who completed multiple degrees are higher still -- 10 per cent more for non-university grads, and 13 per cent more for those who graduated from university.

“It’s substantial,” says Menendez. “At some point [traditional graduates] catch up, but even when you look at five years after they’ve completed their education, there is still a premium.”

There is, however, an important caveat. In order to earn more than -- or even as much as -- traditional graduates, delayers had to have spent their off years in the labour market. The penalty for taking a break to do something other than work was particularly pronounced for university grads, who earned 20 per cent less than peers who went straight from high school to university. There was no earnings penalty for non-university delayers that didn’t work during their break.

Though Menendez says the study didn’t probe what, precisely, is behind this phenomenon, she speculates that it is directly related to the knowledge gained in the labour market.

“I think there is some learning experience that happens when you are working...you may understand a little bit better how the labour market works, what is in demand, who gets the promotions,” she says. “If you [take a break from] your education to travel around Europe, it’s not quite the same.”

Menendez says the next step is to probe the process that takes place during these delays, to identify what kind of jobs make taking a break worthwhile -- and to better inform prospective post-secondary students about the implications of their decisions.

But she says it is clear that there is something “quite special” about students who are able to spend some time on the job before completing diplomas and degrees.

“These guys distinguish themselves from a graduate that goes [through school] in a continuous way -- not because they stop, but because they stop, they return and they graduate,” she says. “They are highly motivated.”

Canada Risks Ending Up On 'Road To Greece' Business Group Warns

2011-10-03T16:58:41Z

Canada's combined federal and provincial net debt will pass $1.1 trillion at 11 p.m. ET on October 3, according to a recent calculation. But while some observers are sounding the alarm bells about the country's balance sheet, others say Canada's fiscal situation is not nearly as bad as it may seem.

The approaching debt milestone was flagged on Monday by the Canadian Federation for Independent Business (CFIB), which is calling for more aggressive belt-tightening measures to address the deepening fiscal hole.

"It's time for governments across Canada to get more serious about controlling and reducing debt," Laura Jones, senior vice-president of research and economics, said in a press release. "Being blasé about debt is the road to Greece and it's not fair to our kids because today's debt is tomorrow's taxes."

Noting that provincial and federal net debt has increased by $100 billion -- or 10 per cent -- in the last a year and a half, the CFIB estimates that total debt has surpassed $31,850 per person.

Per capita debt is highest in Quebec and Ontario, where it has hit $38,725 and $35,550 respectively, and lowest in Alberta and the Yukon, where it has reached $14,700 and $14,900.

But according to Chris Ragan, an expert in monetary policy at McGill University, when it comes to government debt, "It is misleading to look at the total amount."

Much more relevant to Canada's fiscal well-being, says Ragan, is the debt-to-GDP ratio, which he describes as "fairly low."

"If you look at debt as a fraction of GDP, what you're doing is you're scaling it to the size of the economy," he says. "GDP is basically the tax base of governments. So if you look at debt as a fraction of GDP you're getting an indication of the government’s ability to service that debt."

Despite rising levels of government debt, Canada's combined federal and provincial debt-to-GDP ratio was 57.9 per cent in 2010-2011 -- a far cry from the situation in Greece, where the debt-to-GDP ratio is expected to surpass 160 per cent this year.

But Ragan says that an even more illustrative ratio is Canada's net government debt-to-GDP ratio, which accounts for existing financial assets. For 2010, he puts that figure at 44 per cent.

"We will be adding to our debt this year, but GDP has gone up," says Ragan. "So I think what we're going to be seeing is a [net] debt-to-GDP ratio that is probably close to stable maybe rising very gradually over the next few years, up to about 45 per cent."

Canada's current net debt-to-GDP ratio is less than half of what it was in the mid-1990s, when fear of hitting the so-called debt wall prompted drastic spending cuts.

"What we knew at that time was that debt-service costs were becoming very large, and financial markets were starting to pull a Greece on us," says Ragan. "They were starting to wonder, how the heck are we going to pay this back?"

The fiscal tightening and economic growth that followed brought Canada net debt-to-GDP ratio from 92 per cent in 1996 to less than 40 per cent in 2008.

"There was a dramatic turnaround," he says.

Though the CFIB did acknowledge in its release that net debt is not as high as it has been in the past, Ragan says he is concerned about using rising debt levels to justify tough austerity in the current economic climate.

"If they conclude from this that governments should start clamping down and raising taxes or cutting spending, I think this is probably a bad time to do that. Right now we have a recovery that's looking pretty sluggish," he says. "Governments should be back on track toward balance, but you don’t want to do it too aggressively."

Stagnant Wages + Low Confidence = Bad Times For Canada Ahead

2011-09-29T18:30:48Z

As unsettling economic news dominates the headlines, evidence is mounting that Canadian consumer spending will continue to disappoint in the months ahead.

A pair of studies released Thursday show that wage growth and consumer confidence have both ground to a halt -- a sign, warn economists, that consumers aren’t in a position to give the economy the boost it needs.

Despite a recent uptick in inflation, which hit 3.1 per cent in August, Statistics Canada data released Thursday shows that wages are failing to keep pace, with average weekly earnings increasing just 2.2 per cent in the year ending in July.

“The majority of Canadians are just not getting wage gains that are commensurate with the rising cost of living,” explains Scotiabank’s Derek Holt, who blames uncertain times -- during which he says workers have been weary to push for a raise and employers reluctant to part with profits -- for the stagnation.

As Holt sees it, too much emphasis is being placed on job growth; it’s how well those jobs pay, he says, that will determine how wide consumers are willing to open their pocketbooks.

“What’s happening to the average wages of all workers matters a lot more than just adding a few tens of thousands of jobs each month … at the margin,” he says. “It’s going to be the wage picture that drives most of the consumer spending outlook, and that in turn explains why we’ve had a pretty soft consumer so far this year.”

After retail sales in Canada fell in July (the 0.6 per cent drop followed three months of consecutive gains), Holt predicts that consumer spending numbers in August and September will “come in a lot weaker than what the consensus is expecting.”

And if the current mood among consumers is any indication, he may very well be right.

The latest Conference Board of Canada survey found that consumer confidence in failed to recover in September.

Though confidence was up slightly over the previous month, stemming four months of consecutive decline, Pedro Antunes, director of national and provincial forecast says he “wouldn’t call it an increase.”

“Given a margin of increase around these surveys, I would just call this kind of stable from the already weak point that we had in August,” he says.

The survey, which gauges consumers’ attitudes toward their financial positions, employment prospects and making major purchases, put confidence in early to mid September at 75, which is still significantly below the average of 100.

But considering the uncertainty that has mounted in the past few weeks, Antunes says the current picture may be even worse.

“We hear about the turmoil with respect to Greek debt, and the possible consequences on financial markets, we’ve seen equity markets just bounce around like a yo-yo,” he says. “These latest factors weren’t even happening when we did the survey, so you have to worry about how consumers might feel at this very moment.”

Despite these ominous signs, however, neither Scotiabank nor the Conference Board of Canada is forecasting a return to recession. In the longer term, Holt says falling commodity prices, borrowing costs and a decline in the value of the Canadian dollar will act as a “shock absorber,” and “free up household incomes.”

“I think it’s an environment in which to err on the side of caution,” he says, “but with a hopeful eye that once we get beyond the next six to nine months or so, we may be looking at a bit of a better outlook.”

'Ethical Oil' Founder Appointed To Jack Layton's Climate Committee

2011-09-28T00:49:13Z

Former Conservative Party strategist Alykhan Velshi is not generally associated with efforts to reduce Canada’s carbon footprint.

But that’s about to change.

Velshi, who has been the driving force behind Ethical Oil -- a pro-industry campaign that aims to re-brand the Alberta oil sands -- was recently appointed to the board of the Toronto Atmospheric Fund (TAF), a city council committee that finances local initiatives that fight global warming, and lists Jack Layton as one of its original founders.

It’s a decision that is drawing fire from critics, who are voicing concerns about an appointment they say defies logic.

According to Velshi, who occasionally blogs for HuffPost Canada, he was drawn to the position by the opportunity to keep an eye on TAF’s bottom line “at a time of economy uncertainty.”

“When I applied for the position, I saw my role on the board as ensuring that TAF fulfilled its mandate, and delivers value for money for taxpayers at a time of deficits,” he says.

Velshi, who was an aide to former Environment Minister John Baird, says his history of working for “environmental causes” was “felt by city Toronto City Council to have given me a good deal of experience to contribute to this.”

“I come into this role with an open mind, and I look forward to TAF’s activities,” he says. “I look forward to serving Toronto taxpayers in this voluntary, unpaid position.”

But while Velshi may have received the approval of the majority of councillors, not all are on board.

As Adam Vaughan sees it, appointing a vocal advocate of oil sands production to a committee devoted to fighting greenhouse gas emissions “blows the mind.”

“We have a group of radical libertarians in the mayor’s office, and they actually think Ethical Oil is an environmental achievement,” he says. “These guys are Orwellian. You can’t make this stuff up.”

EthicalOil.org, the website behind the re-branding campaign, has gained notoriety in recent months for its hard-hitting ads, which position the Alberta oil sands as an “ethical” alternative to the oil produced in undemocratic countries. The ads have ignited a dispute between Ottawa and Saudi Arabia.

Though Velshi announced this week that he is ceding control of the website (a decision he told The Huffington Post had nothing to do with the TAF appointment, but rather a natural end to his commitment to the project), Vaughan remains steadfast in his rebuke.

“I don’t care what organization he does or doesn’t belong to, the last thing he is is a progressive environmentalist,” he says. “He’s just another conservative appointed by an ultra-conservative mayor to undermine environmental initiatives in this city.”

But despite the insinuation that Mayor Rob Ford is behind the appointment, Velshi maintains he has “never spoken to the mayor about this.”

After submitting his application several months ago, he was interviewed by the Civic Appointments Committee, which then recommended him for the position -- the standard process for committee appointments. Council gave its stamp of approval in an in camera vote last week.

“I was appointed by Toronto City Council. I can’t really speak to the rationale,” he says. “All I can really speak to is my application and my own interview. I laid out to you the same thing that I laid out to them in terms of my priorities would be.”

But the decision has also left Ontario NDP energy critic Peter Tabuns scratching his head.

“I don’t understand the logic in making this appointment if you want the Atmospheric Fund to be successful in its programs,” he says. “I think Mr. Velshi will find huge conflict between his commitment to expanding oil production in Canada and serving on the board of a fund whose aim is to substantially reduce our reliance on fossil fuels.”

Though Tabuns says he “won’t presume to speak for Jack,” he says Layton’s vision for the fund as a means to “energetically lead campaigns to reduce our reliance on fossil fuels” is “not consistent with what I’ve heard of Mr. Velshi’s.”

But former TAF chair David Soknacki has a different take. Though he confesses he “chuckled” when he heard about the appointment, he says adding Velshi to the group will inject a fresh perspective.

“If you take a look at the TAF membership right now … there is fair similarity of outlook. A couple of appointments that have a different outlook I think is healthy for any organization,” says Soknacki, maintaining that he was appointed to the fund “for the same reasons.”

“I was put on the board to keep an eye on Jack,” he says, referring to the left-leaning Layton, who helped create the fund in the 1991 with a $23 million endowment from the city.

Velshi’s perspective is one that Soknacki says could prove to be a significant advantage to TAF, particularly in the current climate of austerity.

“If the administration doesn’t feel that an organization is responsive or part of the team, they will be less inclined to protect it,” he says, noting that the fund came under review when he was at the helm.

For her part, Coun. Shelley Carroll, the current TAF chair, says she is interested to learn more about Velshi, whose credentials represent “a first” for the organization.

“I look forward to any new board member that comes fully understanding the mandate, and is ready to help us meet that mandate, both in the investment sense and in the galvanizing the environmental community sense,” says Carroll. “I hope that Mr. Velshi has decided that that’s his new interest.”

Alykhan Velshi's "Ethical Oil" campaign has been one of the more notable attempts at a rebranding in recent history. Check out these other notable rebrandings:

The Other Side To The Pipeline Protest

2011-09-23T22:22:02Z

As hundreds of demonstrators prepare to descend on Parliament Hill on Monday to protest the development of the Alberta oil sands, the patience of some of their most prominent adversaries appears to be wearing thin for what they claim is a campaign of rhetoric not based on fact.

In a speech to the Canadian Club of Toronto Friday, Natural Resources Minister Joe Oliver turned his attention to the question of how to address the increasingly vocal opposition to the proposed Keystone XL Pipeline, acknowledging that “There is a significant communications challenge.”

Noting the “celebrity protesters” that have made headlines in recent weeks for opposing the transport of bitumen from Alberta to Texas, Oliver outlined the safety and environmental standards the pipeline has met, pointing out that greenhouse gas emissions in the oil sands are lower than in coal plants in Wisconsin.

“We just have to keep repeating those points and making people understand that this exaggerated rhetoric about the end of the planet just doesn’t pass muster,” he said. “With regard to the oil sands and the Keystone XL Pipeline in particular, it’s time to separate fact from fiction.”

More than 1,200 demonstrators were arrested in Washington earlier this month as they protested Keystone XL, which is currently awaiting approval from U.S. President Barack Obama. The protesters, many of whom represent environmental and First Nations groups, say the pipeline will pollute waterways and fisheries.

Following his speech, Oliver told media his statements were not born out of frustration.

“People are entirely free to express their views, as long as its done in a civilized way,” he said. “They’re free just as I’m free to counter with the facts if I believe the facts are not being stated as clearly as they should be.”

But in a recent conversation with the spokesman for TransCanada Corp., the Calgary-based company behind Keystone XL, the emotion was considerably more palpable.

Shawn Howard told The Huffington Post Canada that the information being propagated by some of those opposed to the project has made it “very difficult to have any kind of an informed discussion.”

“As a company, we’re held to a certain standard. We’re expected to be precise, we’re expected to provide a lot of facts,” he said. “It becomes frustrating when people will willfully make things up, or lie right through their teeth, even though reality and the real world and facts tell them something completely different. It’s kind of perplexing.”

Howard points to an assertion that the pipeline could someday be used for bulk water removal of the Ogallala aquifer, which runs below the U.S. Great Plains, as a recent example.

The accusation, leveled by the Council of Canadians in August, stems from testimony delivered at the Nebraska state assembly earlier this year. When asked about how the company would eventually take the pipeline out of service, a TransCanada official prefaced his response by listing the various products that it could be used to transport before that time, including oil, gasoline and water.

“He was talking about how thorough our monitoring programs are that they would stand the test of time,” says Howard. “He wasn’t talking about some secret deal [to transport water].”

Howard’s comments come as tension between those on both sides of the issue mounts. In advance of Monday’s protest, organizers report that hundreds have expressed a willingness to risk arrest.

“You see people beginning to step forward and say there is a role for non-violent civil disobedience,” said Andrea Harden-Donahue, energy campaigner for the Council of Canadians. “That’s to underscore the seriousness of an issue to our government, and to stand side-by-side with other people who share that opinion and share the opinion that enough is enough.”

Labour officials, who believe that the Keystone XL Pipeline will costs the Canadian economy tens of thousands of jobs, have also spoken out about the issue. On Thursday, the Communications, Energy and Paperworkers Union of Canada (CEP), petitioned MPs in Ottawa to reverse their approval of the pipeline, calling it a “jobs killer.”

All of which, says Clayton Thomas-Muller of the Indigenous Environmental Network, is proof that the movement is gaining momentum.

“This is one of those sea-change moments, not just for First Nations but for everybody who is concerned about the psychotic energy policy of Canada, and their attempts to market dirty tar sands to the world."

Related Video:

Gordon Pinsent Eloquently Attacks The Oil Sands

2011-09-22T19:39:06Z

Gordon Pinsent is the latest Canadian celebrity to endorse the protest against the oil sands planned for Parliament Hill on Monday.

Canada’s elder statesman of theatre spoke out on Thursday in opposition to the oil sands, which have come under increasing scrutiny in recent weeks following well-publicized protests in Washington over the proposed Keystone XL Pipeline.

“I can't think of anything -- here, now, or in our future -- that would rank above the tar sands for sheer, blind, stupidity,” Pinsent said in a press release by Greenpeace Canada, one of several organizations behind the protest. “The dangerous minds who are heralding the tar sands as an answer of any kind to our betterment need to be shut down with such positive action as to cancel any possible recurrence.”

Musician Dave Bidini and member of the Order of Canada Tantoo Cardinal -- the first Canadian indigenous celebrity to pledge to be in attendance at the Ottawa event -- are other recent additions to the small but apparently growing list of Canadian celebrities that have lent their support to the action.

Dave Thomas of SCTV fame, as well as Graham Greene, Mia Kirshner and Kate Vernon have also given their stamp of approval to the protest.

It is not yet known whether Pinsent will join the hundreds of demonstrators that organizers are expecting to attend the sit-in on Monday. But the characteristically eloquent actor was clear about his position, articulating his concerns about “our children’s future and the world they would be left to clean up or live with” in almost Shakespearean terms.

“It would break the hearts of this world to see their world beyond their control, having to fictionalize and paint over a nature that seemed to have ignored and eluded them. A beauty we have known for so long, to suit our lifespan and not theirs,” he said. “What kind of heroics would that take? This world has already lost too much of its beauty. To denaturalize and tear away what remains by greed and desperation is an unforgivable future.”

Rising Gas Prices Like A 7% Income Tax Hike: Economist

2011-09-22T00:23:11Z

Inflation over the past year on gas alone has done as much damage to Canadians' bottom line as a seven per cent income tax hike, a CIBC economist says.

Benjamin Tal said Wednesday's inflation data from Statscan, which shows year-over-year prices rising at a 3.1 per cent rate in August, suggests that consumers are about to run out of steam.

The numbers exceeded analyst expectations, as consumers shelled out 4.4 per cent more for food, 13.4 per cent more for energy and 22.8 per cent more for gasoline.

In five out of eight components of the Consumer Price Index (the basket of goods used to determine the rate of inflation), prices rose faster in August than in July, when inflation fell to 2.7 per cent.

"Clearly there's an impact on the consumer, and that's one of the reasons we see consumer spending softening," says Tal, whose report released Tuesday predicted that consumer spending would slow in coming months as Canadians pay more attention to their balance sheets.

The uptick in energy prices is no surprise to Consumers' Association of Canada President Bruce Cran, who describes Canadians as "totally frustrated."

"This is confirmation that consumers are being gouged, particularly in the fuel areas," he says. "I don't know what can be done about it, but consumers at the moment are [bearing] the brunt of the problem with the fuel prices, and I can't see any relief in sight."

Not everyone agrees, however. Bank of Canada Governor Mark Carney made clear in a speech in New Brunswick Tuesday that he's not concerned about inflation, indicating that the likelihood of an interest-rate hike remains slim, even though August's numbers exceeded the Bank's target of one to three per cent inflation.

Carney said he expects inflation "to continue to moderate as temporary factors, such as significantly higher food and energy prices, unwind."

But in the current climate of global economic uncertainty, a cooling off of inflation that arrives in this manner may come at a price.

"We are entering a period in which emerging markets are starting to soften. This means that inflation will soften [and] you don't have to raise interest rates in Canada to fight it," says Tal. "It's either you get inflation or you get slower economic growth -- that’s more or less where we are now."

As Sal Guatieri, senior economist at BMO, sees it, "the trend in inflation in Canada remains very subdued."

He says the increase in August, which was 0.2 per cent higher than analysts were anticipating, is "still well below the peak we were seeing for this year," which saw the inflation rate climb to 3.7 per cent.

"For the most part it's simply payback for several months of downside surprises in the inflation figures," he says.

But despite the evidence that another reprieve may be coming, he concedes that rising prices are just another factor weighing on consumers, who are already struggling with stagnant wages and significant debt loads.

"Hourly earnings have been growing at less than the inflation rate in Canada in recent months," says Guatieri, "so workers are losing purchasing power."

Federal, Provincial Governments: Give 'Em An Inch, They'll Take $82 Billion

2011-09-15T19:57:01Z

For many of us, the immediate response to receiving an unexpected windfall of cash is to spend it -- which, as a new study suggests, is an impulse that is also shared by government.

The fiscal accountability rankings released Thursday by the C.D. Howe Institute show that in the past decade, federal and provincial governments have overshot their projected spending by a total of $82 billion. The substantial overrun -- equivalent to roughly 14 per cent of total current expenditures and the sum of current projected deficits -- is due, at least in part, to the tendency of governments to pour found money into new expenditures.

The worst offenders: resource-rich Saskatchewan and Alberta.

To be sure, accurately predicting government spending over the course of a fiscal year can be tough; faced with emergencies, governments are often forced to open the taps. But according to Colin Busby, senior policy analyst at the C.D. Howe Institute, unexpected expenditures don’t account for the bulk of the discrepancy.

"Obviously, a small portion of [the overrun] will be due to emergency situations, and we’re not really concerned with that. But another portion of it will be a one-time expense on a government service, and another portion of it is going to be a recurring expense," he told The Huffington Post. "It’s hard to say how much of that $82 billion is falling into each category, but I think it’s the two latter examples that are probably the most concerning."

As Busby explains, the rankings, which are based on the difference between the fiscal plans outlined in government budgets and the audited statements of financial results published in public accounts, reveal "a very strong correlation" between jurisdictions that enjoyed better-than-expected revenues and those that spent more than they said they would.

With the exception of Newfoundland and Labrador, which was only jurisdiction to undershoot spending, Busby says those that scored lowest on the accountability scale -- aptly dubbed The Pinocchio Index -- were resource-rich jurisdictions, where unanticipated revenues quickly turned into added expenses.

Source: C.D. Howe Institute

"There is a very close -- knee-jerk, almost -- reaction in most resource-based jurisdictions of getting extra revenues over the course of the fiscal year, and then finding ways to spend them as opposed to what would be a more preferred course of action -- either paying off debts or saving more," he says. "Certainly, resource-based jurisdictions performed by far the worst in our analysis."

As a percentage of 2010-2011 budgeted spending, Saskatchewan had the most egregious record. Over the past 10 years, the potash-rich province overshot spending by a total of $3 billion -- roughly 30 per cent of the total spending planned for this fiscal year. Meanwhile, oil-endowed Alberta had a total of $10.4 billion in additional spending, which is equivalent to more than 25 per cent of total budgeted spending for 2010-2011.

It's no coincidence that the jurisdictions with the worst accountability records also have some of the best balance sheets in the country: resource-dependent provinces have enjoyed many surprise injections of revenue in recent years. But as Busby points out, the report shows that they could be in even better fiscal shape.

"Were they able to put these higher-than-expected revenues toward their debt levels -- or in Alberta's case, increasing their savings -- they could have accomplished an even stronger balance sheet," he says. "There’s so much extra potential there."

After Newfoundland and Labrador, which underestimated spending by $300 million, Nova Scotia and Ontario performed best, with overruns equivalent to less than 10 per cent of 2010-2011 budgeted spending. The Federal government landed in the middle of the pack, overshooting spending by a total of $35 billion -- about 12 per cent of this year’s budgeted expenditures.

Though Newfoundland and Labrador scored best on The Pinocchio Index, the study identifies a a significant caveat: the province received a grade of "F" for its reporting practices of public accounts.

"They are still pursuing these very old reporting procedures ... that make the process a lot less transparent to legislators and to the general public," says Busby. "So it takes what is a good result on one hand and shoves it into a very grey space where we’re not sure how much we can applaud those results."

While reporting procedures across the country have gotten better in recent years, Busby says there is still room for improvement -- particularly in the context of renewed demand for fiscal responsibility in the aftermath of the financial crisis.

"The public should demand more from governments in terms of following through on their budget promises,” he says. “We need to pay more attention to it, both as a society and as policy makers and as legislators."

Canada's Banks Face Leaner Times: Analyst

2011-09-14T18:49:58Z

As the European sovereign debt crisis deepens, Canadian banks could soon feel the pinch.

In a note Tuesday evening, National Bank Financial analyst Peter Routledge said that the turmoil unfolding on the other side of the Atlantic and soft economic growth at home has made the outlook for Canada’s big six banks bleaker than what most analysts are expecting.

“Despite the strength in the quarter, we are convinced that earnings estimates will fall short of consensus over the near to medium terms,” he said. “[The third fiscal quarter] will be the last ‘good’ quarter for some time.”

Routledge estimates that in 2012, the average earnings-per-share (EPS) growth for the big six banks will be just 6.7 per cent -- barely half of what is was in 2011.

“We think capital markets will be down materially in the fourth quarter and will remain depressed really through much of 2012,” he told The Huffington Post. “We think the economy will not grow rapidly, which means tighter net interest margins and slow loan growth.”

Though Routledge says earnings growth at Canada’s big six -- of which National Bank is one -- will be “somewhat muted,” he does not anticipate a return to recession, and a situation where clients start defaulting on their loans, and banks’ earnings shrink.

“There is still expected EPS growth, rather than negative EPS growth, so it’s not a disaster scenario,” he says. “It’s just we’re a little more bearish than the street.”

In 2009, average EPS growth for the big six contracted by 2.2 per cent.

But despite the pessimistic forecast, Routledge, who spoke out in defence of Canada’s banks in August when an American blog raised questions about the stability of the sector, maintains that “Canadian banks are generally quite solid and quite profitable.”

Though Routledge concedes that a contraction in earnings could cause a slide in RRSPs and equity valuations, he says that in this case, the overall implications will be negligible.

“I don’t see the EPS outlook for Canadian banks having a material impact on the economy,” he told HuffPost. “It’s the other way: If the Canadian economy stays out of recession, EPS will be down marginally. We’ll still have EPS growth and valuations will probably correct up from where they are.”

5 Signs Canada's Economy Is Fizzling

2011-09-09T17:16:10Z

Since the financial meltdown in late 2008, bad economic news has had a tendency to arrive all once.

This has recently been the case in Canada, where an onslaught of negative reports are contributing to growing uncertainty about the strength of the recovery. The latest example came Friday morning, as Statistics Canada data showed that the country lost 5,500 jobs in August, despite analysts’ expectations that 25,000 new jobs would be added.

“It confirms that the Canadian economy is delivering a soft performance,” Craig Alexander, chief economist for TD Bank told The Huffington Post. “The economic activity data that we’ve recently received suggest that the economy is in fact growing in the third quarter, but the pace of rebound from the second quarter may not be as pronounced as people thought … The pace of growth in the second half of this year is going to be fairly subdued.”

Just how “subdued” growth will be is anyone’s guess. But at the moment, there’s plenty of reason to suspect that economic performance in the months ahead may be bumpy at best.

Here are five signs that Canada’s economic recovery has hit a rough patch:

Canada's Global Competitiveness Plummets

2011-09-07T14:43:29Z

Canada is no longer among the world's Top 10 most competitive countries.

In the Global Competitiveness Report released Wednesday by the World Economic Forum (WEF), Canada's ranking slipped to 12th overall. Despite maintaining an identical competitiveness score, Canada has dropped three positions since 2009 as other countries improved their performance.

According to the Conference Board of Canada, the Canadian partner institute in preparing the the report, the ranking "reinforces how global competitors continue to gain ground."

"Much more can be done to improve productivity, economic performance, and global competitiveness," Michael Bloom, the Conference Board's vice-president of Organizational Effectiveness and Learning said in a press release. "Canadian businesses do not appear to be adapting adequately to globalization or building effective global value chains as quickly as their international competitors."

The rankings were based on an executive opinion survey conducted with 14,000 business leaders across 142 economies, including 82 in Canada.

In Canada, respondents pointed to health and primary education systems, labour markets, financial markets and infrastructure as particular strengths, while government red tape and wasteful spending were identified as some of the factors that made it tough to do business here.

Canada's macroeconomic environment ranked 49th overall. In terms of gross national savings as a percentage of gross domestic product and overall debt levels as a percentage of GDP, Canada placed 80th and 129th respectively.

On a global level, WEF founder and executive chairman Klaus Schwab says the rankings reflect the uneven way the world recovered from the financial crash of late 2008.

"Much of the developing world is still seeing relatively strong growth -- despite some risk of overheating, while most advanced economies continue to experience sluggish recovery, persistent unemployment and financial vulnerability, with no clear horizon for improvement," he said.

For the third year running, Switzerland snagged top spot, while Singapore jumped ahead of Sweden to take second position.

Canada is not alone in falling behind. After three years of decline, the United States was bumped to fifth position overall on concerns about government inefficiency and low public trust in government. Germany dipped slightly to sixth position, and Japan dropped three spots to ninth overall.

Have Canadians Given Up On Caring About The Oil Sands?

2011-09-07T11:03:26Z

The recent protests in Washington over plans to funnel crude from the Alberta oil sands to Texas put the spotlight on the growing opposition to the project south of the border. But as activists hoisted placards, chanted slogans and got arrested (police carted off more than 1,200 protesters during the two-week-long “sit in”), the demonstrations also illuminated something else: a conspicuous lack of outrage over the oil sands in Canada.

Though local environmental groups insist that grassroots opposition to the Keystone XL pipeline -- and the oil sands more broadly -- burns just as strongly in Canada, the relatively muted reaction to the project thus far raises questions about what’s behind the apparent disparity, namely: Are Canadians as concerned as their U.S. counterparts?

In some respects, the comparatively subdued response on this side of the border can be explained by the nature of the current controversy. Despite the fact that Calgary-based TransCanada Corp. is behind the Keystone pipeline, Washington has the power to stop the project, which will run primarily through the U.S.

But according to author and activist Naomi Klein, when it comes to the broader plan to expand oil sands production, “a lot of Canadians are blocking the issue out.”

“It’s absolutely the case that Canadians have not really come to terms with the moral and ethical implications of that decision and what it means to our standing in the world,” she says. “I don’t think it’s because Canadians don’t care. I think there’s been a lack of leadership and I think that there’s a lot of fear.”

The Shock Doctrine author, who was one of the original signatories on the letter urging the public to descend on Washington, was arrested on Sept. 2 when she refused to clear the sidewalk in front of the White House during a demonstration focused on indigenous issues. After about three hours in custody, she paid a $100 fine, and was released.

(Full disclosure: Klein is also a blogger for HuffPost.)

The political climate may be another factor. As Ryan O’Connor, a post-doctoral fellow at Trent University studying the history of the Canadian environmental movement, explains, the mood in the U.S. is increasingly uncertain, which could be prompting the green movement to pursue more dramatic options.

“Environmentalists [in the U.S.], who had once held out great hope for President Obama, have very little reason for optimism,” he says. “I don't think Canadians have lost faith in the political and administrative channels to the same degree as the Americans.”

Though Canadian groups have in the past played a major part in pipeline protests (O’Connor cites the Toronto-based Pollution Probe’s role in derailing the Mackenzie Valley Pipeline in the 1970s as one example), at present, he says, “The perception among Canadians that our environmental concerns aren't as dire as those in the United States.”

The oil industry has a somewhat different take. According to Travis Davies, spokesman for the Canadian Association of Petroleum Producers (CAPP), what he calls a “more considered” response on this side of the border illustrates the fact that Canadians have “more access to information about the oil sands” than their American counterparts.

“We’ve been having this conversation longer,” he says. “There’s always going to be an extreme view that is going to be loud, but I think by and large Canadians want to understand what’s going on on the ground.”

He says a recent CAPP poll found that provided it’s “being done responsibly,” three-quarters of Canadians believe that taking the oil sands forward is “the right thing to do.”

And as TransCanada spokesman Shawn Howard sees it, the fact that just over 1,000 people were arrested while protesting the project in Washington -- a metropolitan area with a population of about 5.4 million -- doesn’t signal widespread concern in the U.S., either.

“I would suggest that the silent majority has spoken on Keystone yet again,” he told HuffPost.

Howard doubts organizers met their target of 2,000 protesters, but there is no official count of the total turn out.

The controversy, however, is set to continue for at least a few more weeks. Inspired by the demonstrations in front of the White House, which wrapped up on Saturday, environmental groups are planning a similar sit-in on Parliament Hill on September 26 -- proof, say organizers, that the opposition in Canada is formidable.

“For a number of years there’s been many ongoing campaigns targeting the tar sands on a number of levels. We actually have seen a shift in public perception,” says Andrea Harden-Donahue, energy campaigner for the Council of Canadians. “The tar sands has been put on a platform publicly. Much of that is not because of the actions of our government, but instead the actions of concerned citizens and organizations around our country.”

CORRECTION: This article was altered from its original version. It was edited to more accurately reflect the opinions of TransCanada's Shawn Howard.

Report: Job Ads On The Rise

2011-09-02T15:43:59Z

Amidst unsettling reports of shaky consumer confidence, negative GDP numbers and still-stagnant employment south of the border, a glimmer of hope on the jobs front: help wanted ads are on the rise.

The Conference Board of Canada's survey of online job postings released on Friday found that help wanted ads across the country increased significantly in June and July, more than offsetting the declines in the previous two months.

The Help Wanted Index, which measures help wanted ads across 79 online job boards, rose eight points in July to 127.3 -- 27 points above December 2010 levels.

According to Pedro Antunes, the Conference Board's director of national and provincial forecast, it's a positive -- albeit unanticipated -- sign that actual employment numbers may also be headed for a boost.

"Honestly, we were surprised," says Antunes, who also spoke to The Huffington Post last week about the Conference Board's latest Index of Consumer Confidence, which declined in August for the fourth consecutive month on fears about the United States debt-ceiling crisis and European debt.

But unlike consumer confidence, which, as he explains is "an intangible...about how people about the economy," the Help Wanted Index is "a tangible number," which tracks upcoming employment "fairly well."

In the run-up to the recession, for instance, the Help Wanted Index fell "before employment did, as a pretty good leading indicator of the monthly employment numbers," he says. "This is why we track this number in particular -- because we feel it does give us a good sense of the next couple of months, whether we might see employment gains."

The index was up in all provinces in July. Alberta saw the biggest boost with an increase of more than 17 points; Quebec, meanwhile, experienced the most modest increase with a gain of 0.9 points.

There are, however a few caveats to the positive numbers. For one, the index doesn't account for the type of jobs being advertised, which means that it doesn't distinguish between short-term contract jobs and more coveted full-time permanent positions.

And though the July gains pushed the Help Wanted Index to an all-time high, they also reflect the ongoing shift away from newspaper ads.

"There's a structural change we think going on where there's more and more people and businesses using online job boards," says Antunes. "I don't know how much that might influence the numbers."

Yet he says there's still reason to optimistic about the latest results.

"It is a pretty good indicator of the demand for employment out there," he says. "We think that will will see some better job numbers in the [coming] months."

Fragile Canadian Economy Has Little Room For Error

2011-09-01T11:20:30Z

UPDATE AT BOTTOM

If there was any doubt about the fragile nature of Canada's economic recovery, it was most likely put to rest by the GDP numbers released Wednesday morning. But those requiring further proof should consider how little it took for the economy to slide into the red.

Commenting on the news that GDP shrank by 0.1 per cent in the second quarter (for an annualized rate of 0.4 per cent), officials maintained that the slowdown was mainly due to several isolated incidents -- a testament to just how lukewarm the recovery truly is.

"The weakness in the second quarter was largely due to external factors," Finance Minister Jim Flaherty told reporters in Toronto. "The tsunami and earthquakes in Japan in the second quarter had a very strong effect on the auto sector, particularly auto imports."

Economists at Statistics Canada, too, pointed the finger at unexpected events, in part blaming the wildfires in Northern Alberta for the contraction in the energy sector, which had a significant effect on overall GDP.

The agency cited the 6.7 per cent decline in energy exports as the primary cause of the economic slowdown.

All of which suggests that, despite positive signs on the domestic front -- there was growth in the public sector, professional services, construction and retail trade -- it still doesn't take much to push the economy over the edge.

And if the economic outlook is any indication, that's not something that's going to change anytime soon.

Derek Burleton, deputy chief economist for TD Economics, maintains that there is "pretty good strength under the surface" of yesterday's negative GDP numbers. But even three quarters out, the bank is anticipating what he describes as "a pretty tepid result" in terms of economic growth.

TD is forecasting roughly two per cent growth in the third quarter, one per cent growth in the fourth quarter and two per cent growth in the first quarter of the next fiscal year.

"There are enough pieces of the puzzle already in place that it would be hard for the economy not to enjoy a modest respite in the third quarter, but the weak momentum heading out of [the third quarter] can really impact the fourth, that's for sure," he told The Huffington Post, referring to the United States debt-ceiling debacle that shook markets this summer. "One per cent [growth in the fourth quarter] is pretty weak, and it wouldn't take a lot if something unanticipated were to happen to knock that into negative territory."

With the debt crises in the euro zone deepening, the spectre of "something unanticipated" is precisely what Canada's export and manufacturing industry is worried about.

As Jayson Myers, president and CEO of Canadian Manufacturers & Exporters, explains, the attention of his members has recently turned to the "impact of uncertainty" on consumers and the business community.

"The expectation was that the second half of the year was going to be quite strong, but what has flown up over the last two months, of course, is a very volatile dollar, and concern about the credit situation," he says. "Both consumers and a lot manufacturers may be a lot more cautious right now in terms of hiring, or in terms of major investments."

For his members, he says it's still largely business as usual.

"As long as there are orders coming in the door, they are certainly not pulling up stakes, and not wringing hands," he says.

But perhaps now more than ever, they are aware of just how quickly the situation can change.

"The whole credit situation around the world is pretty precarious, and it doesn't take much out there to take us back to the situation where we have credit markets tightening up," he says. "I think everyone is keeping their fingers crossed that we’ll see demand strengthen in the second half of the year."

UPDATE:

The decline in energy exports that pushed Canada's second-quarter GDP into negative territory came after "a huge increase" in petroleum exports in the previous quarter, says Statistics Canada senior analyst Brenda Bugge.

As Bugge told HuffPost, petroleum exports in the first quarter were up 29 per cent (in nominal terms) on higher prices and an increase in the volume of exports.

Petroleum exports decreased by 11 per cent in the second quarter to a level that she describes as "more normal" and "not much below trend."

Canada Better Off Focusing On Economic Migrants, Study Finds

2011-08-30T03:16:59Z

As Citizenship and Immigration Canada conducts ongoing public consultations on the mix and number of immigrants the country should take in, a pioneering study has offered a powerful argument for prioritizing “skill-assessed economic immigrants,” whose earnings levels, the study has found, far exceed those of other kinds of immigrants.

Motivated in part by the rapid rise in the overall level of immigration, which has continued despite the economic downturn, as well as changes in the type of immigrants admitted, a pair of Queen’s University economists are weighing on several contentious aspects of Canadian immigration policy just as that policy is being reviewed.

Their working paper on the differences in earnings across different categories of immigrants in Canada, which was released this month through the Canadian Labour Market and Skills Researcher Network, found that economic immigrants, whose admission is determined by a points system that measures education and experience, had median earnings that were as much as 56 per cent higher than other classes of immigrants.

A recession, meanwhile, was shown to have “very marked and long-lasting scarring effects” on the earning power of immigrants of all stripes.

Commonsense though the findings may seem, rarely have they been so definitive. In an effort to gauge how well immigrants are integrating into the Canadian labour market, Michael Abbott and Charles Beach tapped CIC for a decade’s worth of annual earning data for all immigrants that arrived as landed immigrants in 1982, 1988 and 1994.

“It’s not a sample. It consists of the totality of all immigrants who have arrived in … those respective years,” Beach told The Huffington Post. “That makes it really quite large and, if you wish, more reliable than any other study that’s out there.”

By comparing the annual earnings of four different classes of immigrants -- economic immigrants, those who accompanied them, family class immigrants, and refugees -- the researchers were able to quantify just how much skills matter.

What they found was that the 10-year median earnings levels of economic migrants significantly exceeded those of the other classes -- between 30 and 37 per cent higher for men, and between 39 and 56 per cent higher for women.

The study found that refugees and family class immigrants -- those who came to join family already here -- had the lowest earnings levels. The real earning levels of refugees declined over the each successive cohort, suggesting that it got more difficult over time for this group to make ends meet.

But regardless of their skill level, immigrants felt the sting of recession. In 1990-1991, there was a decline in the median real earnings of male immigrants in all four admission categories in both the 1982 and 1988 cohorts. Meanwhile, those who arrived in 1994 experienced relatively low initial annual earnings, suggesting that the downturn continued to take a toll on immigrants, even after it was officially over.

A similar trend was observed in the aftermath of the recession in the early 1980s for those who arrived in 1982.

“That was actually a bit surprising to us,” says Beach of the effect of recession on immigrant earnings. “Perhaps it shouldn’t be, because there’s an of old rule of thumb in labour economics that says, ‘Last in, first out.’ If a recession comes along, and people get laid off on the whole, it’s the most recently hired, people with less tenure or seniority in the firm. And immigrants in general are people who have recently arrived.”

It’s a finding he says should prompt policymakers to consider reducing the number of immigrants admitted during tough economic times.

“In this recent recession and period of slow growth, that’s not what’s happened. The tap not only has been kept on, it’s been increased,” he says, adding that there has also been a growing number of newcomers admitted as foreign temporary workers and provincial nominees.

Total immigration to Canada has risen from 84,000 in 1985 to more than 280,000 in 2010, the highest number in more than half a century.

Immigration numbers vary from year to year, but they have been on an upward trend for decades, and last year’s 281,000 arrivals was the highest number since 1957, when Canada took in 282,000 immigrants.

Family class immigrants currently make up 26 per cent of those admitted; immigrants chosen for their economic potential, meanwhile, make up about 30 per cent.

Beach says the outcomes of skill-assessed economic immigrants is a testament to their relative success -- and the fact that the proportion of those admitted under that category should not be reduced.

“If we want to get immigrants to do well in Canada, that category is the one [that] does consistently better than the others,” he says.

But changing the mix of immigrants Canada takes in could have a political cost. Earlier this year, Immigration Minister Jason Kenney came under fire after reports showed that CIC was planning to reduce the number of family reunification visas by five per cent in 2012.

On Monday, Kenney’s ministry launched an online online questionnaire -- the department’s latest attempt to get public input on the appropriate mix of immigrants.

“The online consultation provides an important opportunity to gather input from stakeholders and the public on key questions facing CIC,” says Minister Jason Kenney. “This is also a chance to highlight some of the considerations and difficult choices involved in managing a global immigration system.”