Economic Week in Review – April 2 2015

The Economic Week in Review for April 2 2015

  • Economy growth not yet “atrocious.”
  • Economic security and public investment whip terrorism and tax cuts as priorities
  • No future for Future Shop, employees left in the dark
  • Wages increasing (a bit)
  • Profits permanently higher?
  • Still Working on the Edge
  • Diversity recognized

  • Not yet “atrocious.” One day after Bank of Canada governor Stephen Poloz warned Canada’s economy would have an “atrocious” first quarter, Statistics Canada reported that the economy shrank by just 0.1 per cent in January, not as bad as expected. Still about 40 per cent of Canadian executives surveyed expect the economy to decline over the next year, the most pessimistic outlook since 2009 when Canada was in deep recession. Major banks, including TDCIBCBMO and Scotiabank have scaled their forecasts down to below two percent growth this year, with no improvement in the unemployment rate and lower inflation, although RBC remains more optimistic.
  • Economic security and public investment whip terrorism and tax cuts as priorities. As the economy has declined, the Harper government has become obsessed with terrorism, but 90 per cent of Canadians polled by Nanos said economic policies will be more important than plans to fight terrorism in determining who wins the next election. Those polled said the federal government’s top priority should be infrastructure investment, followed by paying down the debt and ivesting in social programs. Only 14 per cent called for more tax cuts. Corporate executives also put a low priority on cutting taxes, with only a quarter saying it should be a priority in the federal government’s budget, well-below balancing the budget (53 per cent), investing in infrastructure (44 per cent) and investing in skills training (36 per cent).
  • No future for Future Shop. The sudden closing of 131 Future Shop stores in Canada shocked their 1,500 workers, who found out Saturday morning they’d be losing their jobs, with the business offering limited severance. Since two-thirds of these workers are part-timers, working less than 15 hours a week, many will have a hard time getting Employment Insurance (EI) benefits. Cuts to the EI program have reduced eligibility so much that just 37 percent of unemployed workers now qualify.
  • Wages increasing (a bit). Base wage increases in major collective agreements settled in February averaged 2 per cent over the duration of the agreements, up slightly from 1.9 per cent in January and above the 2014 average of 1.7 per cent. Average public sector wage settlements have remained below private sector increases. The federal government Labour Program is forecasting average base wage increase in collective agreements settled in 2015 will be 1.8 per cent, slightly higher than previous years, but still below the target rate of inflation. Average increases are expected to be higher in Maritime provinces, Quebec, Manitoba and Saskatchewan and lower in Ontario and BC. Statistics Canada also reported that average weekly earningsincreased by 3 per cent in January compared to the year before, with the biggest increases in wholesale trade and manufacturing, and the smallest increases in education and in admin and support services. 
  • Profits permanently higher? Average corporate profit rates are now at a 27-year high at just over 8 per cent of sales. The CIBC’s Benjamin Tal says that instead of falling, higher profit rates are here to stay for some time because labour costs and wage increases remain soft, and because the lower value of the dollar will help exporters. Canada Post made a profit of $194 million last year, following a reported loss of $125 million in 2013. Canada Post has been profitable in 18 of the last 20 years, but is still planning to eliminate home delivery and cut thousands of workers.
  • Still Working on the Edge. report by the Workers Action Centrebased on the experiences of workers in precarious jobs includes extensive recommendations on how Ontario should improve employment standards, enforcement and labour relations rules to improve the conditions of workers like them. A much higher share of workers in equality-seeking groups, including women, Aboriginal and racialized workers and workers with disabilities are in precarious jobs. Workers in precarious jobs not only have lower levels of security and benefits, but also lower pay: the TD Bank estimates they make about $15,000 ($11,800 to $18,000) less on average than those in more secure jobs.
  • Diversity recognized. At a time when states like Indiana are moving backward in accepting diversity with religious laws thinly veiled against gays and lesbians, a number of major employers have reacted forcefully saying they won’t tolerate discrimination of any form. In Canada, almost half of the best diversity employers are in the public sector, which also reflects the fact that pay is more equitable in the public sector, including for women, racialized and Aboriginal workers—largely because of the positive influence of unions.

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