BoC Rates, Jobz Jobz Jobz, Lumber
A Whole Lotta Jobs for Canada
It’s certainly been a while, but believe it or not, we have some ACTUAL, REAL-LIFE positive news regarding the state of Canada’s economy and job market. REJOICE!
That’s right people – Canada’s economy gained a whopping 81,100 net jobs in August, a much rosier result than the expected 15,000 forecasted by analysts.
According to Statistics Canada, most of these jobs were part-time positions filled by young people, and the service industry saw the greatest pick-up in numbers. Geographically-speaking, the vast majority of the increase was seen in our most populous provinces, Ontario and Quebec, with smaller gains Manitoba, Saskatchewan and New Brunswick. Jobs numbers were largely unchanged in the remaining provinces and territories.
The private sector saw an increase of 94,000 employees, the number of educational services workers went up by 20,500 (primarily in Quebec), while finance, insurance, real estate, rental and leasing also rose by 22,400. However, despite this positive update for Canada’s job market, unemployment remained steady of 5.7% – I guess you’ve gotta take your good with the not-so-good, right?
This is a particularly important set of statistics, as this will be the final publication by Statistics Canada prior to the triggering of the national election, and will more-than-likely be a hot topic of conversation on the campaign trail.
Keep it up Canada – you’re doing AMAZING SWEETIE.
Bank of Canada Keeps Key Rate Steady
All eyes were on the Bank of Canada (BoC) this past week. Many economists had predicted that Canada will follow the global rate-cutting trend and decrease its key interest rate in September. Instead, the Bank of Canada announced that it would neither raise nor lower its key rate from 1.75 per cent.
Why did they decide to do so? Many reasons: Canada’s Inflation is well-behaved, the housing market is showing signs of recovery, unemployment is generally low, and our GDP growth is surprisingly strong. In short, as the BoC’s Deputy Governor Lawrence Schembri stated, the Canadian economy is showcasing “a welcome degree of resilience.”
Does that mean we are out of the woods? Well, not exactly. The US-China Trade war, Brexit and other negative global developments could still very well consume the Canadian economy into recession. There are other signs of concern as well. Consumption and business investment are weak. Deputy Governor Schembri speculated these concerns are “likely linked to ongoing trade war and related uncertainty.” Thanks, Trump.
In a negative scenario, the BoC will be forced to cut rates in October. All that being said, it seems (and the BoC agrees) that the Canadian economy is doing pretty darn well- at least for now.
Let’s Talk Lumber
Canada’s softwood lumber industry could be experiencing some much-needed relief. On Wednesday a binational NAFTA* panel sent the U.S. – Canada softwood lumber case back to the U.S. International Trade Commission (ITC) after deciding that there were insufficient grounds on the US claim that Canadian lumber exports were causing injury to the American softwood lumber industry.
It’s okay, we don’t expect you to be following the lumber market, let’s back up. In April 2017 the U.S. imposed a 20% duty on Canadian softwood exports—increasing the price of Canadian lumber in the U.S. in order to increase domestic sales. 2017 marked the 5th round of trade disputes over softwood lumber and the debate has not changed: the U.S. claims that Canadian softwood lumber is unfairly subsidised by the government, resulting in underpriced lumber, and is therefore hurting the U.S. forestry industry.
Why does this matter? The softwood lumber market employ’s over 200 000 Canadians (mostly in B.C.), generates approximately $22 billion in GDP (2016), and the U.S. is its biggest export destination (buying $18B USD in 2016). When Canadian lumber is offered for 20% more than U.S. domestic suppliers, its most important customers say ‘no thanks’.
The effects? Strong demand allowed Canada’s softwood market to successfully manage the first year of the duty, but in mid-2018 market effects caused demand to drop, lowering prices by 55%, which exacerbated the effects of the duty. In the past year over 5000 people in B.C.’s lumber industry have been laid-off (1000 permanently and 4000 temporarily) and between May and July alone 45 lumber mills have closed.
What’s next? If the ITC reverses its claim, the 20% duty could be lifted, resulting in free trade, and companies could be reimbursed billions of dollars. The panel has given the ITC 3 months to rethink its claim, but don’t hold your breath. History tells us it could take two or three more rounds between the NAFTA panel and the ITC before any decision is made.
* The new NAFTA (USMCA) still has to become ratified in Canadia, Mexican, and American legislatures before it comes into effect – until then, we’re stuck with the old NAFTA