Sadie Tanner Mossell Alexander, the first African-American to earn a PhD in economics, in 1944
observed
that Black workers would be the “last to be hired and the first to be fired” unless the economy was at full employment.
The economics profession is finally catching up, as policy-makers such as Bank of Canada governor Tiff Macklem and U.S. Federal Reserve chair Jerome Powell are as focused on levelling the playing field for marginalized groups as they are on traditional worries such as inflation.
Systemic racism still blocks ethnic minorities from fully participating in the economy unless white bosses are forced to choose between either confronting their prejudices or missing an order due to a lack of staff. Ancient gender roles force women to choose between careers and children. The long-term unemployed become victims of both atrophy and those managers who are conditioned to prefer poaching active workers to fill open positions, rather than taking a chance on someone who has been on the sidelines for six months.
History and our own stupid human behaviour mean we continue to leave considerable talent on the bench — or in the stands. As a result, the economy is less productive than it could be, which makes balancing budgets, closing output gaps and hitting inflation targets that much harder.
Macklem, who took over as Bank of Canada governor in June, is making inequality the focus of policy, as Powell in the United States and Christine Lagarde at the European Central Bank have also done. On Feb. 23, Macklem made it clear that he intends to let the economy run hotter for longer than most mainstream economists would have thought safe only a few years ago, reinforcing both the likelihood that interest rates will remain extremely low for at least another couple of years and that more people will potentially get to participate in the recovery.
The reason: to test the bounds of full employment in order to crowd more people into the workforce.
that the unemployment rate had been unusually low for an extended period of time before the pandemic, and yet inflation never took off. It could have been a fluke. But in case it wasn’t, Macklem indicated that he and his deputies on the Governing Council agreed to probe the limits of their previous understanding of the relationship between employment and inflation. The pre-pandemic experience suggests the central bank needn’t fear inflation quite as much as it has in the past, which would allow policy-makers a freer hand to stoke economic growth.
“Based on past economic cycles, we would have expected inflationary pressure to begin to rise,” the governor said in a virtual speech hosted by the Calgary and Edmonton chambers of commerce. “But inflation wasn’t threatening to take off. As the pandemic recedes and the recovery continues, we will keep that experience in mind.”
The unemployment rate dropped below six per cent at the end of 2017 and averaged 5.8 per cent until the governments shut down most of the economy in March 2020 to fight COVID-19.
That level is essentially full employment, according to the Bank of Canada’s understanding of how the economy works. That is, when the jobless rate drops that low, economists at the central bank have long assumed that everyone who wants a job would have one and, therefore, growth would be such that inflationary pressures start to build.
But inflation never became a major concern during that entire period. The Consumer Price Index (CPI) averaged annual growth rates of about two per cent, which is what the Bank of Canada is obligated to achieve. The relationship between the unemployment rate and prices appears to have changed, so why not try for fuller employment?
“There’s a shared responsibility and monetary policy has a role to play,” Macklem
said
on a call with reporters after his remarks. “If we can all play that part, we can get Canadians back to work, we can grow the labour force and we can achieve a complete, shared recovery. If we don’t do that, it’s going to be an even more protracted recovery. It won’t be as shared, and there will be less potential to grow going forward.”
The Bank of Canada is benefiting from a path cleared by the Fed. The American central bank cut interest rates three times in 2019, even as the economy continued to grow. Powell was accused of courting trouble, and he may yet have to contend with a collapse of the stock-market bubble. But the jobless rate had dropped to 3.5 per cent by the eve of the pandemic, the lowest since the late 1960s. Millions of Blacks and other marginalized workers found jobs, and inflation remained dormant.
Inequality isn’t as acute in Canada as it is in the U.S., but it’s still an issue. “Some measures suggest that Canada is among the top jurisdictions for inclusion and equity in the distribution of education and skills attainment,”
a new report
by the Brookfield Institute for Innovation and Entrepreneurship said, “but troubling inequities persist, and many face barriers to the use of their skills in the labour market, leading to stubbornly high levels of income and wealth inequality.”
Women in Canada are 17.5 percentage points more likely to have a post-secondary credential than men, and yet the gender-pay gap has barely changed in decades, according to Brookfield’s study. Some 71 per cent of non-Indigenous Canadians aged 25 to 34 have earned a certificate or a degree beyond high school, compared with 29 per cent for Blacks and 40 per cent for First Nations.
Macklem’s latest remarks suggest policy-makers are prepared to take these sorts of divisions at least as seriously as inflation. The jobless rate was 9.4 per cent in January, a long way from full employment, no matter how you measure it. “The economy will need support for quite some time, and the bank will continue to do its part,” he said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
