After a series of historic interest rate hikes, economists are left wondering whether job losses are next.
High interest rates cause businesses and consumers to pull back on spending. As business slows, companies review their staffing levels and unemployment tends to climb.
However, up until now, the Canadian labour market has kept its steam.
“I think it’s surprised both market expectations and also the Bank of Canada’s expectations,” said BMO economist Shelley Kaushik.
In December, the unemployment rate was five per cent, just above the all-time low of 4.9 per cent reached in the summer.
In its latest monetary policy report, the Bank of Canada said it expects the full effects of rate hikes on the labour market to play out over a longer period.
“Part of rebalancing demand and supply in the economy is rebalancing the labour market,” said Governor Tiff Macklem during a news conference on Wednesday.
The comment came as the central bank raised its key interest rate for the eighth consecutive time and said it was taking a conditional pause, keeping the door open to further rate hikes if inflation isn’t tamed.
Labour groups have voiced concerns about the Bank of Canada’s rate hikes in recent months, with Unifor president Lana Payne previously accusing the central bank of waging war on the working class.
Jim Stanford, an economist and the director of the Centre for Future Work, is concerned higher interest rates will slow the economy more than the central bank is anticipating.
“I think that a serious downturn is still more likely than the soft landing,” he said.
Stanford said 40 years ago, that was the case when the Bank of Canada fought off runaway inflation with rapid interest rate hikes.
In either case, he said it will mean “higher unemployment and reduced life chances for people who are trying to find a way and in a labour market.”
But some economists are cautiously optimistic that employment may prove to be somewhat resilient to the slowdown, given that unemployment is currently near historical lows.
“The hope is that as businesses start to see that slower demand, that they will start to pull those job vacancies before they start firing workers,” said Kaushik.
Job vacancies reached record highs last year, with over one million jobs unfilled in the economy.
Since then, the number of unfilled positions have fallen to around 850,000 vacancies in November.
On Thursday, Statistics Canada reported the number of job vacancies fell by 2.4 per cent in November to their lowest level since August 2021.
The Bank of Canada is also hopeful it can rebalance the economy and restore low inflation without trigger massive job losses.
In a research paper published in the fall, Bank of Canada researchers estimated in their base case scenario that restoring normal job vacancy levels would push up the unemployment rate to a peak of 6.7 per cent.
As the economy cools, BMO’s forecast suggests Canada’s unemployment rate will average at six per cent this year.
And while that does suggest more Canadians will be unemployed, Kaushik said a six per cent unemployment rate is “still fairly low.”
A greater loss in unemployment was experienced during the 2008 global financial crisis. According to Statistics Canada, the unemployment rate rose from 6.3 per cent to 8.6 per cent between October 2008 and October 2009.
This report by The Canadian Press was first published Jan. 26, 2023.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
