People are taking to the streets and the North American economy is in shambles, but you wouldn’t know it by looking at U.S. markets.
Until now, action by the Federal Reserve Board has been wonderful for the richest 10 per cent of U.S. citizens who, according to the central bank’s own data, own 90 per cent of all stocks.
By cutting interest rates to near zero and promising a flood of new money into the economy through quantitative easing, Fed Chair Jerome Powell has U.S. market traders convinced it’s time for renewed exuberance.
The Dow Jones Industrial Average paused in its rise yesterday, but U.S. President Donald Trump seemed thrilled when the Nasdaq market soared to new highs.
Market record as economy slumps
“NASDAQ HITS ALL-TIME HIGH,” crowed Trump in a tweet. “Tremendous progress being made.”
NASDAQ HITS ALL-TIME HIGH. Tremendous progress being made, way ahead of schedule. USA!
But on main street, where businesses are failing, where unemployment has hit double digits, where coronavirus deaths keep climbing and anti-Black racism protesters fill city centres, progress is considerably less obvious. Records are headed in the other direction.
It is well-known that financial markets are not necessarily a good short-term indicator for the wider economy. But as the central bank head made very clear at Wednesday’s news conference, the suffering is far from over for Black and Hispanic low-wage earners.
Just as the Organisation for Economic Co-operation and Development — sometimes described as the rich countries’ economic think-tank — was predicting the worst recession in a century, Powell announced the bank would hold interest rates below 0.25 per cent.
And the consensus view from members of the Federal Open Markets Committee, which advises the Fed chair, was that the central bank was unlikely to hike those rates again until 2022.
It was a point that Powell made emphatically at yesterday’s news conference to an online assembly of reporters.
Not even thinking about it
“We’re not thinking about raising rates,” he said. “We’re not even thinking about thinking about raising rates.”
Asked twice about how he could justify the fact that those continued low interest rates contribute to the soaring wealth of the richest while the poor are thrown out of work, Powell was unwilling to pass judgment.
And asked directly whether there was some way to tweak the system to prevent a widening of the wealth gap, a repeat of what happened following the 2008 economic meltdown, the Fed chair was unable to offer suggestions.
Not only that but one reporter observed that since the Fed intervened with its rate reductions on March 23, every stock in the S&P 500 index had risen in value despite a sharply weakened economy. The reporter asked whether the Fed was worried it had created a market bubble that could pop.
Powell sidestepped the questions, offering instead the same justification as central bankers offered in 2008. Saving the financial system was the first essential step in saving the entire economy, he said, and that required stopping the panic once investors realized the COVID-19 disease would sweep the world.
The Nasdaq, known as the market where many technology companies list, hit another new high on Wednesday. (Reuters)
“From that point forward, investors everywhere in the world, for a period of weeks, wanted to sell everything that wasn’t cash,” Powell said. “So what happened was, markets stopped working.”
Just as in 2008, said Powell, the Fed and others, including the Bank of Canada, had to flood the market with cash as the only way to “restore the markets to function.” And while it is not the Fed’s job to decide asset price levels, he said, he was pleased markets are now functioning once again.
Struggles on main street
Also just as happened 12 years ago, getting the real main street economy working again is a harder task. While sending money to financial markets was quick, getting loans to struggling small businesses has been much more difficult. But eventually low rates should help there too, he said.
“There’s no playbook here,” Powell said. “If we’d had a great idea for changing main street, we would have done it.”
While some businesses try to reopen, the employee entrance at this hotel, a sector which employs many lower wage workers, has little traffic. (Jonathan Ernst/Reuters)
The Fed chair was visibly dismayed by the economic setback, when only months ago, unemployment was at record lows reaching a point where he could see wages starting to rise and even people who had left the workforce were being drawn back in.
Now, he fears it will be two years or more before the economy can begin to replace those lost jobs. Millions will likely never get their jobs back, and most heart breaking, he said, was that the worst suffering has been in low-wage service jobs often held by the least well off.
“Unemployment has gone up more for Hispanics, more for African Americans, and women have borne an extraordinary, a notable, share of the burden,” said Powell.
And while the head of the Federal Reserve said he would use every tool in the central bank’s toolbox to get people back to work, Powell was frank about the things he could not do.
Fiscal spending, tax policy and wealth redistribution are tools that remain firmly in the hands of elected officials should they decide to use them.
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
