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How Ottawa can end CERB, boost the economy and help the unemployed – The Globe and Mail

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The good news is that our economy is reopening. The bad news is Canada has a ways to go before recovering all the jobs lost this year.

The return journey will take months and, if there are headwinds or speed bumps, it could take years. That means even as things improve for most Canadians, a large minority will be unemployed or underemployed for some time, through no fault of their own. They are going to need support, and the traditional Employment Insurance program won’t cut it, since many of the unemployed do not qualify for it.

But first, the good news.

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The Canadian labour market has already recouped more than half its pandemic job losses. By April, 5.5 million workers had been affected by the economic shutdown – three million lost their jobs, and 2.5 million were still employed yet not working. But between April and July, the economy added more than 1.6 million jobs, according to Statistics Canada, and the number of people working less than half their usual hours fell below one million.

That means the number of workers affected by COVID-19 has dropped from 5.5 million to 2.3 million. And the unemployment rate, which rose from 5.6 per cent in February to 13.7 per cent in May, has fallen back to 10.9 per cent. There is every indication that those numbers will continue to decline in August and – assuming no health or economic speed bumps – through the fall.

To keep this moving in the right direction, the most important thing is continued progress on reopening the economy. And that in turn is dependent on smart public-health measures that allow reopening to happen, without sparking major COVID-19 outbreaks.

But even if everything goes right – steady economic recovery, no second pandemic spike, and strong demand from our chief export market in the United States – Canada’s job market won’t get back to where it was in February until late 2021 or 2022. The excess of job seekers over jobs is dropping fast, but hundreds of thousands of idle Canadian workers will not find work for some time.

The question is what should be done to help them.

The Trudeau government has yet to spell out the details but, later this month, it is going to allow the Canada Emergency Response Benefit (CERB) program to begin wrapping up, transferring responsibility for supporting most jobless people to a redesigned Employment Insurance program. In principle, that’s not a bad idea. It all comes down to how EI is redesigned.

CERB had to be created for two reasons. First, because EI’s processing systems couldn’t handle millions of people all losing their jobs, and all applying for benefits, at the same time. And second, because most unemployed Canadians don’t quality for EI. In 2018, only 42 per cent of the unemployed were eligible.

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The tricky balance Ottawa has to strike involves providing a robust safety net for those who are genuinely unemployed – of whom there will still be about two million in September, and hundreds of thousands next year – while not providing that help in a way that discourages people from working.

The best way to do that may be to relax the Employment Insurance rules. To qualify for EI now, a worker must have worked between 420 and 700 insurable hours, depending on their local unemployment rate, and have accumulated those hours either in the past year or since their last claim, whichever period is shorter. Temporarily relaxing the criteria would allow more people to qualify.

However, a lot of today’s income-less people used to be self-employed, and they may not qualify for EI, even under looser rules. Ottawa is going to have to create some kind of bridge program for them – and it has promised to do so.

Getting more unemployed people into the EI tent makes sense. EI allows people to work while receiving benefits, with only some of their earnings clawed back, which means that finding work is rewarded rather than punished. EI also offers programs for education and retraining – and given that a period of joblessness is the best time possible for someone to acquire new skills, the financial support for unemployed workers to do so should, if anything, be expanded.

The ideal outcome? A more accessible EI program, but one that, come the new year, few Canadians are applying for – not because the rules are too restrictive, but because the economic recovery has been so successful.

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China is on a construction binge and that's good news for the global economy – Economic Times

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By Matt Phillips

The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again — and global prices of metals are reflecting that renewed appetite for growth.

China consumes roughly half of the world’s industrial metals, according to analysts. As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country. As a result, the prices of iron ore, nickel, copper, zinc and other metals used to build infrastructure have surged in recent months.

Since late March, prices of iron ore — the key ingredient in steel — have risen more than 40%. Nickel, needed for stainless steel, and zinc, used to galvanize metal, are up more than 25%. Copper, which is used in wiring for power transmission, construction and car manufacturing, and has long been seen as a barometer for the world’s industrial economy, is also up around 35%.

“China, as usual, went the investment route and is massively investing in metals-intensive infrastructure,” said Caroline Bain, a commodities market analyst with Capital Economics in London. “So there’s been a very strong pick up in China’s demand for metals.”

Last month, China’s state railway operator announced plans to double the size of its high-speed rail network over the next 15 years. In July, investment from China’s state-owned enterprises, including giants such as China National Offshore Oil Corporation and China Mobile, surged by 14% compared with the prior year, according to Standard & Poor’s analysts. (Private companies, by comparison, bolstered investment by just 3%.)

In Guangdong, the country’s most populous province, regional officials plan to spend some 700 billion yuan — about $100 billion — this year on public medical facilities, 5G networking and transportation infrastructure.

In February, the coronavirus outbreak prompted a lockdown of much of the country’s economy, the second largest in the world after that of the United States. From January to March, China’s economy contracted by 6.8%, the first decline the country has acknowledged in roughly half a century. Industrial activity stopped, causing metal prices to plunge. Copper and aluminum prices all dove roughly 20% in that period, while iron ore fell about 15%. The sudden pause in demand from such a big buyer immediately strained several countries that have built large parts of their economy around digging ore out of the ground and shipping it to China.

Australia’s exports to China — mostly iron ore and coal — tumbled roughly 20%, as the country fell into its first recession in nearly 30 years. Metal exports from Brazil, Chile and Peru also slumped, driven by cratering demand from China and declines in mining production, but also because miners were forced to halt operations as the coronavirus spread locally. The share prices of global mining giants, which get large portions of their revenue from China, cratered. In local currency terms, Vale in Brazil and the Anglo-Australian giant Rio Tinto both tumbled roughly 40% from January to March.

But the response of the authoritarian government in China — its state-led model that gives Beijing significant influence over the direction of the economy — was enormous, helping China post one of the fastest recoveries of any of the world’s largest economies in recent months.

Goldman Sachs’s estimates of Chinese budget deficits — a measure that includes both official budget deficit numbers and a variety of off-balance sheet government support that is common in China — ballooned to 20% of gross domestic product in the first half of 2020 from about 10% at the end of 2019, as the country pumped money into the economy.

Recent economic reports from China show where that government money has flowed. August data on industrial production revealed 5.6% growth over the same month last year, firmly establishing a V-shaped recovery for the sector. Industrial production in sectors tied to infrastructure, such as cement, steel and iron, all posted strong gains. Other official data on investment showed growth in utilities, road and rail construction.

Economists at the Organization for Economic Cooperation and Development expect that China’s GDP will actually grow by 1.8% this year, making it the only member of the Group of 20 nations that will not suffer a recession this year. That’s the best expected performance of any of the countries the organization tracked in its latest economic update.

“The recovery in GDP is much faster and stronger than elsewhere,” said Bain of Capital Economics.

That’s good news not only for metals markets, but could also herald better times for the global economy. Analysts have studied the prices of some metals as a leading indicator of global economic growth, even referring to copper as “Dr. Copper” because of its supposed ability to predict the direction of the economy as well as any economist with a doctorate.

“People’s perception of the economy is how weakened it is, yet all the industrial metals are telling you a very different story,” said Chris Verrone, an analyst and partner at Strategas Research in New York. “We think copper is the market trying to tell us that the economy is stronger than we expect.”

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U.S. September job report is going to show economy entering a weaker phase – MarketWatch

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American households are used to television dramas where difficult problems are resolved in one hour, or perhaps eight one-hour episodes on Netflix.

So it is with the economy, and there is a growing perception the U.S. economy has been suffering for long enough that the worst must be behind us.

Gregory Daco, chief U.S. economist at Oxford Economics, said he routinely comes across people now who think the economy is out of the woods, given that the unemployment rate has dropped to 8.4% a peak of 15%.

They don’t seem to realize that the unemployment rate is still higher than the peak unemployment rate of prior recessions, Daco said, in an interview.

The fact is that even after what has been a fairly strong first phase of recovery, the economy has only recovered to reach levels close to the worst part of the 2008-2009 financial crisis, he added.

The economy now is closer to the gnarly 2009 period than the slow but steady recovery of 2014-2016.

“I think that is often times an eye opener for clients,” he said.

Daco said the September jobs report from the U.S. Labor Department due this coming Friday will signal the economy is entering a critical phase, with less assistance from government and a number of uncertainties from the November elections, the coronavirus pandemic, and uncertain financial markets.

“There are a number of risks and we are going into the fall without much insulation,” he said.

The rough consensus among economists is for September nonfarm payroll gains to moderate to slightly under one million in September from 1.37 million gains in the prior month.

Daco is forecasting a sharper slowdown to a gain of 600,000 jobs. He sees the unemployment rate dipping to 8%, but due in part to workers giving up looking for work and dropping out of the labor force.

While 600,000 jobs would be considered strong in an ordinary environment, it is not strong enough to put a dent in the 11 million Americans who have lost jobs during the pandemic and millions more who are underemployed, he said.

“I continue to view the glass as half-empty. We’re still a long ways from where we were pre-Covid,” Daco said.

Richard Moody, chief economist at Regions Financial Corp., thinks it may be hard to gauge the strength of the September report given the technical cross-currents in the data.

September is usually the month that summer vacation resort employment declines as the season ends, and without those job losses this year, the reported gain might look stronger. In addition, there was also a decline in temporary census workers in the month that may skew the data to the downside.

The job report will be released Friday at 8:30 a.m. Eastern on October 2. There will also be critical data during the week on the manufacturing sector for September from IHS Markit and ISM on Thursday, and on consumer spending and inflation for August.

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Alberta cities warned 'fiscal reckoning' is ahead as COVID-19 shakes economy – Calgary Herald

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Article content continued

In the UCP government’s fall budget that year, cities saw their capital transfers and grants slashed, with Edmonton and Calgary taking the largest reductions.

AUMA president Barry Morishita said Thursday that the organization is looking forward to “resetting” the relationship between the advocacy group and the minister. AUMA declared its relationship with Madu “broken” over the summer after he didn’t respond to concerns on changes to local election rules and passed amendments into law over its objections.

In prerecorded remarks, Premier Jason Kenney touted the province’s infrastructure stimulus plan — $500 million that will be doled out to cities for projects that will spur job creation. Calgary is submitting a list of projects for a total of $152.8 million in funding.

But the premier also scolded local governments that have not embraced pro-growth policies. He said he wouldn’t “name names” but revealed a manufacturer complained that a municipal noise bylaw is preventing it from setting up shop.

“In the depth of a crisis like this, those 400 jobs matter a lot more than a few noise complaints from local residents,” he said.

He added cities should focus on getting rid of “unnecessary rules, red tape and costs” that might stand in the way of job creation.

“When I speak to major business leaders about prospective investment in Alberta, very often a message that I hear back is the greatest impediments they’ve experienced are at the local level, at the municipal level,” he said.

masmith@postmedia.com

Twitter: @meksmith

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