Kevin Carmichael: High interest rates bringing balance after years of housing overspending
Higher interest rates hurt, but they might be bringing some balance to Canada’s economy after years of overspending on housing.
Statistics Canada on Jan. 31 said gross domestic product increased 0.1 per cent in November from the previous month, evidence the economy was approaching stall speed at year-end, just as the Bank of Canada predicted it would be.
It was the weakest month-to-month increase since January 2022, and there’s little reason to anticipate a re-acceleration in December. Statistics Canada said preliminary data suggest GDP was unchanged last month, which implies the economy grew at an annual rate of 1.6 per cent in the fourth quarter, according to Bank of Montreal chief economist Douglas Porter.
That would be a slightly faster pace than the 1.3 per cent rate the Bank of Canada predicted in its latest economic outlook, but still considerably slower than the 2.9 per cent rate in the third quarter and the 3.2 per cent rate in the first quarter. The Bank of Canada’s interest rate increases — four percentage points between March and December with an additional quarter-point lift last week — are starting to bite.
“Growth has come to a crawl,” Charles St-Arnaud, chief economist at Alberta Central, said in a note to his clients.
Canada is coming off a long high of housing-led growth. It was fun for a while, especially for those who thought they had purchased a place to live only to discover they are now sitting on fortunes.
Population growth and limited supply were responsible for some of the demand that drove housing prices to rare heights over the past decade, but much of it was caused by ultra-low interest rates and a decision by households to pile up dangerous levels of debt. Now, interest rates are higher than some new homebuyers have ever seen, and the housing bubble is deflating.
One of the main causes of the decline in GDP in November was residential building construction, which dropped 1.8 per cent, the seventh decline in eight months and the biggest since unionized construction workers went on strike in May 2022.
Canada could have used two periods of ultra-low interest rates and extraordinary levels of fiscal stimulus to turn itself into a modern economy. And perhaps it took some steps in that direction, as some of that money will have sloshed into productive enterprises and provided backing for some talented entrepreneurs. But we mostly bought existing homes and condos, enriching the real estate industry, perhaps the economy’s least productive sector.
A notable moment in Canadian economic history occurred in December 2008. As the Great Recession gathered force, and central banks pushed borrowing costs to zero, the “real estate and rental and leasing” industry generated output equivalent to 11.7 per cent of GDP, surpassing the contribution from manufacturing for the first time, according to Statistics Canada data.
The country’s brokers, agents and landlords didn’t look back. Their share of GDP climbed to 14.8 per cent in April 2020, when many other industries were forced to shut down, and central banks had once again dropped interest rates to essentially zero to stave off deflation in the early days of the COVID-19 crisis. (Manufacturing’s share was 8.5 per cent.)
Bank of Canada governor Tiff Macklem told the House finance committee in November that he intends to conduct an analysis of how monetary policy was deployed during the pandemic. The central bank for the first time used quantitative easing (QE), an approach to stimulus that involves creating money to purchase financial assets.
Macklem was one of the most active users among the major central banks, and it’s fair to wonder whether he was too active, given the additional froth that was whipped up in housing markets. Shelter costs were an important contributor to the inflation surge that prompted the most aggressive series of interest rate increases in the Bank of Canada’s history.
Canada’s central bankers dislike taking responsibility for what happens at the micro level in the economy, saying their only job is to keep inflation at around two per cent. That’s true, but the problem with that dodge is that there is now sufficient real-world evidence to suggest the distortions created by zero interest rates should be considered against the desire to achieve a certain inflation target.
In some ways, last year wiped out more than a decade of such distortions. The benchmark interest rate is now back to where it was in 2008, before the Great Recession. And, perhaps as a result, economic gravity is reasserting itself.
Manufacturing will probably never be the economic engine it was a generation ago, but at 9.4 per cent of GDP, it’s still below its pre-pandemic level of around 10 per cent. There’s room to grow, although higher borrowing costs and an economic downturn will make that harder in the short term.
A more positive sign is that a couple of industries that will be key to future growth — and probably geared to structural changes in the economy rather than short-term interest rates — continue to claim a bigger share of the economy.
Companies that provide services related to information technology — think Montreal-based CGI Inc., which builds computer systems for companies and governments — now generate about 5.6 per cent of Canada’s GDP, which is more than oil and gas and the most since Statistics Canada started measuring the industry’s output in 2007, when the percentage was about 4.3 per cent.
At the higher end of what is very loosely described as the innovation economy, companies that provide professional, scientific and technical services generated output worth $136.8 billion in November, the equivalent of 6.6 per cent of Canada’s $2.1-trillion economy and a record.
Combined, IT services and professional and technical services now account for about 12 per cent of the economy. That’s getting close to real estate, which has dropped to 12.9 per cent, the lowest since February 2020, and nearing the 11.4 per cent recorded in early 2008. We’ve almost worked off the excesses of one crisis. There’s still some rebalancing to do.
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A Game-Changing Factor to Job Search: Your Ability to Make Human Connections
This column will be a departure from my usual job-searching topics to focus on something crucial to a successful job search and your career momentum, especially when networking and interviewing: making human connections.
“The most important things in life are the connections you make with others.” – Tom Ford, American fashion designer.
Genuine human connections lead to positive energy exchange and trust building. Since most job search activities involve interacting with people, projecting positive energy and being seen as trustworthy greatly benefits you.
According to American psychologist Abraham Maslow’s Hierarchy of Needs, love and belonging are the most essential needs we must fulfill, besides food, water, and safety. We are more fulfilled when our needs for love and belonging are met.
We live busy lives, juggling work, family responsibilities, self-care, side hustles, and more. Therefore, often our social connections fall by the wayside. You might not think connecting with others is important, but it is. Social connections can lower anxiety and depression, help regulate emotions, increase self-esteem and empathy, and improve your immune system. These are huge pluses when job hunting.
Sadly, we live in a time when there is a great deal of disconnection. While technology gives the appearance we are more connected than ever, the screens around us disconnect us from nature, ourselves, and those around us. Rather than using technology, especially social media, to enhance our human connections, we use it to replace them.
Being brave, proactive, and taking chances is often required to make human connections. Striking up a conversation with a stranger can be intimidating, requiring you to step out of your comfort zone. Your lowest-hanging fruit is to reconnect with current friends and family. Then venture out and try new activities, such as joining a club or taking classes, to meet people to build a relationship with.
Putting yourself out there will ultimately pay off in the form of a rewarding feeling that comes from building human connections. Here are six simple ways you can create human connections.
Surround yourself with people with shared interests.
It is easy to bond with people who share your interests and hobbies. Identifying commonalities between your interviewer and yourself is the most straightforward way to bond with your interviewer, which will give you a competitive advantage.
Do you love reading? Join a local book club. Are you a runner? Join a running club. Go where people who share your interests and beliefs are, such as clubs, volunteering, sports, taking classes, church, or sitting on an advisory board.
Overcome your resistance.
Building relationships is often intimidating because of a natural fear of rejection. However, to make human connections, you must overcome your limiting beliefs causing your resistance to change, and embrace situations outside your comfort zone.
The best way I know how to lower your anxiety when meeting new people is to remember showing interest is a massive gesture to anyone you meet. Therefore ask open-ended questions about the other person and make your discussion all about them.
TIP: When meeting someone for the first time, ask yourself, “How can I help this person?”
Smile and give off a positive attitude.
People prefer positive emotions to negative ones when forming a social connection; therefore, first impressions count.
A positive demeanor and a genuine smile will naturally draw people to you. Before spending time with others, I find doing a gratitude exercise and taking a few minutes to reflect on the good things in my life helpful in creating a positive attitude.
Putting your best self forward will maximize your chances of being a people magnet.
If you want to make friends more easily, allow yourself to be more vulnerable with others. This does not mean dropping all filters or boundaries. Too much, too soon, can put people off. On the other hand, you do not want to be an overly edited version of yourself and thus come across as not being authentic.
People can sense whether or not someone is genuine, so let them see the most authentic version of you. Your vulnerability will also prompt them to feel comfortable around you and connect with you on a deeper level.
Do not hide behind your phone.
In social situations where you are uncomfortable, hiding behind your phone is easy, preventing you from making real-life connections.
Being on your phone during a party or networking event makes you less approachable. Whenever you are out, focus on being present and engaging with the people around you.
Stay in touch.
Human connections need to be nurtured. Regular contact deepens your connections.
If you make a new friend, keep in touch with them and grow your friendship. Likewise, maintain your existing relationships with friends, family, and colleagues by keeping in touch.
Making and maintaining human connections is an activity you should prioritize if for no other reason than the fact that opportunities (e.g., jobs, friendships, love) exist all around you; the only caveat is they are connected to people. Therefore, the more people you are connected to, the more opportunities you will be exposed to.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to firstname.lastname@example.org.
First Citizens acquires troubled Silicon Valley Bank – CP24
North Carolina-based First Citizens will buy Silicon Valley Bank, the tech industry-focused financial institution that collapsed earlier this month, rattling the banking industry and sending shockwaves around the world.
The deal could reassure investors at a time of shaken confidence in banks, though the Federal Deposit Insurance Corp. and other regulators had already taken extraordinary steps to head off a wider banking crisis by guaranteeing that depositors in SVB and another failed U.S. bank would be able to access all of their money.
Customers of SVB will automatically become customers of First Citizens, which is headquartered in Raleigh. The 17 former branches of SVB will open as First Citizens branches Monday, the FDIC said.
European shares opened higher Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%.
Investors worry that other banks also may crumble under the pressure of higher interest rates. On Friday, much of the focus was on Deutsche Bank, whose stock tumbled 8.5% in Germany, though it was back up about 3.6% in early trading Monday. Earlier this month, shares of and faith in Swiss bank Credit Suisse fell so much that regulators brokered a takeover of by rival UBS.
In the U.S., SVB, based in Santa Clara, California, collapsed March 10 after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-largest bank collapse in U.S. history after the 2008 failure of Washington Mutual. Two days later, New York-based Signature Bank was seized by regulators in the third-largest bank failure in the U.S.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000, so depositors were able to access their money.
New York Community Bank agreed to buy a significant chunk of Signature Bank in a $2.7 billion deal a week ago, but the search for a buyer for SVB took longer.
The sale announced late Sunday involves the sale of all deposits and loans of SVB to First-Citizens Bank and Trust Co., the FDIC said.
The acquisition gives the FDIC shares in First Citizens worth $500 million. Both the FDIC and First Citizens will share in losses and the potential recovery on loans included in a loss-share agreement, the FDIC said.
First Citizens Bank was founded in 1898 and says it has more than $100 billion in total assets, with more than 500 branches in 21 states as well as a nationwide bank. It reported net profit of $243 million in the last quarter. It is one of the top 20 U.S. banks and says it is the largest family-controlled bank in the country.
Shoppers Drug Mart moves away from medical cannabis, will send patients to Avicanna – CTV News
Shoppers Drug Mart Inc. is moving away from its medical cannabis distribution business and preparing to transfer patients to a platform run by biopharmaceutical company Avicanna Inc.
The pharmacy chain owned by Loblaw Companies Ltd. announced the shift Tuesday, but did not say what prompted the change or how much money Toronto-based Avicanna is paying for Shoppers to refer patients to its MyMedi.ca platform.
“We are grateful for the trust placed in us by our medical cannabis patients over the past few years, and are confident we’ve found the right partner in Avicanna to continue to support them,” said Jeff Leger, Shoppers’ president, in a statement.
His company will start to send customers to Avicanna’s platform in early May, with all of the patients set to be off-loaded from Shoppers’ medical pot service by the end of July. Customers will be able to place orders on Shoppers’ website through the transition period.
Avicanna said it will offer a similar range of products including various formats, brands and “competitive pricing.” Like Shoppers, its online medical portal will strive to educate customers around harm reduction and provide specialty services for distinct patient groups like veterans.
Shoppers first launched its medical cannabis business in Ontario in January 2019, months after recreational pot was legalized in Canada (medical pot was legalized in Canada in 2001) at a time when many predicted the weed sector would be booming in the coming years.
The sector has instead struggled with profitability and as high numbers of recreational cannabis shops cluster in several cities, many retailers and licensed producers have had to drop their prices to stay competitive.
However, Shoppers said it racked up tens of thousands of patients in its four years of existence, providing them with access to cannabis from more than 30 brands including Aphria Inc., Hexo Corp.’s Redecan and the Green Organic Dutchman.
Shoppers’ medical cannabis patients were required to obtain a prescription from a licensed health care provider such as a doctor to begin ordering pot from the company, which shipped orders to their homes.
But the company was unhappy with how medical pot regulations limited its model. Shoppers claimed Tuesday that medical cannabis remains the only medication that is not dispensed in pharmacies.
“As we move away from medical cannabis distribution, we remain firm in our belief that this medication should be dispensed in pharmacies like all others and will continue our advocacy to that end,” said Leger.
Avicanna’s statement did not outline its feelings on the matters, but its chief executive said it was “motivated” to “put our full efforts toward advancing medical cannabis and its incorporation into the standard of care.”
“We are thankful to be selected as the partner for this transition and look forward to introducing MyMedi.ca, supporting patients and providing them with continuity of care,” said Avicanna chief executive Aras Azadian in a statement.
This report by The Canadian Press was first published March 28, 2023
A Game-Changing Factor to Job Search: Your Ability to Make Human Connections
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