TORONTO — Canadians who want to help the country’s economy rebound should book haircuts, hire tradespeople for home renovations and keep ordering from local restaurants, economists say.
They believe these actions are more likely to quickly stimulate Canada’s economy and keep money within the country than online impulse shopping, which many have gravitated to during COVID-19 lockdowns.
“We could get a little bit more bang for every buck that’s spent by households if they were incentivized to spend more on the services that have domestic content and those also just happen to be the services that have been hardest hit during the pandemic,” said Royce Mendes, a senior economist with at CIBC.
Spending on services, said Mendes on Friday, helps stimulate a rebound because the people who offer them are likely to take money they earn and spend it within the domestic economy again.
If they see demand for their services return quickly enough, they may spend more on supplies needed for their work and may hire back Canadians laid off during the pandemic.
The economy lost almost 213,000 jobs in January as lockdown measures erased months of gains and marked the worst monthly declines since last April. The hospitality and service industry were hit particularly hard because restaurants, salons and other entertainment venues were ordered closed in many provinces to quell the spread of the virus.
However, Statistics Canada said Friday that 259,000 jobs were added in February, almost entirely wiping out losses sustained since the start of the year.
Douglas Porter, Bank of Montreal’s chief economist, said spending on services can help stimulate the economy and bring back even more jobs, but the reality is lockdowns and restrictive measures still remain in parts of the country, so haircuts or trips to the gym aren’t an option for everyone.
“Canadians should really double down on trying to help local businesses and services as much as they can and in the here and now and that’s with things like supporting your local restaurant through takeout or a small retailer through curbside pickup,” he said.
While he’s hoping Canadians will boost the economy by opening up their wallets, he warned that it won’t be an option for everyone.
Some have seen their financial situation bolstered during the pandemic, but others have taken on mounting debt or lost their source of income.
“Before this all began, the single biggest concern for the Canadian economy was an overextended consumer, so I would say this (spending advice) applies to people whose finances can actually handle that,” he said.
Yet Porter doesn’t believe it will be hard to get most people to spend again.
Many, he said, have saved during the pandemic and others are anxious to spend on favourite pastimes they’ve missed or on something other than goods.
“You only need so many Peloton bikes,” he joked.
Mendes had similar predictions.
“I expect that there will be some indulging, some going out for dinner more often or going out for maybe more expensive dinners,” he said.
“Maybe even going on a vacation that is a little bit more expensive, or maybe going on a few more vacations over the next 12 months.”
When vacations are safe and permitted, he said the key will be encouraging people to travel within Canada.
“Keeping that money within the borders will help the economy recover at a faster pace.”
Mendes’ remarks echoed a recent call by Destination Canada, a crown tourism corporation, for Canadians to consider domestic travel before flying abroad. The company recently said that if enough Canadians shift their international travel plans to focus on domestic destinations, it could speed up recovery for the tourism sector by up to one year.
This report by The Canadian Press was first published March 12, 2021.
Companies in this story: (TSX:CM, TSX:BMO)
Tara Deschamps, The Canadian Press
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FACT SHEET: Biden Administration Roadmap to Build an Economy Resilient to Climate Change Impacts – Whitehouse.gov
Agency Actions Will Protect Retirement Plans, Homeowners, Consumers, Businesses and Supply Chains, Workers, and the Federal Government from Financial Risks of Climate Change
Today, the Biden-Harris Administration released a comprehensive, government-wide strategy to measure, disclose, manage and mitigate the systemic risks climate change poses to American families, businesses, and the economy – building on actions already taken by the Biden-Harris Administration including just this week: a redesigned National Oceanic and Atmospheric Administration (NOAA) Climate.gov site to better connect Americans to climate explainers, data dashboards, and classroom-ready teaching resources; the Department of Labor’s new proposed rule to safeguard life savings and pensions from climate risk; as well as the Federal Acquisition Council’s advanced notice of proposed rulemaking to consider greenhouse gas emissions when making procurement decisions.
This year alone, extreme weather has upended the U.S. economy and affected one in three Americans. Both international and domestic supply chains have been disrupted by climate change – whether it’s floods in China and Texas, or wildfires that have burned nearly six million acres of land, supply chains across critical industries including housing, construction, semiconductors, and agriculture have been affected, causing delays and shortages for both consumers and businesses. American families are paying the costs. Extreme weather has cost Americans an additional $600 billion in physical and economic damages over the past five years alone. Climate-related risks hidden in workers’ retirement plans have already cost American retirees billions in lost pension dollars. Climate change poses a systemic risk to our economy and our financial system, and we must take decisive action to mitigate its impacts.
By addressing the costs of the climate crisis head-on, the federal government will safeguard the life savings of workers and families, spur the creation of good-paying, union jobs, and ensure the long-term sustainability of U.S. economic prosperity. The roadmap makes clear that protecting the financial health of American households, deploying clean energy in United States, and building an economy from the bottom-up and the middle-out go hand-in-hand.
The Administration’s whole-of-government strategy includes six main pillars to achieve the goals of the President’s May 2021 Executive Order on Climate-Related Financial Risks, including several major announcements this week demonstrating concrete actions to protect American families, the federal government, and the economy from climate-related financial risk:
Promoting the resilience of the U.S.financial system to climate-related financial risks.
- A forthcoming report from the Financial Stability Oversight Council (FSOC) will kick off the first step in a robust process of U.S. financial regulators developing the capacity and analytical tools to mitigate climate-related financial risks.
- The Treasury Department’s Federal Insurance Office has launched a process to address climate-related risks in the insurance sector, with a focus on assessing the availability and affordability of insurance coverage in high-risk areas for traditionally underserved communities.
- Consistent with its statutory mandate, the Securities and Exchange Commission (SEC) staff is developing recommendations to the Commission for a mandatory disclosure rule for public issuers that is intended to bring greater clarity to investors about the material risks and opportunities that climate change poses to their investments. This rule is expected to be proposed in the coming months.
Protecting life savings and pensions from climate-related financial risk.
- This week, the Department of Labor announced it is proposing a rule that protects workers’ hard-earned life savings by making clear that investment managers can consider climate change and other ESG factors in making investment decisions. The proposed rule – which, if finalized, would help safeguard the more than half of American workers who participate in a retirement plan through their job, representing over 140 million Americans and more than $12 trillion in retirement savings and pensions – would protect workers by making sure that retirement managers don’t turn a blind eye to climate risks and other important factors. It would also make clear that retirement managers can take important environmental, social, and governance factors into account when making investment decisions, so that workers can share in the gains that come from sustainable investments.
- The Department of Labor is also working to protect the nearly 6.5 million participants in the Thrift Savings Plan – the largest defined-benefit contribution plan in the world – by analyzing how to further factor in climate-related risks.
Using federal procurement to address climate-related financial risk.
- The federal government is the world’s single largest purchaser of goods and services, spending over $650 billion in contracts in fiscal year 2020 alone. This week, the Office of Management and Budget (OMB) announced that the Federal Acquisition Regulatory (FAR) Council will begin the process of exploring amendments to Federal procurement regulations to require agencies to consider a supplier’s greenhouse gas emissions when making procurement decisions and to give preference to bids from companies with lower greenhouse gas emissions. As part of this work, the FAR Council published this week an Advanced Notice of Proposed Rulemaking to gather information to help major Federal agency procurements minimize the risk of climate change.
- The FAR Council is also actively exploring an amendment to federal procurement regulations that would improve the disclosure of greenhouse gas emissions (GHG) in federal contracting and set science-based GHG targets. By identifying and mitigating climate risks through procurement, the Federal government is leading by example, deploying public procurement policy as a tool to strategically shape markets and promote a more resilient economy.
Incorporating climate-related financial risk into federal financial management and budgeting.
- OMB, federal agencies, and the Federal Accounting Standards Advisory Board are taking steps to develop robust climate-related risk assessments and disclosure requirements for federal agencies.
- Next year, the Fiscal Year 2023 President’s Budget will include an assessment of the Federal Government’s climate risk exposure and impacts on the long-term budget outlook, along with additional assessments.
- In addition, agencies will further incorporate climate-related financial risk in both the Budget and agency financial reports to increase transparency and promote accountability.
Incorporating climate-related financial risk intofederal lending and underwriting.
- The Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), the Department of Agriculture (USDA), and the Treasury Department are each working to enhance their federal underwriting and lending program standards to better address the climate-related financial risks to their loan portfolios, while ensuring the safety and security of communities most impacted by climate change.
- HUD is working to meet the challenges that climate change poses to American homes, beginning by identifying options to incorporate climate-related considerations into the origination of single-family mortgages.
- The VA, which has nearly $913 billion in loan volume outstanding to U.S. Veterans, is conducting a review of climate-related impacts to its home loan benefit program.
- USDA is addressing climate risk in its own single-family guaranteed loan programs, with the goal of applying lessons learned across its entire range of loan programs.
Building resilient infrastructure and communities
- This week, the Federal Emergency Management Agency (FEMA) began the process of updating its National Flood Insurance Program (NFIP) standards to help communities align their construction and land use practices with the latest data on flood risk reduction. Through a new Request for Information, FEMA will gather stakeholder input to make communities more resilient and save lives, homes, and money through potential revisions to standards that have not been formally updated since 1976.
- In addition, agencies have come together to build resilience from other types of more severe and extreme weather events, such as heat waves, droughts, storms, and wildfires.
- Also this week, the National Ocean and Atmospheric Administration (NOAA) released a suite of products to make the Federal government’s climate information more accessible to Americans. NOAA upgraded its website to make it easier for governments, communities, and businesses to access the data they need to prepare for and adapt to climate risks. And Federal agencies also delivered two reports that lay out a comprehensive plan to further increase open-access delivery of climate tools and services for the public.
- More than 20 agencies released climate adaptation and resilience plans to safeguard federal investments – and taxpayer dollars – from the costs of climate change. The plans reflect President Biden’s whole-of-government approach to confronting the climate crisis as agencies integrate climate-readiness across their missions and programs and strengthen the resilience of federal assets from the accelerating impacts of climate change.
These steps will help safeguard the life savings of workers and families, spur the creation of good-paying jobs, and ensure the long-term sustainability of U.S. economic prosperity in the decades to come. Together, they will help usher in a new era where climate-related financial risks are thoroughly understood – where they are measured, disclosed, managed, and mitigated across the economy to the benefit of American workers, families, and businesses.
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