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Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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Bank of Canada governor indicates readiness to let economy run hot to include more people in recovery – Financial Post

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‘We can expect a long adjustment process and a protracted recovery’

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Sadie Tanner Mossell Alexander, the first African-American to earn a PhD in economics, in 1944 observed that Black workers would be the “last to be hired and the first to be fired” unless the economy was at full employment.

The economics profession is finally catching up, as policy-makers such as Bank of Canada governor Tiff Macklem and U.S. Federal Reserve chair Jerome Powell are as focused on levelling the playing field for marginalized groups as they are on traditional worries such as inflation.

Systemic racism still blocks ethnic minorities from fully participating in the economy unless white bosses are forced to choose between either confronting their prejudices or missing an order due to a lack of staff. Ancient gender roles force women to choose between careers and children. The long-term unemployed become victims of both atrophy and those managers who are conditioned to prefer poaching active workers to fill open positions, rather than taking a chance on someone who has been on the sidelines for six months.

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History and our own stupid human behaviour mean we continue to leave considerable talent on the bench — or in the stands. As a result, the economy is less productive than it could be, which makes balancing budgets, closing output gaps and hitting inflation targets that much harder.

Macklem, who took over as Bank of Canada governor in June, is making inequality the focus of policy, as Powell in the United States and Christine Lagarde at the European Central Bank have also done. On Feb. 23, Macklem made it clear that he intends to let the economy run hotter for longer than most mainstream economists would have thought safe only a few years ago, reinforcing both the likelihood that interest rates will remain extremely low for at least another couple of years and that more people will potentially get to participate in the recovery.

The reason: to test the bounds of full employment in order to crowd more people into the workforce.

Macklem noted that the unemployment rate had been unusually low for an extended period of time before the pandemic, and yet inflation never took off. It could have been a fluke. But in case it wasn’t, Macklem indicated that he and his deputies on the Governing Council agreed to probe the limits of their previous understanding of the relationship between employment and inflation. The pre-pandemic experience suggests the central bank needn’t fear inflation quite as much as it has in the past, which would allow policy-makers a freer hand to stoke economic growth.

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“Based on past economic cycles, we would have expected inflationary pressure to begin to rise,” the governor said in a virtual speech hosted by the Calgary and Edmonton chambers of commerce. “But inflation wasn’t threatening to take off. As the pandemic recedes and the recovery continues, we will keep that experience in mind.”

The unemployment rate dropped below six per cent at the end of 2017 and averaged 5.8 per cent until the governments shut down most of the economy in March 2020 to fight COVID-19.

That level is essentially full employment, according to the Bank of Canada’s understanding of how the economy works. That is, when the jobless rate drops that low, economists at the central bank have long assumed that everyone who wants a job would have one and, therefore, growth would be such that inflationary pressures start to build.

But inflation never became a major concern during that entire period. The Consumer Price Index (CPI) averaged annual growth rates of about two per cent, which is what the Bank of Canada is obligated to achieve. The relationship between the unemployment rate and prices appears to have changed, so why not try for fuller employment?

“There’s a shared responsibility and monetary policy has a role to play,” Macklem said on a call with reporters after his remarks. “If we can all play that part, we can get Canadians back to work, we can grow the labour force and we can achieve a complete, shared recovery. If we don’t do that, it’s going to be an even more protracted recovery. It won’t be as shared, and there will be less potential to grow going forward.”

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The Bank of Canada is benefiting from a path cleared by the Fed. The American central bank cut interest rates three times in 2019, even as the economy continued to grow. Powell was accused of courting trouble, and he may yet have to contend with a collapse of the stock-market bubble. But the jobless rate had dropped to 3.5 per cent by the eve of the pandemic, the lowest since the late 1960s. Millions of Blacks and other marginalized workers found jobs, and inflation remained dormant.

Inequality isn’t as acute in Canada as it is in the U.S., but it’s still an issue. “Some measures suggest that Canada is among the top jurisdictions for inclusion and equity in the distribution of education and skills attainment,” a new report by the Brookfield Institute for Innovation and Entrepreneurship said, “but troubling inequities persist, and many face barriers to the use of their skills in the labour market, leading to stubbornly high levels of income and wealth inequality.”

Women in Canada are 17.5 percentage points more likely to have a post-secondary credential than men, and yet the gender-pay gap has barely changed in decades, according to Brookfield’s study. Some 71 per cent of non-Indigenous Canadians aged 25 to 34 have earned a certificate or a degree beyond high school, compared with 29 per cent for Blacks and 40 per cent for First Nations.

Macklem’s latest remarks suggest policy-makers are prepared to take these sorts of divisions at least as seriously as inflation. The jobless rate was 9.4 per cent in January, a long way from full employment, no matter how you measure it. “The economy will need support for quite some time, and the bank will continue to do its part,” he said.

• Email: kcarmichael@postmedia.com | Twitter:

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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Coronavirus: Public need 'home truths' on economy – Hammond – BBC News

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Former Chancellor Lord Hammond has said the government must risk unpopularity and tell “some difficult home truths” about the state of the economy.

He told the BBC that dealing with the pandemic had been the financial equivalent of “fighting a war”.

But giving money away was easier than collecting it for “a populist government”, he added.

A Treasury spokesman said Chancellor Rishi Sunak “will be honest with the British people” about what is needed.

Next week’s Budget comes amid rising unemployment and follows the biggest UK annual economic shrinkage on record.

In an interview with BBC political editor Laura Kuenssberg, Lord Hammond – who resigned as chancellor when Boris Johnson became prime minister in 2019 – said the economy had taken a “huge hit” from Covid-19, but should “bounce back”.

There had been “long-term scarring”, with sectors like aviation and hospitality suffering “permanent damage”, and transport and retail “changed forever”, he added.

Official figures show the UK economy contracted by 9.9% in 2020 – more than twice as much as in any previous year on record.

On Tuesday, it was revealed unemployment had risen to 5.1% in the three months to December – the worst rate since 2015.

And the national debt – worsened by furlough, other pandemic help schemes and falling tax takes – stands at more than £2 trillion.

Lord Hammond said it was unlikely in the “foreseeable future” that ministers would be able to “do anything that will actually see the debt starting to fall”.

“But what matters is not the absolute size of the debt, but the size of the debt relative to our economy,” he said.

“If we can grow the British economy over the coming years, then just as we did after the Second World War, we can make the debt fade in significance, because, although it stays the same in absolute terms, it becomes a much smaller percentage of our national economy.”

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Analysis box by Laura Kuenssberg, political editor

Philip Hammond has never been Boris Johnson’s number one fan, to put it mildly.

They clashed on Brexit, with the former chancellor being booted out of Parliamentary Conservative Party during the wild political autumn of 2019.

But even though he is back in the party fold, and with the ermine of a Tory member of the House of Lords no less, the former occupant of No 11 isn’t mincing his words.

While he sticks to the broad consensus backing the government’s massive emergency economic support during the pandemic, Lord Hammond looks very pointedly to the challenges that will come next, questioning whether Downing Street will have the right priorities.

His not very subtle implication: Downing Street would rather be popular than do the right thing.

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Lord Hammond said the challenge facing the government was “how to move out of this crisis period”.

He praised Mr Sunak for getting the economic response right so far and said he was “very confident” his instincts were “the right ones”.

But he said his fear was “that as a populist government, giving money away is always easier than collecting it in”, and warned that ministers had “made very extravagant commitments to the British electorate in good faith before the coronavirus crisis”.

“Not all of those commitments can now sensibly be delivered on and that’s going to be a big challenge for a government that regards its short-term popularity as very, very important,” Lord Hammond added.

He said he was “not sure” the current “top leadership” had the “appetite for being unpopular, in order to do the right thing”.

The prime minister has said the chancellor will set out the government’s plans to “build back better” in next Wednesday’s Budget.

Mr Sunak has promised to lay out the “support we’ll provide through the remainder of the pandemic and our recovery”, adding: “I know how incredibly tough the past year has been for everyone, and every job lost is a personal tragedy.”

Responding to Lord Hammond’s comments, a Treasury spokesman said: “The chancellor has always put protecting jobs and livelihoods at the heart of everything he has done and that will not change.”This Budget will give people the reassurance they need in the immediate term, and he will be honest with the British people about how we are going to recover beyond this crisis.”

Labour leader Sir Keir Starmer said it was “not the time” for tax increases for individuals or businesses, given the ongoing impact of the pandemic.

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‘We need some help now’

James Green

James Green, who runs the Whitstable Oyster Company in Kent, says the impact of the pandemic has been “tough”.

“Obviously there’s Covid-19 at the beginning of the year, which affected us, the restaurant side of the business and the oyster sales. We were open over the summer. We were busy, like most coastal places, and then we shut again in November.”

But Mr Green adds: “For the oyster side of the business the impact of Brexit is probably had more of an effect than Covid-19, I would say.”

As a result of Britain leaving the single market, he says he has tons of oysters sitting on his farm that he cannot sell either to France or domestically.

Mr Green says the chancellor should give the shellfish industry “some help to get us through now – otherwise there won’t be one”.

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PACE Releases Guidance for Circular Economy Transition in Five Sectors | News | SDG Knowledge Hub | IISD – IISD Reporting Services

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The Platform for Accelerating the Circular Economy (PACE) Secretariat has released five publications that outline how the electronics, textiles, food, plastics, and capital equipment sectors can increase their circularity. Comprising the ‘Circular Economy Action Agenda,’ the reports serve as a rallying call for businesses, governments, researchers, consumers, and civil society to work together.

Each publication outlines the objective for a circular economy and what circularity in that particular sector looks like, the impact on people and the planet if those objectives were to be achieved, the barriers that stand to hinder implementation, and actions that can optimize the sector’s transition towards a more circular economy.

The report, ‘Circular Economy Action Agenda: Electronics,’ authored in partnership with Accenture, notes that less than 20% of electronics are collected and recycled, despite the raw materials within e-waste being valued at approximately USD 57 billion per year. A circular economy for electronics, the report explains, would see products use more recycled and recyclable content, designed for longevity and collected for recycling when they are no longer suitable for use. However, barriers include, inter alia, production systems that depend on virgin materials, lack of industry-wide standards for circular design and inconsistent regulatory regimes, and lack of knowledge on the hazards wrought by e-waste.

The report’s ten calls to action to accelerate the transition to a circular economy for electronics include, inter alia, incentives for designing circular products, enabling easier sourcing of recycled content, increasing market demand for circular products and services, setting up effective collection systems, and encouraging customers to take back their electronics once they are no longer useable. For each call to action, as also done in the other four publications, the report outlines where governments, financial services institutions, consumers, and civil society actors can start.

Of note is a cross-cutting call to action to enable efficiency and transparency in compliance and responsible transboundary movement. It cites the relevance of the Basel Convention, which prohibits illegal trade and dumping of hazardous waste as end-of-life electronics are often classified. PACE recommends that competent authorities to the Basel Convention team up with trade ministries, private sector actors, and standard-setting institutions to develop certifications and “green lanes” for environmentally sound management of e-waste.

Used textiles trade should be managed with targeted efforts to ensure environmental benefits.

The report, ‘Circular Economy Action Agenda for Textiles,’ also produced with Accenture, flags that people throw away apparel worth an estimated USD 460 billion each year, and that the textiles industry consumes roughly 215 trillion liters of water annually. Recycling textile waste, the report notes, can unlock up to USD 100 billion per year, as well as natural resource and chemical use reductions.

The report envisions a future where inputs for textiles are safe, recycled, or renewable; where textiles are kept in use for longer; and where textiles are recycled at the end of their use, rather than incinerated or landfilled. Barriers to achieving this vision include high price sensitivity in the fibers market, short trend cycles (e.g. fast fashion), undeveloped collection and sorting infrastructure, and blended fibers and chemical additives that compromise the quality and safety of textile recycling.

The ten calls to action to accelerate the transition to a circular textile economy include incentivizing and supporting textiles’ design for longevity and recyclability, encouraging behavioral shifts, guiding new business models, increasing efficiency and quality in textiles sorting, and making the recycled fibers market more competitive. The authors note that (re)used textiles sent overseas can deliver environmental benefits, but it remains unclear how much imported textiles are actually reused, rather than downcycled or disposed of. Accordingly, a call to action emphasizes that the used textiles trade should be managed with targeted efforts to ensure environmental benefits and help preserve local industries, in part through matching countries’ desired levels of import and export.

The report, ‘Circular Economy Action Agenda for Plastics,’ also by PACE and Accenture, projects plastic packaging volumes to more than quadruple by 2050, to over 318 million tons per year. A circular economy for plastics, the report notes, starts with eliminating unnecessary plastics and shifting from virgin materials to recycled or renewable ones. Highlighting that just 14% of plastic packaging today is collected for recycling (and that an even lower percentage is actually recycled), several of the report’s ten calls to action point to a need for incentivizing reusing—and eventually recycling—plastics, in part through better-functioning collection systems and strategically-planned sorting and recycling facilities.

Fragmentation of the plastic waste trade globally can contribute to uncertainty around investments in reverse logistics and recycling infrastructure.

The report calls out fragmentation of the plastic waste trade globally as a barrier to a circular economy for plastics, which, beyond disincentivizing plastics’ collection and transport, can also contribute to uncertainty around investments in reverse logistics and recycling infrastructure. One of the calls to action outlines how actors can strategically plan sorting and recycling facilities in compliance with trade regulations. The call to action references the Basel Convention’s Plastics Waste Amendments, which came into effect in January 2021, to enhance control of transboundary movements of plastic waste.

The report, ‘Circular Economy Action Agenda: Food,’ developed by the PACE Secretariat and Resonance, notes that a third of all food is currently lost or wasted, despite the fact that 800 million people do not have enough to eat. The report highlights the value of a regenerative food system that goes far beyond the current production regime where 75% of food is derived from just 12 plant and animal species. Rather, a circular food economy would recycle the nutrients in food byproducts to make textiles and animal feed or drive innovations. Less than 2% of nutrients are recycled today.

The report calls for a transition to healthy diets based on regenerative practices that avert food loss and waste hotspots. Additional calls to action include reframing wasted food and byproducts as valuable resources, rather than trash, and facilitating secondary market development for these inputs. Nineteen barriers identified include perverse incentives such as ecologically harmful agricultural subsidies and lack of finance or assistance to more sustainable production methods, as well as poor coherence and logistics such as cold chains and proper storage.

The report, ‘Circular Economy Action Agenda: Capital Equipment,’ by PACE, Accenture, and Circle Economy, covers long-lived buildings, machines, and infrastructure, which consume 7.2 million tons of raw materials annually. A circular economy for capital equipment, the report notes, would primarily see products designed with reuse rather than recycling in mind, and delivered though “product-as-a-service” models that go beyond one-off sales. Calls to action, similar to other sectors, include incentives for circular product design, servitization, increasing end-of-use product return, and responsible reverse logistics systems, among other recommendations. One barrier of note is that some public organizations are not allowed to trade with private parties, which prevents capital equipment from being returned for refurbishing or reuse.

PACE notes that over 200 experts from more than 100 businesses, governments, and civil society organizations have contributed to the development of the Action Agenda. PACE was created in 2018 by the World Economic Forum (WEF). It is now hosted by the World Resources Institute (WRI). [Publication: Circular Economy Action Agenda: Electronics] [Publication: Circular Economy Action Agenda: Textiles] [Publication: Circular Economy Action Agenda: Plastics] [Publication: Circular Economy Action Agenda: Food] [Publication: Circular Economy Action Agenda: Capital Equipment] [PACE Circular Economy Action Agenda Landing Page]

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