Good morning. It’s James Keller in Calgary.
Alberta’s economy has faced one crisis after another.
The province has been in an economic trough for more than five years since oil prices collapsed in late 2014. Tens of thousands were out of work and unemployment rates were stubbornly high.
The economy was showing signs of life at the start of 2020 when that progress – and so much more – was wiped away.
There was a price war between Russia and Saudi Arabia that pushed oil prices down to historic lows. The COVID-19 pandemic made that worse, as economies around the world shut down and global demand for oil plummeted, further constraining prices.
And at the same time, restrictions designed to slow the pandemic in Alberta have pushed even more people out of work, threatened the future of many businesses and ripped a multibillion-dollar hole in the province’s finances.
Premier Jason Kenney’s government unveiled its plans this week to confront those challenges and set the province’s economy on the path to recovery.
The central plank of that plan is a corporate tax cut, speeding up plans to cut the rate by two percentage points to 8 per cent. Instead of waiting until January, 2022, the rate cut takes effect today, leaving Alberta with by far the lowest corporate tax rate in the country.
Kenney also announced an increase to infrastructure spending this year to put people to work immediately building bridges, highways and other projects. The government is adding more than $1-billion to previously announced commitments, bringing the infrastructure budget for the current fiscal year to more than $10-billion.
But the most difficult work for the government – diversifying an economy that for too long has been at the mercy of oil and gas prices – will come later.
Kenney says the province is committed to diversifying the economy, whether that means expanding what the energy sector produces or growing tech and financial services in Alberta. The details for exactly how it will do that will be rolled out sector by sector in the coming weeks.
He offered a hint of that work this week, introducing a hiring grant designed to help the tech and innovation sector, particularly startups that can’t benefit from corporate tax cuts because they aren’t generating profit. The province also announced $175-million through the Alberta Enterprise Corp. to help provide access to capital for early-stage companies.
Rachel Notley, the leader of the Opposition New Democrats, dismissed the plan as the “bare minimum” and said it falls short of the bold vision required to get Alberta’s economy back on track.
The province has a long way to go to get out of its current malaise, underscored the day after the announcement when major credit rating agency Fitch Ratings downgraded the province’s credit rating.
Fitch Ratings downgraded Alberta to a double-A-minus from double-A, citing higher provincial borrowing during the pandemic-driven economic crisis and a debt burden relative to GDP that is “incompatible” with a double-A rating.
The New York-based agency also pointed to the lack of details from the government about the extent of damage to Alberta’s bottom line, and the province’s lack of a planned path toward economic recovery.
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here. This is a new project and we’ll be experimenting as we go, so let us know what you think.
AROUND THE WEST
LONG-TERM CARE: British Columbia has opened the door to visitors at long-term care facilities, ending a ban that was implemented in March to protect elderly people from COVID-19 but that also put residents at risk because of isolation and lack of family support. The new policy, which requires visitors to book appointments in advance and wear masks, among other precautions, weighs the risks of COVID-19 against unintended negative consequences, says Provincial Health Officer Bonnie Henry.
In Alberta on Tuesday, that province’s Chief Medical Officer, Deena Hinshaw, said Alberta will update its long-term care visitor policy within the “next several weeks.” Starting Thursday, Alberta Health Services will permit some patients at acute care facilities such as hospitals to visit people outdoors, so long as they remain on the property. AHS will also grant unaccompanied outdoor access to some patients at certain facilities, and issue day, overnight or weekend passes for patients in select programs.
ENVIRONMENTAL FUNDING: The Alberta government has revised the mandate of a public inquiry investigating the funding of environmental charities, which is currently facing a legal challenge that is attempting to derail the entire process. The provincial cabinet changed the terms of reference last week to instruct the inquiry, led by forensic accountant Steve Allan, to look at the “the role of foreign funding, if any,” which appears to leave open the possibility of the inquiry concluding that there is none. The change was made as the government gave the inquiry a four-month extension and an extra $1-million, which represents a budget increase of 40 per cent over the original cost of $2.5-million. Devon Page, the executive director of Ecojustice, said the changes appear to be an attempt to save the inquiry from his group’s legal challenge. However, he said the new terms of reference don’t make the inquiry any less problematic.
SPILL RESPONSE: The Canadian Coast Guard has partnered with an Indigenous group on Vancouver Island to build a marine facility in Port Renfrew, B.C., aimed at improving its response in the event of an oil spill. The memorandum of understanding with the Pacheedaht First Nation is in part a response to 156 conditions the National Energy Board said must be met before the Trans Mountain Pipeline expansion project can go ahead.
KENNEY’S SPEECHWRITER: Alberta Premier Jason Kenney is facing renewed calls to fire his speechwriter after more of Paul Bunner’s columns about race and LGBTQ people surfaced. The Opposition New Democrats have unearthed more pieces of Bunner’s writing, mostly from his time at the conservative magazine Alberta Report in the 1990s, that included comments the NDP said were disparaging to First Nations and LGBTQ people. NDP MLA David Shepherd said the columns were more proof that Bunner has to go. “The sheer volume of hateful writing has taken us some time to sift through,” Shepherd told reporters. “We cannot have any trust that Jason Kenney is sincere about confronting systemic racism as long as he continues to have Paul Bunner working in his office. He must fire him.” Kenney has rejected calls to fire of Bunner.
CHOIRS SILENCED: With health authorities warning that singing spreads coronavirus-carrying droplets at a high rate – because it involves deep breathing and voice projection – choirs have been forced to cease in-person rehearsals and cancel concerts. Since early March, the more than 3.5 million Canadians who sing in choirs have been searching for ways to practise without getting together and struggling to make do without ticket revenue from performances.
It has meant choirs have been resorting to virtual concerts and practices, coming together with the help of digital editing software because no technology currently exists to allow choristers to sing together in unison online. But directors like Lonnie Delisle of the Universal Gospel Choir in Vancouver say choirs like his will find their voice. “We know that the arts plays a role in providing a presence of healing and hopefulness – things that we’re all reaching for right now.”
ALBERTA’S NEW LIEUTENANT-GOVERNOR: Prime Minister Justin Trudeau has named business owner and philanthropist Salma Lakhani as Alberta’s new lieutenant-governor, replacing Lois Mitchell as the Queen’s representative in the province. When she formally takes over the role, Lakhani will become Canada’s first Muslim lieutenant-governor. She has been long recognized for her work and philanthropy in a range of fields, including health care and human rights.
OFFICE SPACE: Approvals and applications for new towers in Vancouver have continued since March, with two downtown office towers approved in May and two new applications received for office buildings for the Broadway corridor. The projects are moving ahead even as several other tower developers have continued unchecked with construction on their downtown projects.
MANITOBA TAX CUT ON HOLD: Manitoba Premier Brian Pallister says he may not fulfill a promise to cut the provincial sales tax next year because of the fiscal fallout from COVID-19. Pallister originally promised to cut the tax to 6 per cent from 7 by this summer and introduce a provincial carbon tax at the same time. But when the pandemic started, he pushed the plan back to 2021. With economic uncertainty continuing, Pallister said Tuesday the tax change may be off the table. The Progressive Conservative government released updated budget figures Tuesday that showed another wide swing in Manitoba’s finances. In early March, the government forecast a $220-million deficit. Three weeks later, as COVID-19 numbers grew across Canada, the government warned the deficit could reach $5-billion. The fiscal update said a more likely scenario is a deficit of $2.9-billion based on new economic projections from banks and other institutions.
SASKATCHEWAN’S LEGISLATURE: Saskatchewan’s Premier has rejected a call by the Opposition to reconvene the legislature in the weeks leading up to the fall provincial election. On Tuesday, during the final stretch of a three-week spring sitting, NDP Leader Ryan Meili asked Premier Scott Moe to have legislature members return in September. Meili said the Saskatchewan Party government’s 2020-21 budget fails to meet the needs of residents hurting because of the COVID-19 pandemic. And he wants members to return in the fall so the government can spell out how it has spent a $200-million contingency fund established to respond to the health crisis. Moe responded outside the assembly, saying Meili just wants a “do-over” of the spring sitting.
Adam Radwanski on Jason Kenney’s economic recovery plan for Alberta: “And yet, for those willing to squint a little, it’s possible to see this announcement as a potential first step in Mr. Kenney’s reckoning with forces – a global fight against climate change that threatens to decimate Alberta’s resource sector in the long run – toward which he was highly dismissive after coming to office last year. And it could even signal some fresh willingness to work with Ottawa to confront that reality. Not that Mr. Kenney is about to say any such thing, explicitly. While making room for an assertion that oil prices will soon return to $60 a barrel, and that ‘every credible forecast of future world energy consumption sees oil and gas continuing to dominate the supply mix for the next several decades,’ his government’s new 29-page strategy does not include the words ‘climate change’ anywhere.”
Mackenzie Moir, Alex Whalen and Bacchus Barua on B.C.‘s surgery backlog: “B.C.‘s COVID-19 backlog response will include limited partnership with private clinics, however – and that’s a good thing. This type of initiative has precedents in Canada. In 2010, the aptly-named Saskatchewan Surgical Initiative used private clinics to provide publicly funded surgeries and helped Saskatchewan lower its wait times from Canada’s longest (28.8 weeks in 2008) to the shortest by 2015 (13.6 weeks). “
How Ottawa can end CERB, boost the economy and help the unemployed – The Globe and Mail
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.
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.
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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Sorry Coronavirus Pandemic, The Economy Has Had It With You – Forbes
The global economy hasn’t got time for the pain.
Despite second waves in Australia, Japan and Spain — all countries that were deemed success stories and out of the woods — and some U.S. states like Rhode Island rolling back plans to open up, the global recovery narrative is alive and well on Wall Street.
Take that panic sellers!
Before anyone thinks the pandemic is over and the economy is going to return to pre-Covid levels, it bears keeping in mind that the economy is only recovering from being nearly completely shut down. Think of it as a dimmer switch; once turned to off, it’s now at the lowest brightness possible without flickering off. That’s kind of where most of the developed markets sit. Within emerging markets, only China is growing into positive GDP territory.
Last week’s economics data showed the global economy is on a path to recovery. Although re-accelerating Covid-19 cases are fuelling fears of ‘second waves’ in the epicenter states, their economic consequences would likely be more muted as the appetite for lockdowns again is weak.
Over the weekend we learned that President Trump will not wait for Congress to decide on some aspects of the coronavirus relief packages passed since the spring. He will extend the Federal government’s unemployment insurance, but will cut it from $600 a week to $400. Many companies, from services to assembly lines, have said they cannot get workers to come back to the shop floor because they are making more on unemployment.
Meanwhile, the central banks in advanced economies continue to be supportive of both stocks and bonds. Many people hate this as it distorts price discovery, among other things. But the Fed has seen what happens when retired persons lose 40% of their retirement portfolio due to economic crises. Unless they are buying those same assets back on the lows, which most are not doing because they are not working and likely not investing, then they have to wait years for those prices to recover.
The Fed’s moves in the market may be beneficial to big investment houses, but it is also beneficial to retirees who are “guaranteed” a backstop to major market corrections that destroy their retirement accounts.
Economic data looks okay.
July PMIs continue to suggest a solid take-off point for growth in the third quarter, broadly speaking.
In the euro area, the final July PMIs showed a rebound was in effect and China’s manufacturing numbers and the U.S. ISM surveys both surprised investors.
Combined with solid German factory orders and better-than-expected exports from China and Taiwan, a further recovery in global manufacturing and international trade is expected by market consensus in the third quarter.
This week, new Chinese data on credit, industrial production and investment could further fill in the picture of China’s post-pandemic recovery.
“This week’s retail July sales data for the U.S. and China will be important to watch,” says Christian Keller, economist for Barlcays in London .
Wall Street hopes this week is as good as last week when it comes to recovery news. Last week’s better-than-expected U.S. job claims and nonfarm payroll figures gave everyone a reason to stay bullish. But the risk of new layoffs is plausible, especially in states that have either added restrictions to businesses, like New Jersey and Rhode Island, or finding out that mandatory mask use is a buzz kill keeping people away from traditional activities. The employment outlook in the U.S. will be one of main drivers of consumer confidence not only here, but in the region as the rest of the Americas starts to see light at the end of the tunnel.
GUEST COLUMN: Diversify the economy through clean growth – The Journal Pioneer
By Kieran Hanley / Special to The Telegram
As the world battles through the pandemic, its nations are deliberating on what shape global economic recovery will take. There is a growing sense that investments should meet two tests: that they contribute to economic activity and jobs right away; and that they will provide longer-term benefits for the economy, the environment, and society. In short, economic recovery and “clean growth” should go hand in hand.
This is the case in Canada. Long before the pandemic, our federal government was aggressively investing in initiatives related to climate change, sustainability and clean technology. So, it is a safe bet to assume that its approach to economic recovery will follow suit. Influential groups like the Task Force for a Resilient Recovery say that building back better means “supporting the jobs, infrastructure and growth that will keep Canada competitive in the clean economy of the 21st century.”
For its part, Newfoundland and Labrador has been hit hard by not just the pandemic, but also the collapse of oil prices. The reality is that we need to take advantage of any lifeline available to us. And so, part of our economic recovery has to be making the most of any and all federal programs — many of which will have a clean growth twist. We need to be prepared for this.
Yet the opportunity for our province extends far beyond simply being reactive.
There are also opportunities for brand new industries that can put our province at the forefront of the energy transition and diversify our economy.
The pursuit of sustainability within our offshore oil and gas industry will lead to the development and application of new low-carbon products, services and processes that will not only be demanded worldwide and across multiple oceans sectors — but will also contribute to the long-term success of this industry here at home.
The accelerated electrification of our economy will contribute to mitigating the costs of Muskrat Falls. This means increasing the number of electric cars on our roads, converting our Metrobus fleets to run on electricity and switching buildings from fossil fuel-based heating sources to electric. This also means designing a future that involves electrified ferries, seaport and airport operations and industrial processes.
These are just two areas where clean growth perfectly aligns with existing provincial priorities and will create jobs. But there are also opportunities for brand new industries that can put our province at the forefront of the energy transition and diversify our economy.
The production of hydrogen is an important example. Hydrogen is a fuel that emits zero emissions and can be produced through low or zero-emissions means. The past year has seen rapid progress for this industry, with interest intensifying during the pandemic. Several countries are forcefully pursuing its production, with Canada set to announce a national strategy in the near future. Given our existing marine infrastructure and access to enormous renewable energy resources, Newfoundland and Labrador may be in an excellent position to become a global producer of hydrogen — as we are of oil today.
But to make the most of any of these opportunities, we need a plan. That is why in June, the Newfoundland and Labrador Environmental Industry Association (NEIA) submitted a series of recommendations for Newfoundland and Labrador’s economic recovery — with a key action being the creation of a “Clean Growth Directorate” within government. Between navigating resources, regulations, incentives and innovation supports, many government departments have a role to play in the pursuit of clean growth, but none are entirely responsible. A whole-of-government approach to clean growth — and meeting our net zero commitments — is required in order to attain the level of proactivity that is needed. With new provincial leadership comes an opportunity to take deliberate and targeted action.
The clean growth opportunity is immense. It not only provides environmental benefits, but also contributes to economic resilience in a world that is increasingly concerned with greenhouse gas emissions and environmental impacts. Newfoundland and Labrador is blessed with a wealth of resources and is home to a budding technology sector that can enable our province to become one of the cleanest jurisdictions on the planet and an inspiration to other regions around the world.
Let’s put people to work today, building the economy of tomorrow. NEIA stands ready as a partner in the pursuit of any and all options.
Kieran Hanley is executive director of NEIA, the Newfoundland and Labrador Environmental Industry Association.
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