News & Updates

    The Morning Brief - 12.10.18

    Posted by Bruce Carson on Dec 10, 2018 8:44:21 AM


    Economy—November Job Numbers—Finance Ministers Meeting and Equalization Numbers

    November Job Numbers

    The job numbers released by Statistics Canada on Friday did not in any way equate with the numbers predicted by economists. It was forecast that the marketplace would create 10,000 jobs but instead the Stats Can announced the creation of 94,100 jobs in November. There was even an employment increase announced for Alberta of 23,700. The gains were felt right across the country.

    There were 89,800 full time jobs created and 4,100 part time jobs added. 26,000 jobs were added in professional, scientific and technical sectors.

    One of the dampers on these numbers came with the release of wage numbers. Wage growth slowed to 1.7% and for permanent workers it was only 1.5%. The issue here is that inflation at this point is growing more quickly than wages. Also youth employment was down.

    If the numbers are accurate, which is always a question with the labour market survey, they are almost counterfactual given job losses at a call center in Cape Breton, jobs that will be lost in Oshawa with the closure of the GM plant and layoffs in the oil patch where Alberta is shown gaining jobs. While some of these losses would not be reflected in the November numbers, job numbers seem to moving downwards.

    More weight was given to the GDP numbers released last week by the banks than these job numbers when predicting when the next interest rate hike will take place. RBC is predicting growth falling in the last quarter of 2018 to 1.1%. The Bank of Nova Scotia is a little more optimistic forecasting growth of 1.6% in Q4.

    Kevin Carmichael commenting on the growth numbers that are coming wrote “Canada’s economy is on track to end the year with a whimper, not with the roar implied by the latest hiring numbers.

    There might be a significant correction in these job numbers as there has been when Stats Can has set out job losses much larger than anticipated. Even without a correction the forecast is for slower growth to end 2018 and going into 2019. This should raise all the usual questions about debt and deficit and ability to cope with a downturn in the economy. But it could be the federal cupboard is never bare when entering an election year and the size of the deficit is not an issue for the government.

    And there seems to be general agreement at this point that interest rates will not change in January, 2019.

    Finance Ministers Meeting and Equalization Numbers

    The twice yearly meeting of finance ministers from across the country began last evening in Ottawa and the major announcement from Finance Minister Morneau was the equalization numbers from 2019-2020. The amount for the coming fiscal year was increased over the previous one by $880 million with the total now shared being $20 billion.

    The biggest change from the previous year is the fact that Ontario is no longer a have-not province and no longer will be receiving equalization payments. In the current fiscal year Ontario received $963 million. The list now still includes Quebec with $13 billion, up $1.4 billion from the current year. Manitoba will receive $2.3 billion, Nova Scotia and New Brunswick will receive $2 billion each and PEI gets $419 million.

    Ontario, having contributed $8 billion to the pot has now joined Alberta, Saskatchewan and Newfoundland and Labrador seeking that the formula be revamped. Finance Minister Morneau pointed to the federal payment of $4.5 billion for the Trans Mountain pipeline as things that the federal government does for provinces which are over and above equalization payments. What the minister failed to point out is the fact that this pipeline is not being constructed, waiting for the results of two consultation processes and the possibility of even more litigation.

    One might compare the purchase of the Trans Mountain pipeline to the purchase of a luxury car, up on blocks waiting for the engine to arrive. In the meantime engineers and others are involved in interminable consultations regarding the best engine for this car. One of the consultations on the engine has no time limit. At some point there may be an engine but until there is, it can still be argued that the car was purchased. If you wanted a car that was operational, should have asked for that option. 

    The new Quebec government wants to see Quebec’s need for equalization reduced.

    While the federal carbon tax is not on the agenda for today’s meeting both Ontario and Saskatchewan want Morneau to produce a thorough economic impact assessment of the federal carbon tax, particularly as it affects businesses which will also be contributing more to CPP payments beginning next year.

    Morneau’s response was that the carbon tax would have no economic impact as the federal government will be returning proceeds to individuals in provinces which have not adopted their own form of federally approved carbon tax or carbon reduction program.

    While today’s meeting will, no doubt be interesting, it is too bad these numbers were not made public before Friday’s First Ministers Meeting.

    Other National Issues

    Question Period

    This week will be the last week for the House of Commons to be in session before members return after the holiday break at the end of January. At that time members will find the House of Commons Chamber in the Center Block closed as it will now be located in the West Block. In addition to finding their way around a new Chamber, members will also be looking carefully at the calendar. While the 2019 federal election is not to take place until October, 2019, it is quite possible that it will occur sooner, perhaps called shortly after 2019 federal budget is presented. Paul Martin when he was prime minister was a great fan of promising various goodies, but they would only materialize with a Liberal government. One can envisage the same bargain being offered in the spring of 2019. Here is what you are going to get, pharmacare etc. but only if you vote Liberal and if you vote for those other guys, they will take all these spending programs away.

    But first MPs have to get to that point and in the three or four days left before the Christmas break, there are still opportunities to ask questions.

    One of the biggest issues comes with the arrest and detention of the Chief Financial Officer of the Chinese telecommunication giant Huawei, now in a bail hearing and awaiting extradition to the United States. This has put Canada right in the middle of the trade dispute between the U.S. and China and as Canada’s former Ambassador to China, David Mulroney pointed out yesterday this will cause a chill in Sino-Canada relations. He does believe long term it may not cause irretrievable damage to the free trade talks.    

    While Mulroney did not find it strange, Trudeau will be asked how he came to know about the arrest before it occurred and how that squares with Canada’s statement that there was no political interference. No doubt this may be correct but it will be a hard sell to the Chinese government. This arrest also raises questions as to whether Huawei will be part of the bidding process to establish a 5G network in Canada.

    On the oil patch front it is still not clear whether Ottawa will help Alberta with the purchase of tanker rail cars and locomotives. The opposition should at least try to nail this down this week.

    As scandal always trumps policy issues in question period, the matters around Raj Grewal’s departure from the Liberal caucus, RCMP investigations and possible involvement of Minister Bains in a Brampton real estate deal around Brampton will be raised.

    Tomorrow, The Morning Brief will look at other matters for the QP agenda and whether First Ministers Meetings are really worthwhile.

    To Come

    --today, until the end of the week, COP 24 continues in Poland

    --today, finance ministers meet in Ottawa

    --today, building permit numbers for October to be released

    --December 11, Brexit vote in UK House of Commons

    --December 12, Saskatchewan Court of Appeal to deal with applications for intervenor status in the carbon tax litigation

    -- December 13, new housing price index for October to be released

    --December 18-19, U.S. Federal Reserve meets--bc

    Topics: Morning Brief

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