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Is the jobs market really that weak? Today's jobs report from Statistics Canada pointed to a weakening in a labour market that had been rebounding from the recession in spectacular fashion. The report showed a loss of 9,300 jobs overall in July and an uptick in the jobless rate to 8 per cent from 7.9 per cent. Worse than the overall loss was the breakdown: 139,000 full-time jobs wiped out and 130,000 part-time positions created. A poor showing given the strong rebound in the previous months? Absolutely. But is it really as bad as it looks?
Economists believe the picture is skewed by the huge loss of 65,000 job last months in educational services, which includes teachers and administrative staff at every type of institution in the country. That's the biggest decline in that sector on records dating back to 1976, but, notes Toronto-Dominion Bank economist Francis Fong, the theme is not new. Every year in July for the past few years, the sector has posted hefty job losses, which is propobably the result of "some type of structural change" in the data in 2007, such as educational reform or the use of more temporary or contract workers, he said.
Statistics Canada adjusts for this so there should should be no "such large outliers" unless the industry is truly that weak, he said, adding the size of July's job loss appears unrealistic.
"So is there something going on behind the data that is causing job losses in July to be increasingly severe?" he said in a report. "Each July since 2007, the sector has, on a seasonally adjusted basis, consistently lost an average of almost 47,000 net jobs and then recovers that in the subsequent months of August and September."
So today's report may be overstating the true weakness in the jobs market, he said, and "it is very likely that we will see a rebound in job growth in August and September, specifically in the educational services sector, reflecting some payback from today's 65,000 job exodus."
U.S. jobs market also dims The U.S. labour market also turned in a dim showing today, with 131,000 jobs lost in July and an unemployment rate holding firm at 9.5 per cent. While the private sector created 71,000 jobs, the public sector lost as 143,000 people hired temporarily for the country's 2010 census ended their work. To make matters worse, the government also revised figures for June, showing a loss of 221,000 jobs instead of the 125,000 reported earlier. The report, which showed the United States continues to struggle with a jobs crisis after the brutal recession, knocked down New York stock futures.
"The prospects for a significantly lower unemployment rate in 2010 are not promising," said Toronto-Dominion Bank economist Alistair Bentley. "We are projecting annualized GDP growth of roughly 2.5 per cent during the second half of this year. As productivity growth slows from its blistering post recession pace, this outlook is consistent with non-census related job creation of around 150,000 per month for the remainder of the year."
Global recovery may have peaked, OECD says The global recovery shows signs of peaking, particularly in Canada and Brazil, while the United States may be souring, the Organization for Economic Co-operation and Development, warns. The group's composite leading indicator, or CLI, fell in June by 0.1 of a point, signalling a "possible peak in expansion," the OECD said today.
"The CLIs for France, Italy, China and India all point to below trend growth in coming months, whilst the CLI for the United Kingdom points to a peak in the pace of expansion," the OEC said. "Stronger signs of a peak in expansion have also emerged in Brazil and Canada, and in the United States the CLI has turned negative for the first time since February 2009. The CLIs for Japan and Russia point to future slowdowns in the pace of expansion but for Germany the CLI remains relatively robust."
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Magna tops forecasts Magna International Inc. shares surged today as the company topped analysts' estimates with a second-profit and a surge in sales, and pointed to better times ahead. The auto parts giant also boosted its quarterly dividend to 30 cents (U.S.) a share from 18 cents "given the continued profitability and better expectations for vehicle production in our markets." Magna posted a profit of $293-million or $2.59 a share, compared to a loss of $205-million or $1.83 a year earlier. Sales jumped 63 per cent to $6.1-billion. Magna projected annual sales this year of between $22-billion and $23-billion.
UBS Securities Canada analyst Tasneem Azim noted the "impressive outperformance on revenue and costs" in the results and, citing the outlook, said "we expect [second quarter]results to drive positive momentum in the stock and consensus to move higher."
Russia's wheat ban takes toll As wheat prices continued to surge today, Russia's ban yesterday on grain exports began to take a toll on food companies and brewers. Shares in Carlsberg, for example, which will now face higher costs, slumped, as did the stocks of food producers such as Danone and Nestle. Yesterday, Russia's Prime Minister Vladimir Putin announced a ban on exports of grain and grain-related products from mid-August through the end of the year given a terrible drought.
- Food shares fall on Russia grain ban
- Russia's export ban chills wheat markets
- Wheat turmoil hits home on the Prairies
- In pictures: The drought that took the wheat
RBS cites 'de-risking' Here's a word for the post-meltdown era: "De-risking." As Royal Bank of Scotland PLC posted its second-quarter results today, the bank also noted that it was tightly managing its exposure to the debt-burdened European countries at the heart of the continent's troubles. "Overall reductions, indepth reviews and de-risking of portfolios were applied to Greece, Spain, Portugal, Italy and Ireland," it said.
RBS, once held out as the model for a global bank and now partly owned by the British government after the financial crisis, did, however, post a second-quarter profit of £257-million, or more than $400-million U.S.. Much of that was because of one-time items, and loan losses rose. "The rebuilding of RBS is a marathon and not a sprint," said chief executive officer Stephen Hester.
From today's Report on Business
- Chevron wins bid to explore in Beaufort Sea
- Vancouver port vows to unplug bottleneck
- Manulife reports record loss
- Adhocracy: Everybody loves an underdog
And, read our Streetwise blog and Your Business section