Author Archives: CanucksBanter

A fine balance: GDP growth by sector and the impact of austerity

Posted on by

http://rabble.ca

Jim Stanford 

By Jim Stanford    September 11, 2013

A fine balance: GDP growth by sector and the impact of austerity

The second-quarter GDP numbers confirm that Canada’s continuing “recovery,” such as it is, is still balancing very precariously on a knife-edge between expansion and contraction. The various sources of growth vary widely in their current momentum. The overall net balance is barely positive. And coming austerity in the public sector could very much push the balance into negative territory in coming quarters.

Here’s how the numbers add up. I examined the year-over-year change in each major component of GDP (the familiar C+I-G+X-M, with housing investment broken out as its own category), using real (chained 2007) data. The ultimate change in real GDP depends, obviously, on a weighted average of all the component changes. This is a simple way to think about where the impetus for growth is coming from (or not, as the case may be).

The accompanying figure summarizes the data. 

  • Consumers are still spending at a decent clip, despite (or more precisely thanks to) their accumulating debt.
  • Residential housing investment has now peaked and is starting to decline moderately. (Recent data on housing starts and residential construction employment suggest further flatlining or gentle contraction in this volatile sector.) 
  • Business capital investment continues to be lacklustre, despite abundant corporate cash flows. In fact, this graph overestimates the strength of business investment because of well-known problems with the implicit GDP deflator for this category of spending (apparent prices of business capital are distorted downward by the secular fall in the price of computer-related assets, and this makes “real” investment spending look bigger than it is — at least in macroeconomic terms).
  • Net exports are a wipe-out: the trade deficit continues to widen in the face of iffy global demand and our overvalued currency. This result is especially disappointing in light of recent improvements in U.S. demand conditions; it indicates the deep structural weakness in Canada’s participation in the global economy that the Harper government’s rush to sign more FTAs will only reinforce.
  • This leaves the government sector, considering both current “consumption” (spending on programs) and capital investment (infrastructure). The net year-over-year increase as of the second quarter was still positive, but barely so: up by 1 per cent in real terms. This reflects growth in real current consumption (up 1.4 per cent year over year), offset by a contraction in capital spending (down half a percentage point). The net trend in total government spending has recovered from the significant negative values recorded in 2011 (as temporary stimulus spending, mostly on capital “make-work” projects, was being unwound). But at barely 1 per cent real government expenditure is still shrinking both as a share of GDP and in real per capita terms, and hence can be considered evidence of continuing austerity. In contrast, when the economy was recovering much more robustly in latter 2009 and 2010, total government expenditure was growing by as much as 6 percent year over year.

The weighted average of all sectors produces the uninspiring 1.4 per cent year-over-year expansion in total GDP recorded in the second quarter. That’s not enough to offset productivity growth and population growth — which is why there has been no further recovery in the national employment rate (employment as a share of the working-age population) since the end of 2010 (almost 3 years of labour market stagnation). This isn’t so much a “recovery,” as it is treading water.

What’s the outlook going forward? In short: more of the same. 

There’s no sign of coming vigour in either net exports or business investment (what are supposed to be the major engines of growth in a globalized capitalist economy). Best-case scenario for the housing sector is a continued soft landing: that is, an easy-going decline. Consumers are still willing to borrow and spend, for now: how that will hold up in the face of coming interest rate hikes (on both mortgage and non-mortgage debt) is an open question.

Fiscal policy will therefore continue to determine the net balance of economic forces. If governments decide to tighten spending further, then the overall balance would shift even closer to zero (or even cross to the minus side).

This simple analysis also highlights what is required to achieve a more optimistic outlook — one where expansion in spending is sufficient to generate a sustained increase in the employment rate, with resulting spin-off benefits for incomes, spending, and subsequent job-creation. 

New industrial and trade policies could help to address the weakness in net exports and business capital spending. Failing that, fiscal policy must do more of the economic lifting. 

The corporate sector continues to deleverage and accumulate liquid assets; there is no shortage of “money” in Canada’s economy. 

From a social perspective, therefore, there is no fiscal constraint on government’s ability to lead future growth through a major and sustained expansion in spending (especially capital spending — for example, on transportation, housing, and green energy).

After all, that’s how we solved the last decade-long stagnation. Today, five years after Lehman Brothers, it’s increasingly clear we need something similar (hopefully not motivated by war) to end this one.

 

Related items

Examining Harper’s record and spotting a fake economic recovery

Stephen Harper does not expect Canadians to discover that job performance has been poor and that the economy is not improving, while the standard of living for most Canadians is declining.

Labour force numbers worse than they look

The painful reality is this: Labour is not scarce; jobs are scarce. And Canada’s labour market is not healthy; it’s been stalled in recession-like conditions for years.

Austerity chokes the down-and-out, as Harper and Flaherty look the other way

The aggressive austerity cuts carried out by Prime Minister Stephen Harper and Finance Minister Jim Flaherty over the past seven years have come home to roost.

Wealthiest 1% earn 10 times more than average Canadian

Posted on by

http://www.cbc.ca

Canada’s rich earn on average $381,300 a year and are mostly male, white and married
The Canadian Press      Sep 11, 2013 10:00 AM ET

The gap between those who can afford luxuries like this Lamborghini sports car being ogled by some Vancouver cyclists, above, and those who can't even come close to doing so is growing in Canada and the U.S. In Canada, the wealthiest one per cent earn an average of $381,300 a year, compared to a meagre $38,700 for the average Canadian. The gap between those who can afford luxuries like this Lamborghini sports car being ogled by some Vancouver cyclists, above, and those who can’t even come close to doing so is growing in Canada and the U.S. In Canada, the wealthiest one per cent earn an average of $381,300 a year, compared to a meagre $38,700 for the average Canadian. (Andy Clark/Reuters)

For all the growing diversity the 2011 census and related surveys have portrayed in Canada, Wednesday’s final release of data from the National Household Survey reveals a contrasting constant: the richest of the rich in Canada are married, middle-aged, white men.

The rest of us are up to our eyeballs in mortgage debt.

Statistics Canada has published the final batch of data from its new and controversial National Household Survey — the survey meant to stand in for the long-form census scrapped by the Conservatives in 2010. The release was delayed for a month because of a glitch in the agency’s formulas.

CENSUS TRENDS Housing and income across Canada

It shows that the median family income in Canada is $76,000 — generally higher in the west than the east — while the median individual income is just $27,600. That means just as many individuals earn less than $27,600 as earn more.

The richest 10 per cent of individuals are making more than $80,400. And the very rich — the 272,600 individuals who make up the top one per cent — are all making more than $191,100.

Those people are making an average of $381,300 each, 10 times the average Canadian income of $38,700. The large discrepancy between the median and the average suggests there is a very small percentage of the super-rich.

A similar income gap was recently highlighted in the U.S. by an analysis of Internal Revenue Service data that found that the divide between the wealthiest one per cent and the rest is the biggest it has been since the Great Depression of the 1930s. The analysis, by economists from the University of California, Berkeley, the Paris School of Economics and Oxford University, found that the wealthiest one per cent saw their income increase by 31.4 per cent between 2009 and 2012 while the income of the 99 percent grew only by 0.4 per cent.

Wealthy conform to traditional family structure

In Canada, the portrait of the rich differs starkly from the portrait of Canadians in general that has been exposed in previous releases of the census and NHS. Data up till now have shown an increasingly diverse population — aging, but also multi-racial, open to unconventional family structures, with women making huge strides in the workplace.

The rich, on the other hand, are a throwback to the old days: overwhelmingly male, between the ages of 45 and 54, almost always married or living in a common-law relationship.

CENSUS TRENDS How much money do people in your neighbourhood make?

Education clearly pays. Despite recent questioning of the value of university degrees, more than two thirds of the top one per cent had a university degree, compared to 20.9 per cent of the total population. And almost a quarter of those who had a university degree had found a way to work themselves into the top 10 per cent of income earners.

“The high income is really reflective of the old Canada, which is much less diverse,” said Doug Norris, chief demographer at Environics Analytics.

But as immigrant populations become more established and as women gain ground in the workplace, the income data will slowly start to reflect the broader diversity of the population, he predicted.

“Over time, I think you’ll see that diversity creeping in.”

Immigrants making more than median

Already, the NHS shows that second-generation immigrants are making far more money than the national median. And ethnic groups that are well-established in Canada, such as Japanese immigrants, are also well above the median.

As for the other end of the spectrum, the bottom 10 per cent of income earners tend to live in cities, especially Montreal. Low-income neighbourhoods are known for their high proportions of visible minorities and recent immigrants, and a preponderance of single parents.

While the national median annual income for a full-time worker is $50,699, the median for a visible-minority worker is just $45,128. For a First Nations full-time worker, the median income is $41,684.

The highest income in Canada is found in the Alberta oilsands in the census agglomeration known as Wood Buffalo, which takes in the city of Fort McMurray and surrounding communities, where median family income is $186,782.

It’s almost impossible, however, to figure out from the data whether income inequality has increased since the last census in 2006. The government agency refuses to discuss history, and the data released on Wednesday was interspersed with large boxes of warnings not to undertake amateur comparisons.

That’s because the NHS data was collected in a voluntary survey that likely has a bias in favour of higher income respondents while the 2006 census was a mandatory survey with fewer biases. Tables buried in a technical document show some measures of poverty climbing over the past five years while another set of tables shows it falling.

“In here, we start with the premise we’re not doing trends,” said Brian Murphy, a special adviser on income for Statistics Canada. “The NHS, to me, is one piece of the puzzle.”

69% of households own home

Norris crunched some of the numbers himself and adjusted for inflation, finding that median family income climbed by about six per cent nationally between the last census and now. The biggest leap was in the Fort McMurray, where median family income jumped 33 per cent. Families in St. John’s saw their median incomes rise 18 per cent over the five years.

Statistics Canada does, however, venture to make some basic historical comparisons when it comes to mortgage debt and home ownership.

The NHS shows that 69 per cent of households in Canada own their home, up only slightly from the 2006 census after a long, historical climb in home ownership.

Canadians have paid a price for their tendency to buy instead of rent.

More than 25.2 per cent of households are spending more than 30 per cent of their income on shelter, surpassing the standard measure for having an affordable home. That’s up slightly from 24.9 per cent in 2006.

Of those living in an unaffordable home, 83 per cent of them were saddled with a mortgage.

Overall, 58.6 per cent of homeowners were still paying off their mortgages according to the 2011 survey. That’s up from 57.9 per cent in 2006 and 55.2 in 2001. In 1991, it was 51.5 per cent.

Toronto was the most costly city to maintain a home, at $1,366 a month, while Trois-Rivières, Que., was the cheapest at $697.

CUPE National and Ontario leaders lead solidarity rally for striking Bonfield workers on Thursday

Posted on by

BONFIELD, ONTARIO–(Marketwired – Sept. 11, 2013) – Paul Moist, National President of the Canadian Union of Public Employees (CUPE), along with CUPE Ontario President Fred Hahn and Sid Ryan, President of the Ontario Federation of Labour (OFL), will lead a solidarity rally for the striking Bonfield municipal workers on Thursday, September 12, at noon (12:00 p.m.). Henri Giroux, President of the North Bay and District CUPE Council will also attend the rally.

“On Tuesday the Mayor of Bonfield fired five workers without true cause,” said Steve Boyle, CUPE national representative for CUPE 4616-2. “Firing workers in the middle of a strike is not a tactic that will end the strike that is hurting the Bonfield community – sooner or later the Mayor will have to sit down and negotiate with us to end this strike.”

“Our leaders and supporters will be here on Thursday to show solidarity and stand with our members for fairness as they fight for a fair contract,” continued Boyle. On strike since August 1, the 16 workers were forced into a defensive strike to fight off concessions, including the threat of contracting-out services.

Tortorella Has To Be True To His Coaching Style….Just Saying….

Posted on by

Canucks have to out work, out play, out shoot, out hit, and out chance their opponent’s both at home and on the road. Unrealistic? Ye of little faith.

By Andrew Chernoff       September 11, 2013Just-saying

While all eyes may be on Roberto Luongo for the first few days of training camp that started today, new coach John Tortorella has to do what he does best and which helped Tampa Bay to its first Stanley Cup—be the best coach he can be and get the most out of his players, letting every player know that he is boss,

The players are paid to execute the plan and perform as professionals. Tortorella will be accountable for being outcoached and for misjudgements regarding his assessments regarding each players abilities, capabilities, to execute the plan that he has developed to make the Canucks successful in all areas; and the players will be accountable for not executing that coaching plan, and playing up to that high level of expectation.

The question I had for myself, and others I talked to about the Canucks during the summer hiatus was, is this season a retooling season for the Canucks or a rebuilding year.

The Canucks are in a tough division:

How the team comes out of training camp, and which players make up the roster after the first few games of the season, will help to determine whether it is a retooling or rebuilding year; and if the decisions made by Mr. Gillis in the off season were made wisely.

I am not confident that they have the speed, finesse, the toughness or the depth to match or better most of the teams in their division or in the league at this point of training camp.

I will hold my thoughts of how well the Canucks might size up against the teams in their division, and whether they will make the playoffs until they have played their first month.

My pessimistic side says to wait until the end of January, 2014 to see if the Canucks take a nosedive and their more often than not “seasonal slump” or whether they defy the odds and play at least .500 or better and make a strong playoff run to finish the season on a high note.

I will not wait that long. I will give it 15 games.

canucks20132014a

Canucks will play seven road game stretch on the road from October 15 to October 25 which will indicate what their mettle is and how well forged they are as a competitive team and excelling at that high level of expectation or not.

Canucks have to out work, out play, out shoot, out hit, and out chance their opponent’s both at home and on the road. Unrealistic? Ye of little faith.

Beware of international assistance—Pakistan Signs On With IMF Again

Posted on by

September 10, 2013   Jalees Hazir   http://www.nation.com.pk

The government has signed another suicidal contract with the IMF, promising continued obedience to the diktat of the dollar empire.

Why is it so difficult for the ruling PML-N to act upon its 2013 election campaign pledge that it would break the begging bowl? Have the new managers of our economy so much as even seriously considered breaking the bowl of poisonous brews pressed against our lips and poured down our throats in the guise of helpful assistance?

Obviously, if they had given it some thought, they would have come up with a comprehensive plan to sustain Pakistan’s economy without the dollars doled out by the fund, the grand-daddy don of the international monetary system, and other lesser donors in the gang that wait for their cue from the IMF don. No such plan has been presented by the ruling party. In fact, other political parties that use a lot of anti-IMF rhetoric have also failed to present a workable alternative.

Admittedly, coming up with an alternative model of economy is not an easy task. A vast web of many traps has progressively tied us to the hypocritical framework of the IMF that uses the jargon of helping poor and unstable economies to their feet while cutting the hands and feet of countries it assists, making them crippled and dependent on its dole for quarterly survival.

Yet, it is an absolutely necessary and urgent task that the country’s leadership is sleeping on.
The timid so-called alternative floated by the PTI before the elections was mired in the same problematic neo-liberal framework promoted by the IMF, and didn’t go further than tweaking it obediently. There was no attempt to grapple with the fundamental flaws in the international monetary system controlling the planet and its resources and designed to rob the poor to enrich the rich. Certainly, there is a need to look beyond the dollar and the craftily constructed indices of development and growth.

One will not have to start from a scratch either. There is already a debate regarding the air-filled god of dollar and its fictitious worth. Proposals for a new ‘more solid’ and jointly regulated international currency have been floating for a while and countries are finding ways to bypass the dollar through currency swap agreements, barter and other trade arrangements.

There are valuable lessons to be learnt from countries resisting the exploitative framework of the IMF and the unhindered corporate imperialism it would like to impose on the globe through its policy prescriptions. But successive Pakistani governments have gone on following the tricky pied piper as if that was the only option.

The nation has paid the price for that, not only because of the anti-poor policies prescribed by the IMF but also because the multi-million tranches, a bulk of which is used up to pay interest on earlier debt, are tied to good behavior on our part when it comes to conducting our affairs in other spheres.

We must accept killings on our territory by American drones even if it occurs on Pakistan’s defence day. We must not be too enthusiastic about the Pakistan-Iran pipeline. We must develop good ties and trade with India even while it kills Pakistani villagers and soldiers on the LOC and badmouths and threatens us. We must not question the fallacy called ‘War on Terror’ and go along with the plans charted out for our subjugation and eventual destruction.

A large section of the very vocal and very resourceful elitist intelligentsia spends overtime in convincing us of our helplessness. Dominating the discourse in the media, these so-called intellectuals exaggerate the dependence of Pakistan on international assistance and tell us that without the loans and aid, our country would collapse. They would like us to believe that we are a dying patient who could not survive without the oxygen of foreign assistance.

With their interests, elitist credentials and careers enmeshed with the dollar empire, they bind our minds in the chains of slavery and are quick to deride any assertion of independence or sovereignty as emotional ghairat. They would like us to sink deeper and deeper in the quicksand of dependence and the resulting suicidal obedience.

This lobby of opinion leaders might be the most ardent lawyers of the empire in our midst but they are not the only ones. Whether it is political leaders or the military top brass, the bureaucrats or business leaders, the ngo-wallahs or clerics, we seem to have developed a very high level of tolerance for foreign assistance and seem oblivious of all that it brings.

Our government depends on an IMF injection to balance the budget and the peanuts of USAID for development. The military requires the coalition support fund to counter terrorists. The NGOs need donors to fund its projects. Even the religious institutions get foreign assistance for spreading the message of God.

It would be silly to think that all this assistance doesn’t come with a cost or that those assisting us have any altruistic reasons to help us. By opening our doors to these tainted funds we provide leverage to foreign players to meddle in our internal affairs, buy loyalties of our citizens and even shape our societies in ways that suit them. The cacophony of donor-driven voices is designed to confuse our national priorities and create a distractionary discourse aimed at taking us further from any solutions. The fragmentation and divisions caused by various shades of foreign-assisted projects and programs is a constant hurdle in the evolution of a national narrative.

There is a need to end the inflow of the inherently two-faced foreign assistance in whatever garb it comes. And since the Nawaz government says that it will fix the country by fixing the economy, perhaps it should have started by saying no to the IMF. After outsourcing economic planning to the IMF, there is little it could do on that count.

Besides, the more important question remains: Is it even thinking on those lines? Or was all the brave talk about breaking the begging bowl just a popular slogan that it raised without meaning it?

The writer is a freelance columnist.