Business
The Bad Economic Times Have Only Just Started for Canada
Canada’s economic woes have only just begun, despite recent signs of moderation in both GDP and job growth. The agony that Canadians are currently facing due to inflation is only going to intensify, thanks to Trudeau.
There will be a tough spell in the Canadian economy. The rate of expansion has slowed dramatically. Job creation has slowed down. The rate of inflation has not decreased. However, the suffering that families are experiencing now will only intensify.
In a note, Desjardins associate in macro strategy Tiago Figueiredo expressed pessimism about the future.
The economy held up better than predicted for a time there. The interest rate increases from the Bank of Canada accumulated. The economy and the number of available employment both improved even so.
The economy was bound to suffer, though. Rising loan rates and skyrocketing inflation have been devastating to families. Now, economists are seeing signs of instability in the data, and they anticipate this to worsen. the second quarter of this year saw a decline in GDP.
This week, economists will have a better idea of whether or not the economy shrank further in August after showing no growth in July. Reasons for this include natural disasters and labour disputes like the B.C. port strike.
Canada’s economy had already lost steam before that happened.
If that happens, Canada will officially be in a recession because the official definition requires two consecutive quarters of negative growth.
Manulife Investment Management’s global head economist and strategist Frances Donald has argued that we should stop discussing the name of this economic downturn and instead concentrate on how it will affect individuals.
“Even if there are technical factors that avert two quarters of negative GDP, this economy will feel like a recession to most Canadians, for the next year,” she said to CBC News.
Several variables, according to experts, are hiding the true severity of the economic downturn. As a first point, it takes the economy around a year and a half to fully reflect the effects of changes in interest rates.
Seventeen months ago, the Bank of Canada started its cycle of rate increases. That implies we haven’t seen the full effect of Canada’s fastest, most aggressive interest rate increasing cycle yet.
Second, the pandemic altered consumption habits, which have yet to return to pre-pandemic levels of predictability. Canadians made significant purchases during lockdowns due to pandemic fears. We scooped up exercise tools, televisions and hoover cleaners. These same families are now investing mostly on activities rather than material goods.
New data on retail sales shows an increase in July and a decline in August. When so many external forces are tugging at and pushing on consumers, it can be difficult to tell how much of what’s happening is cyclical or seasonal.
Inflation and rising borrowing costs are dampening discretionary consumer spending. Another evidence of slow growth for the Canadian economy at a time when the Bank of Canada is dealing with inflation that’s higher than expected, BMO senior economist Robert Kavcic Said.
An extraordinary increase in immigration looms over all the data and shifts. In just the past year, Canada has seen an influx of over a million new residents. This has boosted consumption, but it has also hidden some structural flaws.
According to Donald, those things have helped make the economy look better than it is.
We are in the time just after the Titanic struck the iceberg, but before it sank. When we’ve had a shock, but it hasn’t been too bad,” Donald explained.
The Bank of Canada has temporarily stopped raising interest rates. The central bank, however, cautioned that this would be conditional on continued inflation reduction efforts.
Fortunately, the Titanic economy isn’t the only one we can save by cutting interest rates.
Since then, inflation has surged to unprecedented heights. The price of everything went up, not just petrol and mortgage rates this time. All of the so-called core measures of inflation, which exclude more erratic factors like the cost of petrol, increased or remained stable.
Scotiabank’s vice president and head of Capital Markets Economics, Derek Holt, calls the breadth of August’s pricing pressures “astounding.” He claims that 52 percent of the items in the consumer price index basket are increasing by four percent on an annualised basis from one month to the next. Almost two-thirds have seen gains of more than 3%.
According to him, the most recent numbers cast doubt on the foundational beliefs individuals have held about the economy.
As the saying goes, “inflation is cooling.” They attribute it entirely to increases in the price of petrol and mortgage interest rates. They say the government’s (fuzzy) “plan” is successful.
They claim that it’s clear the Bank of Canada will not raise rates again. In a note to customers, he called it all “complete, utter, rubbish.”
According to Holt, “definitely ups the odds of a rate hike” at the next FOMC meeting in October because of the recent acceleration in inflation readings.
Sharon Kozicki, the Bank of Canada’s deputy governor, spoke publicly this week and described the central bank’s predicament.
“Rate reductions are still a ways off.”
If we don’t take action now, we’ll have to take even more action later. She warned attendees at a Regina luncheon that excessive austerity could have unintended consequences for the economy.
Some inflationary swings, she added, were “not uncommon,” and that previous rate hikes “will continue to weigh” on economic growth.
Nothing of it is novel. The central bank has spent the better part of the last year and a half discussing the trade-offs involved in preventing inflation from becoming entrenched, while also avoiding doing too much and creating more pain than is required.
Economists like Donald, though, argue that things have changed as the central bank considers when and how it will have to look at bringing rates back down to lessen the burden on people.
“Rate reductions are still quite a ways off,” she said. However, the exit ramp was seen far off in the distance. And the Bank of Canada is working to broaden that exit ramp so they have some leeway if they ever need it.
In her opinion, rates will begin to drop again in the first half of 2019.
“But for a lot of Canadians, there’s… a lot of pain to get through,” Donald remarked.
Aircraft assembly workers walked off the job at Boeing plants near Seattle and elsewhere early Friday after union members overwhelmingly decided to strike.
Over the last year, organized labor has made its voice heard, and the number of union actions has increased dramatically. Last year, Cornell University’s School of Industrial and Labour Relations reported 470 work stoppages (466 strikes and 4 lockouts) involving about 539,000 workers. The nearly 500 work stoppages resulted in an estimated 24,874,522 strike days.
According to Cornell, the number of work stoppages grew by only 9% between 2022 and 2023, but the number of workers participating increased 141% to well over a half million.
Unions such as the UAW, Teamsters, and, as of this week, the International Association of Machinists and Aerospace Workers claim to have made the sacrifices required by their employers during the pandemic and difficult economic conditions. They argue it’s time for wages and benefits to catch up, and workers look to be more inclined to strike.
boeing | AP AP News Image
A Strike At Boeing Extends A New Era Of Labor Activism Long In Decline At US Work Places
Here are some recent discussions between companies and their unions.
Late last year, the United Auto Workers union easily approved new contracts with Ford and Stellantis, as well as a similar agreement with General Motors, that would improve pay across the sector and require automakers to accept higher costs.
The agreements, which will last until April 2028, put an end to difficult negotiations that began in the summer of 2022 and resulted in six-week strikes at all three manufacturers.
The new contract agreements were widely regarded as a success for the UAW. The firms agreed to significantly improve pay for top-tier assembly plant workers, with raises and cost-of-living adjustments totaling 33% salary gains.
Top assembly plant workers were to receive an instant 11% rise and earn approximately $42 per hour when their contracts expired in April 2028.
Under the accords, the manufacturers also eliminated many of the salary categories they had used to compensate different workers. They also agreed in principle to include new electric vehicle battery factories in the national union contract.
UPS & Teamsters
UPS Teamsters union members approved a tentative contract with the package transportation business last year. However, the path to approval was not without controversy, with difficult labor discussions threatening to interrupt package delivery for millions of businesses and households countrywide.
After discussions broke down in early July 2023, Atlanta-based UPS secured a tentative contract agreement with the Teamsters just days before the deadline of August 1.
When the tentative agreement was reached, full- and part-time union workers were expected to earn $2.75 more per hour in 2023, and $7.50 more overall by the completion of the five-year contract. The starting hourly wage for part-time employees was also increased to $21, but some workers complained that it fell short of their expectations.
UPS stated at the time that at the end of the new deal, the average UPS full-time driver would earn around $170,000 per year in pay and benefits. It was unclear how much of the total represented benefits.
As part of the agreement, the delivery business promised to make Martin Luther King Jr. Day a full holiday, eliminate forced overtime on drivers’ days off, and stop deploying driver-facing cameras in taxis, among other issues. It scrapped a two-tier compensation system for drivers and secured tentative agreements on safety problems, such as providing more trucks with air conditioning.
Video Games and SAG-AFTRA
Earlier last month, video game actors secured deals with 80 individual titles, which signed interim or tiered budget agreements with the artists’ union and agreed to the artificial intelligence provisions they sought.
The performers have been striking for more than a month.
Members of the Screen Actors Guild-American Federation of Television and Radio Artists went on strike in July after more than a year and a half of discussions with game industry titans broke down over AI rights.
The interim deal includes wage increases, safeguards against “exploitative uses” of artificial intelligence, and safety measures that account for the strain of physical performance as well as voice stress. The tiered budget agreement intends to make working with union talent more feasible for independent game developers and smaller-budget projects, while simultaneously providing performers with the same safeguards as the interim agreement.
The Las Vegas Resorts and Culinary Workers Union
Last month, thousands of hospitality union members on the Las Vegas Strip negotiated a tentative agreement with the Venetian and Palazzo resorts, the first for staff at the huge Italian-inspired complex that opened 25 years ago.
The Culinary Workers Union stated on the social media site X that the deal was reached after a year of negotiations. It covers more than 4,000 hotel and casino personnel, including housekeepers, cocktail servers, bartenders, and porters.
According to Bethany Khan, a union representative, the agreement parallels the significant gains made in recent contracts extended to 40,000 hospitality workers at 18 Strip locations owned or controlled by casino behemoths MGM Resorts International, Caesars Entertainment, and Wynn Resorts.
These victories included a 32% wage raise over five years, reduced housekeeping workloads, and increased job security in the face of technological and artificial intelligence breakthroughs.
According to the union, the increase in pay under those contracts will result in an average hourly income of $35 by the end of the contracts. Before obtaining their most recent contracts in November, workers at these locations earned around $26 per hour including perks.
In October 2023, 85,000 healthcare workers’ unions signed a tentative agreement with Kaiser Permanente after a strike over salaries and staffing levels.
The agreement included a minimum hourly salary of $25 in California, where the majority of Kaiser’s facilities are situated, and $23 in other states. Workers would also receive a 21% wage boost over four years.
The lead-up to the tentative deal was a three-day strike by 75,000 workers from several states.
The draft deal also contained safeguards against subcontracting and outsourcing, as well as steps to invest in current employees and alleviate a labor shortage.
A Strike At Boeing Extends A New Era Of Labor Activism Long In Decline At US Work Places
Hollywood Studios & SAG-AFTRA
Hollywood’s players voted in December 2023 to approve a settlement with studios that ended their almost four-month strike, bringing an official end to a labor dispute that rattled the entertainment industry for the majority of last year.
Control over the use of artificial intelligence was the most contentious topic during the lengthy, painstaking deliberations. The contract called for a 7% overall salary rise, with additional increases coming in the second and third years of the agreement.
The agreement also includes a hard-won provision that temporarily stalled talks: the establishment of a fund to compensate performers for future viewings of their work via streaming platforms, in addition to customary residuals paid for the screening of films or television shows.
United States Ports and the International Longshoremen’s Association
In a little more than two weeks, some 45,000 dockworkers along the United States East and Gulf coastlines are expected to go on strike, shutting down up to 36 ports that handle nearly half of the nation’s cargo from ships entering and exiting the country. While consumers are unlikely to notice much of an impact if the strike is short-lived, if the International Longshoremen’s Association’s walkout lasts longer than a month, shortages could harm the US economy.
SOURCE | AP
Air Canada CEO Michael Rousseau said in a statement yesterday that the airline may begin shutting down operations and cancelling flights as soon as possible before the strike deadline on Sunday.
According to Rosseau, labour stoppages might affect 80% of Air Canada’s passengers. When a strike or lockout notice is issued, the airline will initiate a “orderly shutdown” of Air Canada and Air Canada Rouge operations.
His comments come as the Air Line Pilots Association (ALPA), the union that represents Air Canada pilots in the labour conflict, announces that it will meet with Air Canada on Friday to try to reach an agreement.
The firm is scheduled to begin shutting down operations on Sunday, as discussions with more than 5,000 union pilots appear to have reached an impasse. Wages have stopped 15 months of discussions between Air Canada and the Air Line Pilots Association.
If negotiations fail, the Montreal-based airline wants the government to request arbitration by this weekend.
Charlene Hudy, ALPA’s local director, said Air Canada’s request for arbitration is extremely disheartening. “Both parties should really try to get to the best deal possible without any government interference,” according to her. The union wants to reduce the wage disparity with US pilots.
Business groups urge intervention over Air Canada pilots strike
“Our goal is to reach a deal, but if there is no agreement by Saturday, we ask the government to be prepared to intervene to avoid these disruptions for Canadians,” Air Canada spokesman Christophe Hennebelle said Thursday in a phone interview. Arbitration is “a path that seems reasonable.”
The airline and the union were still in talks Thursday, but Hennebelle said there’s no guarantee of a resolution “because the union refuses to moderate its wage demands.”
The airline has already begun to decline cargo service orders, and some passenger cancellations may begin on Friday to avoid being detained abroad, according to Hennebelle.
Labour Minister Steven MacKinnon’s office stated in an emailed statement that it is committed to the collective bargaining process.
The government can request that the Canada Industrial Relations Board compel arbitration. When employees at the country’s two main railways went on strike last month, the administration requested that the CIRB intervene. The board issued a decision that sent staff back to work within days.
Air Canada has proposed to increase pilot compensation by around 30% over the next three years. The pilots haven’t had a rise since last year. The union will be able to issue a 72-hour strike notice on Sunday.
If there is no agreement, Air Canada could issue a lockout notice simultaneously.
Meanwhile, the Canadian Federation of Independent Business asked all sides to guarantee that airline services continue and that an agreement is achieved at the table.
In a statement, CFIB president Dan Kelly stated, “If Air Canada and the Air Line Pilots Association cannot reach an agreement, the federal government must be prepared to step in and impose binding arbitration or back-to-work legislation.”
He stated that it is the government’s job to ensure that small businesses and the economy do not face another costly disruption to Canada’s transport network.
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Tensions are rising as a potential pilot strike or lockout at Canada’s largest airline is just days away, with no signs of progress in negotiations.
Several business groups, including the Canadian Chamber of Commerce, are planning an event in Ottawa today to push the government to act after calling for binding arbitration in an open letter.
Air Canada announced earlier this week that a work stoppage is becoming increasingly possible as negotiations with the union continue to stall.
According to the Canadian Press, unless an agreement is reached, either party may issue a 72-hour strike or lockout notice as early as Sunday, potentially leading to a complete work stoppage as early as September 18.
Air Canada said Monday that an agreement is still possible if the Air Line Pilots Association reduces its “excessive” compensation expectations.
The union claimed that corporate greed was stifling negotiations, as Air Canada continues to generate record profits while expecting pilots to accept below-market pay.
According to a new assessment by the Fédération des caisses Desjardins du Québec, the anticipated labour disruption at Air Canada may cost the economy $1.4 billion.
Air Canada Dream Liner – File Image
Canada’s Largest Airline
Economists Randall Bartlett and LJ Valencia predict that a two-week pilot strike at Canada’s largest airline might result in daily losses of approximately $98 million, a 0.06 percent month-over-month loss to real GDP in September.
“Because of its outsized role in the Canadian airline market, a prolonged pilot strike could negatively impact economic activity,” according to the researchers.
The number of passengers could fall by 2.1 million, a 29% decrease from the previous month, they said.
Air Canada and Air Canada Rouge operate around 670 daily flights, carrying more than 110,000 passengers throughout Canada and overseas it is Canada’s largest cargo airline in terms of capacity.
Business organisations expressed “deep concern” on Wednesday about the upcoming pilot strike, claiming it will drastically disrupt Canada’s supply chain.
“The potential for a labour disruption is alarming, given the far-reaching implications for Canadians, the nation’s economy, supply chains, and our global reputation,” stated a letter signed by 41 business groups and 53 local chambers of commerce.
The group planned to attend a press conference in Ottawa on Thursday to encourage the federal government to take measures to avoid potential labour disruptions.
Air Canada Pilots – Getty Images
Last Air Canada pilot strike
The Desjardins economists said their estimate envisions a two-week strike, similar to the last significant Air Canada pilot strike in September 1998. Air Canada’s losses were projected at $200 million at the time, which is equivalent to $355 million now.
Meanwhile, NDP leader Jagmeet Singh told reporters on Thursday that we will “never support” back-to-work legislation as an Air Canada pilot strike approaches and concerns rise over a work stoppage.
“We’re going to send a clear message again that we are opposed to Justin Trudeau and the Liberals, or any government, interfering with workers,” he said during his party’s caucus conference in Montreal.
Singh continued, “If any proposals relating to back-to-work legislation are tabled, we would reject them. We’ll fight back against that. We will never support back-to-work.
Unless a deal is reached by Sunday, Air Canada or the Air Line Pilots Association (ALPA), which represents 5,200 Air Canada pilots, may issue a 72-hour lockout or strike notice.
Air Canada president and CEO Michael Rousseau said in a statement that there was still time to negotiate an agreement with the pilots, and that the company will do all possible to safeguard its customers from a more inevitable work stoppage.
Air Canada Express flights will continue to operate, with third-party carriers Jazz and PAL Airlines providing these services. However, these regional partners transport only around 20% of Air Canada’s daily clients, with many of them eventually connecting on Air Canada aircraft.
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