The Cheap ‘Loonie’ Effect: Is it Working?
Is it working? This is the question the executive leaders at the Bank of Canada (BOC) must be asking every day.
Is the cheaper Canadian dollar (a.k.a., the ‘loonie’) helping the overall economy by taking pressure off the resource sector – which has been humbled by weak commodity prices − and pumping up manufacturing as an alternative?
The dramatic fall in the value of the loonie versus the greenback is supposed to be significantly lifting the export sales to the U.S. of Canadian manufacturers.
There are signs that such an effect is underway. At the same time, there are also contradictory statistics and this Economy at a Glance will explore both data streams.
Tables 1 and 2 accompanying this article set out the two main employment yardsticks for the 33 largest (by population) urban centres across the country − jobless rates and year-over-year employment growth.
In Table 1, the upper portion of the listing − where the lowest unemployment rates appear − is still dominated by cities in western Canada. The West contributes six of the ten best, with Kelowna, B.C. in first position.
The jobless rate is a relatively static measure, however, when compared with the employment growth rate as set out in Table 2. For the past several years, the Top 10 in Table 2 has almost always been led by cities in Alberta or Saskatchewan.
Now, seven of the Top 10 cities for speediest job growth are in Ontario, with another couple of them located in Quebec. Combining those two provinces, 9 of the 10 cities with the fastest employment-level increases are situated in the nation’s manufacturing heartland.
It would seem, therefore, that labour market improvement is definitely underway in central Canada. Nor is it difficult to identify the source of those greater job opportunities. Domestic auto sales are establishing new all-time highs. And U.S. demand for autos and parts is also drawing product down from across the border.
As confirmation of this trend, Ontario’s motor vehicle and parts exports through the first two months of this year were +12.3%.
But the ‘high-fives’ for Canadian manufacturing begin to appear inappropriate when some other data releases from Statistics Canada are examined.
For example, March’s Labour Force Survey recorded declines in manufacturing employment in four of the past five months. The month-to-month change in the number of manufacturing jobs in the country in March was -3,000 and the year-over-year difference was -31,000.
Whereas total employment in Canada has increased a meager 0.8% year over year, that’s cause for celebration versus manufacturing’s figure of -1.8%. (The comparable percentage change for manufacturing employment in the U.S., by the way, is +1.5%.)
The difficulty in sorting out the truth, is fully exposed in Statistics Canada’s Monthly Survey of Manufacturing press release. The latest data-set (seasonally adjusted) records a fourth month-to-month sales decline in the latest five periods; -1.7% for February versus January in ‘current dollars’ and -2.5% in constant (i.e., adjusted for inflation) dollars.
Current-dollar year-over-year manufacturing sales have been -1.5%. On a constant dollar basis, they’ve been somewhat better, but hardly explosive, at +0.2%.
Perhaps it’s a matter of looking deeper into the numbers. (We’ll soon see that it isn’t.)
A big part of the problem has been the -29.4% year-over-year decline in manufactured petroleum and coal product sales.
But transportation equipment sales are also down, -2.3% year over year, mainly as the result of aerospace product and parts sales landing awkwardly at -12.4%.
A 3.7% decline in motor vehicle sales in February year over year was partly offset by a 2.6% increase in the important, but often overlooked, ‘parts’ segment of the industry.
Still, one would think auto-sector sales in total would be making more of a positive contribution in Statcan’s manufacturing survey.
Sometimes I think reading tea leaves is an exact science compared with trying to make sense of economic statistics.
table 1: RANKING OF MAJOR CANADIAN CITIES
TABLE 2: RANKING OF MAJOR CANADIAN CITIES
BY LATEST UNEMPLOYMENT RATE
BY YEAR-OVER-YEAR EMPLOYMENT GROWTH
(highest to lowest)
(lowest to highest)
March 2015 vs March 2014
|1||Kelowna, BC||3.6%||1||Guelph, ON||13.7%|
|2||Thunder Bay, ON||4.3%||2||Brantford, ON||9.0%|
|3||Guelph, ON||4.8%||3||Saguenay, QC||7.7%|
|4||Regina, SK||4.9%||4||Peterborough, ON||7.1%|
|5||Victoria, BC||5.0%||5||Oshawa, ON||4.7%|
|6||Calgary, AB||5.2%||6||Barrie, ON||4.2%|
|7||Saskatoon, SK||5.2%||7||London, ON||4.0%|
|8||Edmonton, AB||5.3%||8||Calgary, AB||3.8%|
|9||Québec City, QC||5.3%||9||Trois-Rivières, QC||3.7%|
|10||Brantford, ON||5.4%||10||Kitchener, ON||3.1%|
|11||Kitchener, ON||5.5%||11||Windsor, ON||2.8%|
|12||Hamilton, ON||5.6%||12||Kelowna, BC||2.5%|
|13||Abbotsford, BC||5.9%||13||Winnipeg, MB||2.4%|
|14||Vancouver, BC||6.0%||14||Sudbury, ON||2.2%|
|15||Trois-Rivières, QC||6.1%||15||Abbotsford, BC||2.0%|
|16||St. John’s, NL||6.2%||16||Saskatoon, SK||1.9%|
|17||Sudbury, ON||6.3%||17||Edmonton, AB||1.7%|
|18||Winnipeg, MB||6.3%||18||Halifax, NS||1.6%|
|19||Halifax, NS||6.4%||19||Regina, SK||1.5%|
|20||Moncton, NB||6.6%||20||St. John’s, NL||1.5%|
|21||Barrie, ON||6.7%||21||Sherbrooke, QC||1.4%|
|22||Kingston, ON||6.7%||22||Montréal, QC||1.1%|
|23||St. Catharines-Niagara, ON||6.8%||23||Vancouver, BC||0.9%|
|24||London, ON||6.9%||24||St. Catharines-Niagara, ON||0.6%|
|25||Ottawa-Gatineau, ON-QC||7.2%||25||Ottawa-Gatineau, ON-QC||0.4%|
|26||Toronto, ON||7.3%||26||Toronto, ON||-0.5%|
|27||Sherbrooke, QC||7.4%||27||Moncton, NB||-0.9%|
|28||Montréal, QC||7.5%||28||Hamilton, ON||-1.0%|
|29||Oshawa, ON||7.5%||29||Thunder Bay, ON||-1.0%|
|30||Peterborough, ON||7.8%||30||Québec City, QC||-2.3%|
|31||Saguenay, QC||8.1%||31||Saint John, NB||-2.5%|
|32||Saint John, NB||9.2%||32||Kingston, ON||-2.7%|
|33||Windsor, ON||11.1%||33||Victoria, BC||-3.4%|
When the ranking numbers are the same, the cities are in a tie.