Canadian Personal Finance Blog

Stats Canada announced some improving numbers for February in the world of Employment, which bodes well for the economy, but also points towards a recovery, which will cause the government to maybe get out of the way, by lowering their intervention, but also have them stop making money so easy to get (i.e. upward pressures on interest rates). This seems to be the opinion from a few folks about these numbers.

Underlying February’s employment change was a notable gain in full-time work (+60,000), which was partially offset by a decline in part time (-39,000). Since the summer of 2009, employment growth has been all in full time.

On Going Employment Graph

Employment Better for Over 55

An interesting figure is that employment for folks over the age of 55 was one of the biggest growth areas in February. This means lots of older folks, who maybe should be thinking about retirement are actually going out and getting jobs?

Employment for men and women aged 55 and over has been trending up for a number of years, the result of employment growth combined with more people moving into that age group.

Yes we are all getting older, but why are we looking for jobs? Guess we need to save a little more for our retirement?

Unemployment Down Too

This month the unemployment numbers trended down, which is good as well.

Big Picture Graph for Unemployment

The Big Table

And here is the big table to ogle for more information:

Parity Between US Buck and Loonie?

That is what the CIBC and their analyst Zafar Bhatti thinks. Same reasons as previous Loonie flights but still worth noting:

• Commodity prices, and Canada being the Northern Resource Kingdom to the U.S. (and a lot of the world)
• Potential for higher interest rates in Canada, thus strengthening the dollar (remember targets are June)
• Canada is a good investment in terms of our credit balance. Yes our Government is in debt, but nothing like the Americans, and most of our debt is held by Canadians themselves (i.e. Savings Bonds), so we are a good risk (maybe we can get a Amex Platinum for Nations?)

An excellent quote from the CIBC is:

…This puts the Bank of Canada between a rock and a hard place, if they signal rates are going to rise, the Canadian dollar will make a run for parity or stronger…

A blip over the summer with a subsiding in the fall might be a good thing for Canadian consumers, maybe.

Big Deal!

Well, actually it can be a very big deal if the Canadian dollar gets really strong, it will cause Canadian products to be too expensive for your Yankee cousins (whether the Canadian dollar strengthens against the Chinese currency and the Euro remains to be seen). Many, many small Canadian firms rely on trade with the U.S. and a soaring Loonie will cause that market to dry up, unless the manufacturers slash prices in reaction to this rise.

Reverse cross border shopping will start again. Many things are cheaper in the U.S. if you simply look at the price tag, and if the Canadian Dollar can buy the same as a U.S. dollar, why shop in Canada? For someone in Ottawa you are 55 minutes from Ogdensburg, and not that far from other U.S. towns and cities that will see an influx of “Frost Back” Canadians with their Beaver Bucks in hand. This will help these border towns a great deal, but will have the reverse effect on Canadian border towns.

Is this a permanent thing? I have no bloody idea, but I am now looking at US Index funds (and ETF’s) thinking that if the Canadian dollar goes any higher am I getting a bargain? As is pointed out in the CIBC report, if American Inflation explodes (say because their Government is printing money as fast as they can spend it) and the U.S. Central Bank has to raise interest rates, then this will simply be a “bulge” which will subside quickly and the Canadian Dollar may slide back to where it has been (of course if Canadian Inflation explodes in reaction to American Inflation, the two factors may cancel each other out).

I would encourage you to read over this very interesting report and form your own ideas and opinions about where we are going from here (economically).

Don’t we live in interesting times?

The Budget announced on Thursday did one or two good things, announced some ominous things (for me) and didn’t do much else.

Good: RRSP/RSP to RDSP

The one good thing is that estates of deceased parents and grandparents can transfer money tax-free to a child or grandchild’s RDSP, which helps those with disabled kids, so a very good thing.  The RDSP program will also allow for Carry Forward of the Disability Bonds for up to 10 years, so those who may not have enough to put in one year ,can make it up in the next year (seems a logical step in the program).

OK: Options Victims Saved?

There was a statement about the lucky folks being taxed for money they didn’t make on Stock Options, but the exact logic and methodology is not yet completely understood (as can be seen from this post from Michael James (an admitted victim)). I never had to worry about options ever being worth anything, so I think this doesn’t affect me in any way.

Interesting: Government Cost Controls

This one is directly in my new backyard, with a statement about budget freezes in the public service. What will this mean? Again, not exactly clear, but spending seems to have stopped for now, which might be a good thing for taxpayers (not for us civil servants). Will this mean lay-offs? My guess would be maybe, but a lot of attrition losses due to retirement not being replaced, might be the more logical choice. Will this cut down on bureaucracy and mismanagement? Did it do much in Nortel? Again, the answer is maybe, but I doubt it. Whatever bureaucracy that is there, will stay there, and anybody mis-managing things, are most likely going to stay where they are too, but we shall see.

No mention of the Public Service pension plan, but many ominous statements about it coming from the “side sources” of the government, so another area to watch closely.

Why Not Back to the Past?

So how is it that 4 years ago we were running surpluses and now we are running massive deficits? A couple of reasons come to mind, but they don’t quite add up:

• Massive infrastructure programs to help start up construction and such
• Less Government income, because less folks are working (and those that are, aren’t getting huge raises, and some even took pay cuts).
• More unemployed, so more money going out of the EI “cash cow”, instead of coming in.

But this doesn’t seem to add up to a $50Billion deficit in my mind, but again, maybe it is just not that simple. Anybody think of any other reasons?

Reader’s Note: Random Thoughts will return next week.

Also, watch for the First Big Cajun RRSP Software Giveaway! Coming real soon (once I figure out how it is going to work ).

Gasoline Pumps Inflation

Stats Canada announced the CPI for January and it looks like Inflation is starting to become more of a factor for the Bank of Canada to think about. Year over year for January Consumer Prices were up 1.9% (remember that in December year over year it was 1.3%), so the 0.6% jump is a big one.

Black Gold, Texas Tea

Yes, it is Gasoline prices that are helping fuel this inflationary jump, and this could mean follow on price increases as this price increase percolates through the system.

The increase in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. In January, gasoline prices were 23.9% higher than they were in January 2009. This follows a 25.6% rise in the 12 months to December 2009.

Gasoline prices exerted upward pressure on the CPI for the third consecutive month, as a result of price volatility in the second half of 2008 and the first half of 2009. Prices at the pump have been relatively stable since July 2009.

More importantly the Bank of Canada’s Core rate (which is what they start looking at for when they wish to increase interest rates) is now around 2.0% (year over year) up from 1.5% in December, which may cause the Bank of Canada think tank to start re-thinking when they plan on turning on the Interest Rate economy brakes, which most think is June July timeframe, but if we see another Inflationary jump next month, it may be sooner.

The Big Table of CPI

For those who love details and numbers, I present the Big Table for your perusal:

Nothing New on Jobs Front

Stats Canada published their Labor Force survery for December 2009 on Friday, and it seemed to suggest not much changed in December after a surge in November. This is to be expected with most firms slowing down for the holidays, so the data really only reflect a 2/3 of a month snapshot (if someone got hired between Christmas and New Years I would be very surprised (but it would be a nice present too)).

In the last nine months, employment has stabilized but remains 323,000 (-1.9%) below the October 2008 peak.

Very interesting statement, but given we are only “recovering” not attempting to get back to record highs, it is a slow and steady slope.

At least the graph does not show a slope down.

Unemployment Flat Too

The good thing is that this month’s data also shows that unemployment is stable as well, although seeing it drop would be another good sign of the “recovery” gaining momentum.

Following a large increase in November, employment was unchanged in December and the unemployment rate remained at 8.5%.

Another Big Table

This is the big table of Labour Force Characteristics by Age and Sex