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The Locked In Factor

No Not an LIRA

One of the things I have learned about working in the Technology world for over 20 years is that sometimes tunnel vision kicks in for decisions about what technology to use. I found a fascinating article in the Boston Globe by Leon Neyfakh that talks about how the Nuclear Reactor world is now technologically locked-in with a technology that was not the best one for Japan:

Japan’s reactors are “light water” reactors, whose safety depends on an uninterrupted power supply to circulate water quickly around the hot core. A light water system is not the only way to design a nuclear reactor. But because of the way the commercial nuclear power industry developed in its early years, it’s virtually the only type of reactor used in nuclear power plants today. Even though there might be better technologies out there, light water is the one that utility companies know how to build, and that governments have historically been willing to fund.

Economists call this problem “technological lock-in”: The term refers to the process by which one new technology can prevail over another for no good reason other than circumstance and inertia. The best-known example of technological lock-in comes from the 1970s, when VHS and Betamax, two different kinds of videotape, competed in the market until VHS gained a slight lead and then leveraged it to total domination. Whether the VHS format was actually superior to Betamax didn’t matter. After the lock-in, consumers no longer had a choice.

In the financial industry, that is how a lot of us end up financially locked-in to a specific savings product, like myself with my RESPs in TD Mutual Funds, I ended up financially locked-in, because I didn’t really look at other savings vehicles that might have done better.

Feeling financially locked-in is an uncomfortable feeling. Still, if you can change, it isn’t imperative that you jump (the opposite of locked-in would be a financial joy rider who changes because something seems cool (much like technology junkies need new phones every year)). Still, you should at least figure out whether you are in the right place financially. All decisions in life should be revisited every once in a while to figure out whether your decision is still valid. The argument I don’t have time to do that, means you have decided your initial decision was valid. You will stick with it (but don’t get to complain about it later).

It is rare that any decision locks you into a single path financially (even with LIRA (Locked-in Retirement Accounts) you can change the type of account the LIRA is), so take advantage of the freedom and make sure your decision still works, after all you don’t want to end up with a BetaMax financial solution now do you?


Employment Up a Little More in December

The year ended OK in terms of Employment, with the Employment rate increasing, according to Stats Canada on Friday.  In total there were 22,000 new jobs in December, with 38,000 of those being full-time positions, which is great news. I will make my monthly observation that there needs to be an index that reflects Full-Time employment position stats (yes it is included by Stats Canada, with this data).

To quote Stats Canada:

Employment edged up for the second consecutive month in December, with an increase of 22,000. The unemployment rate held steady at 7.6%. Compared with December 2009, employment increased by 2.2% (+369,000), following a decline of 1.1% the previous year.

So as a whole 2010 was a good year for folks getting jobs back, and that has got to be good news for the Canadian economy overall.

Employment Graph

Final Employment Graph for 2010

This graph is reassuring for Canadians, and hearing that the job increases in Full-time employment is even better news.

Unemployment Graph

Final Unemployment Graph for 2010

This is one of those weird months where, even though Employment increased, unemployment didn’t decrease? Statistics are a wonderful thing.

Private Sector Recovery?

The number of private sector employees increased by 53,000 in December, while self-employment fell by 38,000. At the same time, public sector employment was little changed.

There is a lot of interesting information in this article (I encourage you to read this), but one that caught my eye was that the Private Sector seems to be hiring more folks, which means industry must be recovering in some fashion. The Public Sector has hired a large number of folks, but the Private Sector is the important area where hiring needs to rebound.

Over the past 12 months, 332,000 (+3.1%) employees were added to the private sector and 143,000 (+4.2%) to the public sector. The number of self-employed declined by 106,000 (-3.9%) over the same period.

The Big Table

I include one of the many big tables from Stats Canada outlining employment by age, which is important to me.

November 2010 December 2010 Nov. to
Dec. 2010
Dec. 2009 to
Dec. 2010
Nov. to
Dec. 2010
Dec. 2009
to Dec. 2010
Seasonally adjusted
thousands change in thousands % change
Both sexes, 15 years and over
Population 27,868.9 27,894.2 25.3 403.5 0.1 1.5
Labour force 18,654.8 18,674.0 19.2 236.8 0.1 1.3
Employment 17,227.9 17,249.9 22.0 368.5 0.1 2.2
Full-time 13,898.3 13,936.3 38.0 259.1 0.3 1.9
Part-time 3,329.6 3,313.5 -16.1 109.2 -0.5 3.4
Unemployment 1,426.9 1,424.1 -2.8 -131.7 -0.2 -8.5
Participation rate 66.9 66.9 0.0 -0.2
Unemployment rate 7.6 7.6 0.0 -0.8
Employment rate 61.8 61.8 0.0 0.4
Part-time rate 19.3 19.2 -0.1 0.2
Youths, 15 to 24 years
Population 4,410.7 4,411.3 0.6 11.0 0.0 0.2
Labour force 2,787.0 2,824.8 37.8 -23.0 1.4 -0.8
Employment 2,407.5 2,433.9 26.4 41.9 1.1 1.8
Full-time 1,260.8 1,272.0 11.2 -0.3 0.9 0.0
Part-time 1,146.7 1,161.9 15.2 42.3 1.3 3.8
Unemployment 379.5 390.9 11.4 -65.0 3.0 -14.3
Participation rate 63.2 64.0 0.8 -0.7
Unemployment rate 13.6 13.8 0.2 -2.2
Employment rate 54.6 55.2 0.6 0.8
Part-time rate 47.6 47.7 0.1 0.9
Men, 25 years and over
Population 11,476.4 11,488.9 12.5 195.1 0.1 1.7
Labour force 8,414.0 8,414.7 0.7 146.7 0.0 1.8
Employment 7,836.1 7,844.7 8.6 235.1 0.1 3.1
Full-time 7,233.4 7,233.8 0.4 223.4 0.0 3.2
Part-time 602.7 610.9 8.2 11.7 1.4 2.0
Unemployment 577.9 570.0 -7.9 -88.3 -1.4 -13.4
Participation rate 73.3 73.2 -0.1 0.0
Unemployment rate 6.9 6.8 -0.1 -1.2
Employment rate 68.3 68.3 0.0 0.9
Part-time rate 7.7 7.8 0.1 -0.1
Women, 25 years and over
Population 11,981.7 11,994.1 12.4 197.5 0.1 1.7
Labour force 7,453.8 7,434.6 -19.2 113.2 -0.3 1.5
Employment 6,984.3 6,971.3 -13.0 91.5 -0.2 1.3
Full-time 5,404.1 5,430.5 26.4 36.1 0.5 0.7
Part-time 1,580.2 1,540.7 -39.5 55.3 -2.5 3.7
Unemployment 469.5 463.3 -6.2 21.7 -1.3 4.9
Participation rate 62.2 62.0 -0.2 -0.1
Unemployment rate 6.3 6.2 -0.1 0.2
Employment rate 58.3 58.1 -0.2 -0.2
Part-time rate 22.6 22.1 -0.5 0.5


Canada’s Balanced Budget (Eventually)

Might Balance Budget by 2015

Jim Flaherty (Canadian Federal Finance Minister, and the man who spins the Financial Blarney for the Feds) started the Financial Waffling section of the Government End of Year reports, when he said that the plan to have a Balanced Federal Budget for 2015 May or May not succeed. He then went on to say that they may even be able to balance the budget earlier, but they are not sure.

Would you like blueberry syrup on that waffle?

If I had to go to a bank or bankruptcy agent and had such a wishy-washy plan I’d be laughed right out the door, but let us be fair, Canada’s economy is in a very unsure setting right now. There are more jobs, but those were part-time jobs, interest rates are low however inflation is starting to rise, and the Government can’t easily introduce any new big tax for fear of toppling the whole house of cards.

Money, Money, Money

Not enough of these coming into Government

All the talk of government cut backs is fine, but the only way that governments have managed to balance their budgets is by increasing their income (or by off loading costs to other government levels).  If Canadians remain unemployed, or with lower incomes, the major source of income for the government (i.e. taxes) will remain at lower levels.

Government cuts are fine and dandy, and many claims can be made, however, cuts in spending are usually on the backs of those who can’t afford to lose services, and are very unpopular generally, so any alleged austerity measures I think are simply smoke and mirrors to mask the fact that the Government needs more income!

Remember it was not that long ago that Canada was actually paying it’s debt down, and was running surpluses, so it just shows how fragile government income levels are, and that all governments can find ways to over-spend quickly, if they are in a surplus situation (my opinion is that it was a combination of both that destroyed all surpluses).

Maybe the government can start buying lottery tickets?

My other guess (opinion) is this is another piece of financial slight of hand by the Finance Minister to then deliver a balanced budget earlier and give himself whiplash by patting himself on the back so vociferously. If Canadian jobs can recover, and inflation can stay down for a while longer (thus keeping interest rates down), Canada may be able to balance their books soon, but given how sick the U.S. economy is currently, that may be only a pipe dream.

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The Small Entrepreneur

The National Film Board of Canada has some very interesting video shorts and documentaries up on their web site, but this past year they have started up an interesting series of shorts, which have been shot over a period of time, GDP: Measuring the Human Side of the Economic Crisis is an amazing piece of work and it is on going, so well worth going back to the NFB site to revisit the stories that intrigue you.

One of the stories really interested me, and I have included episode 11 of the story of Edgar and Zoran. This episode shows to some of us how something we take for granted (Canadian Citizenship) is something very important to potential immigrants like Edgar.

When Zoran opened his Calgary carwash, Alberta was booming but local labour was in short supply. A few years later the economic ground has shifted – and the fortunes of the immigrant entrepreneur are intertwined with those of his Filipino guest-workers.


Construction Boom?

My wife and I spent part of Saturday finding out how much replacing the windows on our house is going to cost (the short answer is HOLY CRAP!), however, I am sure I will have many interesting and poignant commentaries on this issue, but that is not what I am writing about today.

As we finished our discussions with the representative at Home Depot, the comment was made that we most likely would not hear from anyone for at least a week due to the “boom” right now in building in Ottawa (at least in the area of repairing and upgrading existing homes).

At first I took this simply as a “sales pitch” about how we should act soon, but then I looked over and saw something that made me think the advice was valid:

“… all booked before June 30th will not be subject to the HST…”

Then I understood the comment. It seems the impending HST is causing a “bubble” in the construction industry in Ontario (much like the Federal Home Upgrade tax credit did last year). It is interesting to see how government programs which are designed to increase Government revenue and allegedly make retailers jobs simpler can as a secondary effect cause consumers to spend money sooner.

My only question is, is this “rush” valid? Did the Provincial Sales Tax get charged for installing windows? Were windows exempt from these taxes? What about the old “cash discount” that has always existed in the construction industry?

All comments appreciated, to help me understand this “bubble”.


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