THE BI-WEEKLY DIGEST The Economics Research Team Crescent School Investment Team
Jake Erdman, Chief Economist Josh Limpert, Deputy Chief Economist Ronald Chow, Chief Strategy Officer
Sunday, February 14, 2016
ECONOMIC STATISTICS
HIGH-LEVEL SECRET MEETING IN TORONTO! Friday, February 12, 2016. Toronto, Ontario, Canada. A closed door meeting. Economists from the biggest banks across the countries as well as from many other financial institutions and economic policy research groups gathered and painted a picture of dramatically reduced economic growth expectation. Douglas Porter, chief economist at Bank of Montreal, has kindly disclosed to us that he and his peers have taken an “axe to their forecasts”. Avery Shenfeld, chief economist at CIBC, urged Finance Minister Morneau to increase spending further to provide economic stimulus. Former chief economist of the Crescent School Investment Team, Ronald Chow, would like to draw attention to the comment of Brian Porter, CEO of Bank of Nova Scotia. He actually suggests there is disconnect between turbulent financial markets and the performance of the economy; while the period of market volatility may be interpreted as a fragile and perhaps unhealthy time, he stands faithful in Trudeau’s government to make sizable investments in the economy (namely infrastructure). With that said, it seems more and more likely that Mr. Trudeau and his government will be working with an unexpected starting point – now up to a projected $20-billion deficit.
TRUDEAU AND HIS LIBERALS – IN A BIND ALREADY! According to Warren Lovely, who heads up public sector research and strategy at National Bank Financial, Trudeau’s government may be facing a budget deficit of nearly $90B in just four years. Lovely also mentioned that the Liberal government’s strategy is too optimistic, as they plan to pay down debt in a very tense manner. Essentially, he believes that Trudeau’s Liberal government should allocate more towards fiscal stimulus programs instead, as it will provide more support for our slumping Canadian economy. In order to keep the budget deficits at $10B per year, the government will not only have to delay any increases in stimulus spending but also have to increase taxes and/or reduce spending in the meantime. - Cole Walderman, Economist Analyst
- Ronald Chow, Chief Strategy Officer
EXODUS OF THE ISRAELITES… ER, SENIOR EXECS… Bank of Nova Scotia welcomed in Brian Porter as the new CEO in November 2013. But, Exodus followed Genesis – the head of global banking and markets division, Mike Durland, is the latest of a long list of executives to leave. Mr. Porter has been pressed to appoint new regional heads for Latin America and Mexio, as well as a new chief risk officer, chief operating officer, capital markets head, wealth management head and marketing head. Mr. Porter, feel free to contact me if you’re looking for a replacement…! Remember: when one door closes, another door opens. - Ronald Chow, Chief Strategy Officer
THE BI-WEEKLY DIGEST
Sunday, February 14, 2016 at 8:00am
THE COLD WINTER FREEZES ALBERTA Canadian employment fell by 5,700 in January, following a 22,800 rise the prior month. Full-time employment managed to rise 5,600, and most of the job losses were in the selfemployed category (-20,200). The public sector bulked up (+18,700) while the private payrolls trimmed a little (-4,100). The unemployment rate nudged up to 7.2%, versus the cycle low of 6.6% a year ago. Average hourly wages were as expected, a 2.8% y/y pace. Total hours worked managed to rise 0.3%. The province of Alberta was the weak spot last month, losing 10,000 jobs and reporting another 4 tick rise to a 7.4% jobless rate. As a result, Alberta’s unemployment rate sits above the national average for the first time since 1988. Only Ontario (+19,800) and B.C. (+1,200) posted gains last month, and these two provinces are expected to lead growth again this year. Headline jobs were below expectations, but the main point is that the Canadian economy is struggling and hence is taking a toll on the job market. - Ronald Chow, Chief Strategy Officer
THE DEMISE OF THE GREENBACK’S STRENGTH The mighty greenback is dragging trade and the economy is tampering hiring, although the job growth remains decent and the jobless rate reaches new lows. Nonfarm payrolls rose 151,000 in January, marking the weakest print since September 2014. Most industries continued to hire; even the hard-hit manufacturing sector saw its strongest gain (+29,000) in more than a year. Constructing hiring slowed (+18,000) despite a likely boost from mild weather. The American unemployment rate edged down to 4.9% for the first time since the early days of the Great Recession. With qualified workers becoming a scarcer commodity, wage growth turned up modestly; average hourly wages jumped 0.5%, and up 2.5% from a year ago. The trade deficit continues to act as the biggest weight on the economy. The job growth and low jobless rate masks the weakness of trade/economy caused by the mighty dollar. - Ronald Chow, Chief Strategy Officer
THE UPCOMING NEWS RELEASES Canadian Manufacturing Sales & Orders – December Tuesday, February 16, 2016 at 8:30am
Canadian Existing Home Sales – January Tuesday, February 16, 2016 at 9:00am
Canadian Consumer Price Index – January Friday, February 19, 2016 at 8:30am
United States Consumer Price Index – January Friday, February 19, 2016 at 8:30am
United States New Home Sales – January Wednesday, February 24, 2016 at 10:00am
Canadian Survey of Employment, Payrolls and Hours – December Thursday, February 25, 2016 at 8:30am
United States Real GDP – Quarter 4 Friday, February 26, 2016 at 8:30am
United States Personal Income and Consumption – January Friday, February 26, 2016 at 8:30am
UPCOMING EVENTS – CRESCENT SCHOOL INVESTMENT TEAM Investment Team Meeting Thursday, February 18, 2016 at 3:30pm in Room 303
Investment Team Meeting Thursday, February 25, 2016 at 3:30pm in Room 303
DISCLAIMER This report was prepared by the Economics Research Team, Crescent School Investment Team. It is for informational and educational purposes as of the date of writing. The views and opinions expressed may change at any time based on the market or other conditions. The information contained in this report are not first-hand reports; they have been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The Crescent School Investment Team, the Economics Research Team and its affiliates and related entities are not liable for any sources of error or omissions contained in this report, or for any loss or damage suffered.
THE BI-WEEKLY DIGEST
Sunday, February 14, 2016 at 8:00am