OTTAWA, Ont. -- Canada's dollar dipped about half a cent in early trading Monday after Statistics Canada reported the national economy shrank in February rather than posting a gain as most economists expected.
Statistics Canada reported the national gross domestic product declined by 0.2 per cent from January. Economists had been expecting Canadian GDP would grow by 0.2 per cent in February.
Shortly after the announcement, the Canadian dollar was down 0.55 of a cent to 101.39 cents US. The loonie recovered some of the lost ground in later trading and was at 101.42 cents a few minutes before stock markets were to open.
"The result leaves the economy tracking well below the Bank of Canada's 2.5 per cent growth rate for the quarter,'' observed CIBC World Markets chief economist Avery Shenfeld.
"Even with a likely rebound in March, the first quarter growth rate looks likely to be no better than two per cent or less.''
Statistics Canada says temporary closures in mining and other goods-producing industries contributed to February's decline from January.
In service industries, gains in wholesale trade and in the finance and insurance sector outweighed declines in retail trade and in the transportation and warehousing sector.
Mining and oil and gas, combined, fell 1.6 per cent in February following a small drop in January and a 2.0 per cent increase in December.
With oil and gas excluded, mining declined 7.0 per cent in February, as output at potash and nickel mines was reduced by temporary shutdowns.
Oil and gas extraction decreased 0.9 per cent. Crude petroleum production declined partly as a result of unplanned maintenance activities in Alberta. Natural gas production also fell.
Manufacturing declined 1.2 per cent in February after increasing for five consecutive months. Non-durable goods manufacturing dropped 1.4 per cent with reduced output of food, chemical, and plastic and rubber products.
Durable goods production fell 0.9 per cent as lower output in transportation equipment and primary metal manufacturing more than offset increases in non-metallic mineral products and machinery manufacturing.
Unusually warm weather meant lower demand for electricity and natural gas, pushing the output of utilities down 1.9 per cent.
Construction rose 0.5 per cent in February with increases in residential and non-residential building.
While the wholesale trade rose 1.5 per cent -- a third consecutive monthly increase -- the retail trade was down 0.4 per cent. It was the second consecutive drop in retail.
New car dealers, who had a notable sales increase in January, saw sales slip last month.
Excluding new car dealers, retail trade edged down 0.1 per cent with lower sales at food and beverage stores, health and personal care stores as well as electronics and appliance stores.
Those drops outweighed increases at building materials stores, clothing stores and general merchandise stores.
The public sector, education, health and public administration combined, was unchanged in February as gains in health services were offset by decreases in education services and public administration.
Photo: CP/Andrew Vaughan
When it comes to evaluating Canadian job growth, the employment numbers are just part of what worries Benjamin Tal, deputy chief economist at CIBC World Markets. "It's not only the quantity, but also the quality of employment that's falling in Canada," says Tal. "A lot of the jobs that are being created are low-quality, especially part-time jobs and low-paying jobs." Though -- unlike the U.S. -- Canada has regained all the jobs lost in the recession, he says that an absence of good-paying jobs is the "main reason" why wages have stagnated. Adjusted for inflation, personal after-tax income is now rising at the slowest rate since 1995. Meanwhile, the skills mismatch in many jurisdictions has left employers short on skilled labour despite still-high unemployment levels in other regions. "If you lose a job, you don't have the skill set to go an find a job elsewhere that companies want and need," says Tal. (Alamy photo)
When Caterpillar decided to stop assembling locomotives in its Electro-Motive facility in London, Ont., it was a poignant reminder of how globalization is giving deep-pocketed, transnational corporations the ultimate trump card in bargaining with workers: a cheaper alternative. According to Mike Moffatt, a labour expert at the University of Western Ontario's Ivey School of Business, because of automation and an increase in imports from lower wage jurisdictions like China and Mexico, Canadian workers are competing for fewer manufacturing jobs. "That's given firms real power to negotiate down wages," says Moffatt, who points to the <a href="http://www.reuters.com/article/2012/02/06/riotintoalcan-alma-idUSL2E8D699U20120206" target="_hplink">Rio Tinto lockout in Quebec</a> as another illustration of the might afforded to companies with global reach. Since locking out workers at its aluminum smelter in Saguenay-Lac-Saint-Jean on December 31, the Anglo-Australian mining giant has used non-union workers to operate the facility at one-third capacity. With no plans to return to the bargaining table, the company recently announced it is restarting two suspended lines, and is expecting to return to full capacity in May. As Tal maintains, "In this environment, the bargaining power of labour is diminishing."
Just as the power has shifted toward private-sector employers, Michael Lynk, a labour law expert at the University of Western Ontario, says there is a sense that governments are becoming emboldened amid the post-recession climate of austerity that has swept from Toronto's City Hall to Parliament Hill. "There's increasingly an attitude of take-it-or-or leave-it by [private sector] employers, but we may begin to see that with public sector bargaining as well, where they basically say, 'You have to meet our bargaining objectives this round, and we're going to be prepared to endure a short or lengthy lockout to prove our point," he says. Though global economic instability recently prompted federal Finance Minister Jim Flaherty to pull back on his earlier commitment to deep cost-cutting in the upcoming budget, government departments are expecting spending to be slashed by between five and 10 per cent, a goal that will be met at least in part at the expense of public service jobs and benefits. The Canadian Centre for Policy Alternatives recently estimated that the <a href="http://www.behindthenumbers.ca/2012/02/02/federal-cuts-could-push-unemployment-to-8/" target="_hplink">federal government's budget cuts could push unemployment up half a percentage point, to 8 per cent</a>. (CP photo)
From <a href="http://dalgazette.com/featured/faculty-strike-rumours-explained/" target="_hplink">Dalhousie University</a> to <a href="http://www.thestar.com/article/1120516--labour-strife-ahead-in-air-canada-pilot-talks" target="_hplink">Air Canada</a>, employers no longer able -- or willing -- to fund costly pension plans are mounting attempts to roll back retirement benefits, stoking labour unrest and a growing sense of financial insecurity among workers. As Dalhouse University labour economist Lars Osberg explains, the financial crisis took a huge bite out of the value of corporate pension portfolios and the interest rate required to generate the stream of returns to make these programs sustainable. All of which explains why experts anticipate a deepening of the trend away from inflation-protected, gold-plated defined-benefit pension plans, shifting responsibility for retirement savings from employers to workers.
The power in numbers that enabled Big Labour to negotiate better wages and benefits in the aftermath of the Second World War is a distant memory today, as the <a href="http://www.huffingtonpost.ca/2011/12/12/canada-income-inequality-decline-unions-middle-class-jobs_n_1139136.html" target="_hplink">erosion of unions continues to whittle away the strength of collective bargaining</a>. This is particularly true in the private sector, where unionization sits at 16 per cent of employees, less than a quarter of public sector unionization. "I think you will see more disputes with unions having to compromise more than in the past," says Tal. "I really don't see that they have the upper hand at this point." Given the yawning gap between private and public sector unionization, Lynk warns that pressure on public sector unions could mount as it has in the U.S. in recent months. "The argument they've been floating is, 'Why should public sector workers have jobs for life, good pensions, and decent wages? They're eating up your taxes,'" he says. "I wouldn't be surprised if we're not [starting] to see the beginnings of that kind of argument here in Canada."