Canada created virtually no net new jobs in the six months to April, consumer debt is at an all-time high, retailers are struggling if not disappearing, and the percentage of Canadians with a job remains well below the pre-recession level.
But things are looking much brighter on the corporate side. According to StatsCan, corporate profits in Canada shot up 12.3 per cent in the first quarter of 2014, compared to a year earlier.
By comparison, Canadians’ average weekly earnings, according to another StatsCan report, went up by about a quarter as much; they rose 3.1 per cent during the same period.
The booming profit numbers are “a very encouraging sign for business investment going forward,” TD Bank said this week, but the broader picture is becoming worrisome. We are facing the prospect of a U.S.-style disconnect between Bay Street earnings and the main street economy.
Just look at manufacturing. Canada has been losing about four per cent of its manufacturing jobs per year since the recession hit. The pace has slowed a bit in the past year, with just 1.8 per cent of manufacturing jobs disappearing in the year to March, 2014. But in that period, manufacturing profits soared a stunning 24.3 per cent.
Automation can explain some of this. Digital technology and robotics have eliminated countless blue-collar jobs in recent years, explaining at least in part why Canadian manufacturing was able to return to pre-recession levels of output with 200,000 fewer workers, and why factory-related jobs keep popping up on lists of Canada’s worst jobs.
Then there are the banks. Despite dire warnings that the country’s housing boom is about to turn a nasty corner, and worries that low interest rates are going to start eating into bank profits, earnings results out in the past few weeks show Canada’s financial behemoths are raking it in.
The six biggest private banks — CIBC, BMO, National Bank, RBC, Scotia and TD — earned unadjusted profits totalling $7.37 billion in the second quarter.
That works out to about $80 million in profit per day, or about $56,000 in profit every second.
Sort of reminds one of the situation in the U.S. in recent years, where the job market cratered and stayed down, even as corporate profits returned to normal and stock markets began to reach towards record highs.
Great for owners of capital, crappy for everyone else who has to depend on a paycheque for their wealth. It all almost looks like what Thomas Piketty is talking about in his talked-about book Capital in the Twenty-First Century.
Piketty says rising inequality is a natural state in capitalism, because capital accumulates faster than the overall economy grows. His numbers were challenged by the Financial Times recently, though that challenge was itself challenged by dozens of other economists.
Experts will inevitably be debating Piketty’s argument for decades. But Canada’s economy today — stocks and profits soaring as consumers take on more and more debt to keep up — certainly seems like a perfect example of what Piketty is talking about.
What Canadian banks' earnings will buy you in the real world, plus the 10 worst jobs in Canada: