Quebec and Canadian Companies: We Hire.

Transcription

1 July 13, 20 Quebec and Canadian Companies: We Hire. Canadian Businesses Are Still Enthusiastic, But Slightly Less Than Before. LBS Economic Research Carlos Leitao Chief Economist Sébastien Lavoie Assistant Chief Economist Marie-Claude Guillotte Economist Emir Coskun Subscription: Martine Bérubé Stéphanie Fortin

2 Sébastien Lavoie Assistant Chief Economist The Monitor Quebec and Canadian Companies: We Hire In last week's issue of The Weekly Monitor, we discussed the lacklustre hiring by American businesses. Maybe some of the 14 million unemployed Americans would consider moving to Quebec and if they knew that our businesses are adding plenty of staff to their payroll. In June, 3,939,700 Quebecers held a job. This record employment level constitutes 0,000 more workers than at the height of the financial crisis in early Not only are jobs abundant, but they are also quality opportunities, meaning about 80,000 of these 0,000 jobs are full-time positions. As such, Quebec's unemployment rate (7.8%) is now at its lowest since December Regionally, employment in the Montreal region is particularly higher today than it was before the crisis, even though this region suffered more job losses than others during the recession. The 8.5% unemployment rate for the Montreal area reflects a low rate in the suburbs (Laval: 6.6%, Montérégie: 7.6%) and a fairly high rate for the city of Montreal itself (9.7%). The Quebec City (5.6%) and Gatineau (6.1%) regions continue to hold their own, whereas finding a job is a little more difficult in Trois-Rivières (8.3%), Sherbrooke (8.0%) and Saguenay (8.1%) Unemployment Rate -- Quebec (%, left scale) Average Unemployment Duration (weeks, right scale) Sources: Statistics /Haver Analytics On the macroeconomic front, these statistics are good news in themselves. However, we cannot go so far as to say that when employment goes well, everything goes well. In fact, two statistics reveal that those who lost their job during the recession are not necessarily the ones who found a new job over the past year. First of all, Quebec has more workers in the construction, professional/scientific/technical services, health, restaurant and accommodation sectors but less in the manufacturing and transportation sectors. The skills acquired in struggling industries are not always transferable to booming sectors. Another sign is the fact that the average duration of unemployment (18 weeks in June) is not decreasing despite all this hiring, which goes to show that the financial situation remains precarious for those experiencing long spells of unemployment. Labour market conditions are improving in the rest of as well. While Quebec is doing remarkably well with 30,000 new jobs in June, Ontario is even more impressive with its creation of 60,000 net jobs. Despite the numerous jobs that disappeared during the recession, Ontario is on the brink of having as many employed persons as before the crisis. With employment picking up in almost all Ontario cities over the past few months, the unemployment rate fell quickly from the 9.5% recorded 13 months ago to 8.3% in June. President Obama only dreams about such figures, having promised an unemployment rate of less than 8% last year (9.5% as of June 20) Unemployment Rate Sources: Statistics /Haver Analytics Montreal Vancouver Toronto Canadian Businesses Are Still Enthusiastic, But Slightly Less Than Before How does the future look for? In light of the most recent public surveys published this morning by the Bank of, the recovery will keep barrelling along. Financial tensions in Europe and rumours of a double-dip recession in the do not seem to be impairing our contractors, although they are slightly less optimistic than they were three months ago, according to the Bank s recent surveys: "Overall, businesses are generally positive about their near-term sales prospects, although they are concerned about recent global economic and financial uncertainties and possible spillover effects in." According to the summer Business Outlook Survey, about half (53%) of businesses expect sales to grow at a greater rate over the next 12 months, which is lower than the percentage recorded in the spring survey. In short, profitability is promising. Businesses also expect to ease off capital spending: "The decline [...] is concentrated among firms in the services sector, with a number of firms citing that they had recently completed an investment that would not be repeated over the next 12 months." The increase in business investment is a key piece of the puzzle to keep the recovery on track. Despite recent global uncertainly and massive hiring over the past few months, intentions are still good. As in the previous two surveys, nearly half of businesses plan to hire more workers over the next year. Small and medium-sized businesses report little change in credit conditions, although the situation seems to be improving somewhat. Access to credit continues to improve mostly for large businesses. 2

3 The Monitor Finally, inflation expectations are well anchored. Over 45% of respondents expect inflation to be between 2 and 3% over the next year. All in all, the outlook is positive for employers and employees. Businesses do not hesitate to make decisions to help boost economic activity, unlike their American counterparts who prefer to keep billions $ in cash assets under their mattresses. In short, the positive results of the Bank of 's surveys are like the cherry on the cake, corroborating our forecast of a 25 basis points hike on July BoC Senior Loan Officer Survey: (Lending Conditions: Overall Balance, NSA, %) Bank of 's Business Outlook Survey 0 0 Investment in Machinery & Equipment: Balance of Opinion 60 Future Sales Growth: Balance of Opinion Source: Bank of /Haver Analytics Sources: Bank of /Haver Analytics

4 The Monitor North American Forecasts This Week's Forecasts (%) This Week Next 4 Weeks In 3 Months 3-Month T-Bills Year Bond Year Bond Canadian Dollar (CAN$/US$) Month T-Bills Year Bond Year Bond Yen (Yen/US$) Euro (US$/Euro) /07/20 Historical Data Forecasts* Q Q Q4 20 Q1 20 Q2 20 Q3 20 Q Q Q Q3 Overnight Rate Month Treasury Bills Year Bond Year Bond Year Bond Federal Funds Rate Month Treasury Bills Year Bond Year Bond Year Bond Canadian Dollar (US$/C$) Canadian Dollar (Euro/C$) Euro (US$/Euro) Yen (Yen/US$) Quarter-end data and annual averages July 5th, 20 Interest-Rate and Exchange-Rate Forecasts 4

5 The Monitor Market Review: Bonds and Currencies International 3-Month Rates Current Spreads (b.p.) against U.S. Yield Jul week -4 weeks -1 quarter - 1 year Jan-04- U.S UK #N/A #N/A France International Bonds: Benchmark -Year Yield Current Spreads (b.p.) against U.S. Yield Jul week -4 weeks -1 quarter - 1 year Jan-04- U.S UK France Germany Greece Portugal Spain Japan Provincial Bonds: Benchmark -Year Yield Current Spreads (b.p.) against Yield Jul week -4 weeks -1 quarter - 1 year Jan Alberta British Columbia Prince Edward Island Manitoba New Brunswick Nova Scotia Ontario Quebec Saskatchewan Newfoundland Currencies Currencies Jul week -4 weeks -1 quarter - 1 year Jan-04- (%) (/US$) (US$/) Australia (Australia/US$) U.K. (US$/ ) Japan (US$/Yen) Euro (US$/Euro) Data updated as at: 13/07/20 5

6 The Monitor Market Review: Fixed Income Charts % U.S. Yield on 3-Month T-Bills % Yield on -Year Federal Bonds U.S Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul- Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul- % Yield Curve 09-Jul- -1 month -1 year 3m 6m 2y 5y y % U.S. - Yield Curve 09-Jul- -1 month -1 year 3m 6m 2y 5y y 30y Yield Spreads in basis points ( minus U.S.) 09-Jul- -1 month -1 year 3m 6m 2y 5y y Jul-08 Oct-08 Spreads on 2-Year Federal Bonds (Can-U.S., base pts) Jan-09 Apr-09 Jul-09 Oct-09 Jan- Apr- Jul- 6

7 The Monitor Market Review: Stocks Exchange and Commodities Stock Market Summary Level Change (%) Jul-09-52w HI 52w LOW (-1W) (-4W) (-13W) (-52W) Jan-04- S&P/TSX 11,570 12,281 9, S&P/TSX S&P/TSX Small Cap Index S&P 500 1,078 1, Dow Jones,198 11,205 8, Nasdaq 2,196 2,530 1, International U.K. - FTSE 0 5,133 5,825 4, Germany - DAX 6,065 6,332 4, France - CAC 40 3,554 4,066 2, Japan - Nikkei 225 9,585 11,339 9, Hong Kong - Hang Seng 20,379 22,944 17, Russia - RST 1,353 1, Australia - ASX All Ordinaries 4,415 5,024 3, Brazil - Bovespa #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A S&P/TSX Sector Summary Level Change (%) Jul-09-52w HI 52w LOW (-1W) (-4W) (-13W) (-52W) Jan-04- S&P/TSX 11,570 12,281 9, Energy Materials Industrials Consumers Discretionary Consumers Staples Health Care Financials Information Technology Telecommunication Services Utilities Commodities Level Jul-09-52w HI 52w LOW (-1W) (-4W) (-13W) (-52W) Jan-04- London -- Gold (US$/once) London -- Silver (US$/once) Copper (US$/LB) WTI Crude Oil (US$/barrel) Natural Gas (Henry Hub) (US$/MMBTU) Data updated as at: 13/07/20 7

8 The Monitor Calendar of Major Economic Indicators KEY ECONOMIC INDICATORS WEEK OF JULY 12, 20 Date Time Release Unit Data for: LBS * Consensus Previous Jul 13 8:30 International Merchandise Trade Billions April Jul 15 8:30 New Motor Vehicle Sales M/M May % Jul 16 8:30 Leading Indicators M/M June % * Laurentian Bank Securities Forecast Consensus from Bloomberg L.P. Date Time Release Unit Data for: LBS* Consensus Previous Jul 13 8:30 Trade Balance Billions May - -$39.2 -$40.3 Jul 14 8:30 Import Price Index M/M June % -0.6% Jul 14 8:30 Import Price Index Y/Y June - 5.2% 8.6% Jul 14 8:30 Advance Retail Sales M/M June % -1.2% Jul 14 8:30 Retail Sales Less Autos M/M June - 0.0% -1.1% Jul 14 :00 Business Inventories M/M May - 0.3% 0.4% Jul 15 8:30 Producer Price Index M/M June % -0.3% Jul 15 8:30 PPI Ex. Food & Energy M/M June - 0.1% 0.2% Jul 15 8:30 Producer Price Index Y/Y June - 3.1% 5.3% Jul 15 8:30 PPI Ex. Food & Energy Y/Y June - 1.1% 1.3% Jul 15 8:30 Initial Jobless Claims Thousands July Jul 15 9:15 Industrial Production M/M June - 0.0% 1.3% Jul 15 9:15 Capacity Utilization - June % 74.1% Jul 15 :00 Philadelphia Fed Index M/M July Jul 16 8:30 Consumer Price Index M/M June - 0.0% -0.2% Jul 16 8:30 CPI Ex. Food & Energy M/M June - 0.1% 0.1% Jul 16 8:30 Consumer Price Index Y/Y June - 1.2% 2.0% Jul 16 8:30 CPI Ex. Food & Energy Y/Y June - 0.9% 0.9% Jul 16 9:55 U. of Michigan Confidence - Jul. P /07/20 8

9 The Monitor North American Economic Indicators Period Monthly Chg. (% or Level) Cumulative change Current Previous - 3 Month - 1 Year Gross Domestic Product (GDP) April 0.0% 0.6% 0.8% 3.3% Manufacturing Shipments April 0.2% 1.4% 1.5%.5% Housing Starts ( ' 000) * May Retail Sales April -2.0% 2.2% 0.8% 6.6% Trade Balance (M$) * April Employment ( ' 000) * * June Unemployment Rate * June Wages (avg. hourly earnings) June 1.7% 2.4% 2.4% 3.4% Total CPI inflation May 1.5% 1.8% 1.5% -1.0% Inflation ex-food & energy May 1.7% 1.9% 2.1% 1.8% Industrial Product Price Index May 0.3% 0.4% 0.3% 1.4% Raw Materials Price Index May -7. 2% 1.6% -4.9% 6.4% Period Monthly Chg. (% or Level) Cumulative change Current Previous - 3 Month - 1 Year ISM - manufacturing * May ISM - Non-manufacturing * May Industrial Production * May Capacity Utilization Rate * May Consumer Confidence Index * June Retail Sales May -1.2% 0.6% 1.5% 6.9% Trade Balance (M$) * April -40,285-40,047-35,062-24,855 Housing Starts ( ' 000) * May Existing home sales May -2.2% 8.0% 13.0% 19.2% Median price of ex. home sales May 4.2% 1.6% 9.1% 2.7% Non-Farm Payrolls ( ' 000) * * May Unemployment Rate * May Wages (avg. hourly earnings) May 2.4% 2.3% 2.4% 3.1% Total CPI inflation May 2.0% 2.2% 2.7% -1.0% Inflation ex-food & energy May 1.0% 1.0% 1.3% 1.8% Producer Price Index May -0.3% -0.1% 0.3% 5.1% - Ex-Food & Energy May 0.2% 0.2% 0.5% 1.3% * Level * * Change in level for the last month, 3 months and 1 year * * * Annual % change Data updated as at: 13/07/20 9

10 The Monitor North American Forecasts 2009Q4 20Q1 20Q2 20Q3 20Q4 2011Q1 2011Q2 2011Q Real GDP (%) Consumption Business investment Non-residential structures Machinery and equipment Residential construction Government spending Exports Imports Current account balance in % of GDP Inflation (%) Total CPI (y/y) Core CPI (y/y) Unemployment rate (%)* Employment Housing starts (000s) Before-tax Corp. Profits (y/y) *Average rate for the quarter or the year. Forecasts as of June 30th, 20 Period-Over-Period Annualized Per Cent Change Unless Otherwise Indicated Annual Average 4th Qtr/4th Qtr Period-Over-Period Annualized Per Cent Change Unless Otherwise Indicated Annual Average 4th Qtr/4th Qtr 2009Q4 20Q1 20Q2 20Q3 20Q4 2011Q1 2011Q Real GDP (%) Consumption Private investment Machinery and equipment Residential construction Government spending Exports Imports Inflation (%) Total (y/y) Core (y/y) Unemployment rate (%)* Housing Starts (000s) Before-tax Corp. profits (%, y/y) * Average rate for the quarter or the year. Forecasts as of June 28th, 20 This document is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of Laurentian Bank Securities (LBS), a wholly owned subsidiary of the Laurentian Bank of. The author has taken all usual and reasonable precautions to determine that the information contained in this document has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze it are based on accepted practices and principles. However, the market forces underlying investment value are subject to evolve suddenly and dramatically. Consequently, neither the author nor LBS can make any warranty as to the accuracy or completeness of information, analysis or views contained in this document or their usefulness or suitability in any particular circumstance. You should not make any investment or undertake any portfolio assessment or other transaction on the basis of this document, but should first consult your Investment Advisor, who can assess the relevant factors of any proposed investment or transaction. LBS and the author accept no liability of whatsoever kind for any damages incurred as a result of the use of this document or of its contents in contravention of this notice. This report, the information, opinions or conclusions, in whole or in part, may not be reproduced, distributed, published or referred to in any manner whatsoever without in each case the prior express written consent of Laurentian Bank Securities.