In his latest public speech, in Vancouver, Poloz rhapsodized about the looming return to what he called “natural economic growth.”
While acknowledging, “we are not yet back to normal,” Poloz contended our economy is at a “tipping point from improving confidence into expanding capacity.”
Maybe.
Unfortunately, his speech failed to acknowledge serious challenges in the economy. Most of the jobs created since the recession, he claimed, “are in occupations requiring relatively high skill levels and are mostly in industries with above-average wages.”
This, he contended, will lead to “the virtuous circle of higher incomes, more spending, and more jobs that are associated with natural growth.”
But he also predicated Canada’s future growth and prosperity on what he sees as a coming surge in exports.
Much is made of Canada’s job recovery from the dark days of mid-2009. And clearly, we have done better than the U.S. But our employment rate—the percentage of people of working age who actually have a job—remains too low, and lower than before the recession hit, while our unemployment rate remains too high, higher than before the recession hit.
Moreover, young Canadians are having an especially tough time in finding regular, full-time jobs, as opposed to shorter-term contract employment, wages and benefits of workers with regular jobs are being squeezed (except for top executive who live in a world of their own), and two-tier compensation systems are growing in number, with new employees earning lower pay and benefits than existing employees. We have widening income and wealth inequality.
While Poloz and the Harper government are correct in pointing out that there has been a recovery in employment since 2009, if you take an earlier benchmark—July 2007—before the economic troubles began and the recession hit, then the numbers tell a different story.
Compared to July 2007, we had gained 895,600 jobs by July 2013. But largely publicly-funded education, health, and public administration accounted for nearly 60 per cent of the job gains or 529,500 jobs while manufacturing lost 289,700 jobs. And despite all the talk of the oil sands and mining, we have added just 29,700 jobs in the resources sector. Construction added another 196,100 jobs, fuelled by the demand for houses and condos because of super-low mortgage rates, while professional, scientific, and technical services, which include law, accounting, advertising agencies, computer systems, and various consulting services, added 210,000 jobs. But we still have some distance to go.
For his part, Poloz brought a hyped message of hope to Vancouver, talking up new kinds of jobs; such as social media experts and professional bloggers and Canada’s prospects for innovative new companies and big export gains in emerging markets, along with the application of new technologies such as 3-D printing, artificial intelligence, and synthetic biology.
“Whole new sectors will take off, descriptions of new classes of jobs will be written, and people will be hired under brand-new, yet-to-be-defined job titles.”
So, he said, “I anticipate that the Canadian economy will normalize and growth will become natural.”
This means, Poloz said, that “natural growth will be self-generating and self-sustaining, and the economy will be growing at its potential, as its productive capacity expands.”
But how?
Poloz is counting on export-led growth. “There is a sequence of events we can anticipate,” he explained. “Foreign demand will build; our exports will strengthen further; confidence will improve; existing companies will expand their production; companies will invest to increase capacity; and, new companies will be created.”
All of this will lead to new jobs, and growing incomes will lead to new spending, reinforcing the domestic economy.
But the competitive battle is much more complicated and while Poloz sees great potential for oil and gas, as well as tech-based services, the manufacturing sector remains in serious trouble. For example, while there has been a surge in auto industry sales and investment in North America, the bulk of that investment has gone to the U.S. and Mexico. Ford Canada has announced a $700-million investment, buttressed by about $140-million of support from the federal and Ontario governments, but this is to retain jobs, not create new ones.
Poloz has a vision on how the world should unfold: “We [meaning presumably Poloz and the Bank of Canada staff] are optimistic that the gathering momentum in foreign demand, especially in the United States, should help lift the confidence of Canada’s business leaders and exporters. We can expect the emergence of new products, new processes, new structures and new industries…”
Yet at the same time Poloz was making his speech, the U.S. Federal Reserve was announcing that it had delayed plans to reduce its stimulus for the U.S. economy because unemployment was still too high and economic growth prospects still too weak.
Poloz admitted his “natural growth” scenario “may be slow in coming, but it will emerge, and it will serve as a driving force of economic growth.”
Fair enough. But there is nothing automatic about this process and there will be many barriers.
Poloz would inspire more confidence if he moved beyond the debatable assumptions of conventional macroeconomic policy and focused on the serious microeconomic problems we face; from skills shortages and poor infrastructure, to inadequate innovation, and the lack of a financial system that supports potential new growth companies while leaving the rah-rah side of things to the Harper government.
Original Article
Source: hilltimes.com
Author: DAVID CRANE
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