Good News And Bad News On Pay Raises

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For many of the workforce, the opportunity to gain a pay raise is something that can be analogised to Christmas, their birthday and Easter all coming at once. Any employed adult awaits news of the latest pay deal like a small child waiting for Santa on Christmas Eve night, hoping that the new deal will be enough to maintain a decent standard of living as well as allowing a nice holiday somewhere sunny (or whatever other maverick spending plan they may have). But for many Canadian workers, hopes for a big raise in 2010 will have to be replaced by an acceptance that even with the recession getting smaller in the rear-view mirror, some realism will have to be employed by the driver for a while to come.

Two surveys from separate consulting firms this week have shown similar results on the question of pay deals from Canadian companies. The consensus is that yes, Canadians can expect a pay raise in 2010 and yes, it will be higher than the deal they got this year. Unfortunately, it is still set to be a modest one as companies gingerly take their initial steps in a world that has just emerged from a recession, and would like to avoid there being another one any time soon, thank you very much. While many companies this year have had to take the unpopular – but at least broadly accepted in the circumstances – step of cutting employee pay, the average Canadian pay rise is set to be around 2.8% according to Hewitt Associates, and 2.3% according to the Hay Group.

Inevitably, some province s will have to look on enviously as others benefit from greater increases. At the head of the queue when it comes to 2010 pay increases will be Saskatchewan, expected by Hewitt to benefit from a 4.1% boost due in no small part to the province’s success in the energy sector. This is far and away the highest increase, with the next competitor being Manitoba, due to enjoy a 3.2% increase, and Alberta which can expect a flat three per cent lift. The lesser increases are due to be in Ontario, with 2.6% and British Columbia, with 2.7 – little surprise there as both provinces were victim to slowdowns in their essential services, manufacturing and forestry respectively.

Raises may be lower than hoped in 2010, but given the economic situation of 2009’s first half, that there will be even this level of raise is seen as positive news. The sunnier financial climate, expected improvement in company performance, as well as a desire to reward employees who have been working “cheaply” are seen as the major reasons for the increased raise. And while the average Canadian may look at their pay raise and feel somewhat undervalued, it is worth remembering that the inflation rate is currently so low as to be almost imperceptible, meaning that any raise in pay will make for a decent gain in living standards. Something to celebrate, even if it may not yet be time to buy airline tickets and sombreros.

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Canadians Feel They Have More Job Security Than Before

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Nearly half of Canada’s current workforce feels more secure in their roles than they did one year ago, according to findings released this week. Although this does not technically constitute a majority, the numbers are in favour of the proposition that Canadians feel they have more job security than before, with 38 percent feeling that they were less secure compared to 46% who feel more secure. It is a sign that people are still divided on the subject of the economy and employment, but that optimism is continuing to creep upward in the light of positive noises at home and abroad. As we wait to see how the recovery continues, it would be chutzpah to suggest that the findings of the recent Harris-Decima poll proved that we were out of the woods, but good news is good news.

The positive feeling is more pronounced among people working in the public sector, of whom 53% said they felt more secure in their employment compared to 42% who felt more secure in the private sector. This is natural, as the companies which are going bankrupt and the plants and offices which are being closed down tend to be private sector entities. With a national unemployment rate of 8.6% expected to rise in the weeks to come, private sector workers still nurse understandable doubts that their jobs are safe. However, the prevailing opinion is that most companies with substantive cuts to make have already made the bulk of those cuts and have now downsized to a reasonable level.

Of the 1,009 people surveyed, some 33% said that they felt job security was the top perk in a job – nearly exactly a third of the group. Almost as many (31%) said that work/life balance was the most important thing in any job. Taking these two groups together it could be said that almost two-thirds of the Canadians surveyed felt that comfort and confidence played a big part in their reasons for doing their job. With 15% citing a secure pension and 12% a generous salary, those feeling that remuneration was the important part of a job was just over a quarter. Whether everyone responding was being entirely honest with the researcher and themselves is a question for another day, however it would appear that a sense of uncertainty in the last couple of years has caused people to reassess priorities.

Other interesting results to emerge from the survey had much to do with the divisions between public and private sector workers. When asked whether government workers were overpaid, 64% of the private sector said they were while only 39% of public sector workers agreed. The reasons for this strength of feeling among the private sector may well be that they resent their taxes being spent on workers who they very much (83%) feel do an excessive amount of “paper pushing”. 72% of public sector workers agreed that their jobs involved a lot of administrative work, but did not feel in such great numbers that it should mean they have to take a pay cut.

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Home Sales Will Still Increase in 2010

In the surest sign yet that the economy is beginning to truly repair itself, the Canadian Real Estate Association has improved its forecast for house sales on existing real estate properties this year. The level of house sales is expected to rise to the point they were at last year just before the recession took hold, and although overall 2009 is set to show falling numbers as compared to last year, the fall will be much less than initially forecast. The experts base this optimism on a second quarter which showed much better results than expected, with sales climbing through the spring months and into July.

The numbers forecast stand at a total of 432,600 for the year. Admittedly this represents a fall on the overall resales in 2008, but only a 0.4 percent drop when we had been led to expect a much steeper fall. The Canadian Real Estate Association had previously forecast a very dramatic fall in the region of fifteen percent. The turnaround sees house sales almost hold to 2008 levels, which represents a much better result than we could possibly have expected. In addition, looking at the price of house sales, the average is expected to increase by 1.5% on last year.

The big winners on house resales would appear to be residents of British Columbia, with an increase this year on their numbers in 2008 of 5.2% (a projected total of 72,500 sales). This is a strong performance in any year, but in a twelve-month period which has contained a long spell of recession in the national and global economies, any increase is impressive. An increase of more than five percent is to be considered nigh-on miraculous. In other provinces, with the exception of Ontario (looking at a half of a percent rise), the numbers are still expected to fall on last year’s numbers, but the scale of the fall-off has now been revised dramatically.

There is some good news for determined pessimists, if you like that kind of thing. the projected sales increases for 2010, which were made around the same time as the previous figures on resales for the year 2009, have been revised downwards. A sign that the recession is going to stick around in some capacity? Probably not. The reason given by the Association is that a number of prospective home buyers are now bringing their plans forward in the light of more positive news. Sales will still increase in 2010, all things being equal, just by a more shallow factor than previously expected.

The projected rebound for 2010 now sits at 5.3% for the year. In any year, this is still a healthy performance, and some commentators are sure to point to the fact that this recovery is now looking more like a steady, shallow recovery as opposed to a steep bounce. In any economy, steady improvement is always preferable to stratospheric increases as the performance is easier to sustain and any retracement much easier to deal with. Overall, the news is positive, and that is news we all wanted to hear.

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Canadians Still Paying More … But Not Much More

Canadian shoppers are used to something of a price difference between shopping domestically and journeying south of the border to pick up some purchases. For various reasons, the dollar goes further in the States even when taking into account the exchange rate, and this has been known to drive some Canadians to visit family in the States, just happening to do a lot of high-value shopping while there. But just recently this price gap has leveled considerably, according to a study carried out recently. It has not closed entirely by any means, but to see it narrowing is positive both for shoppers and for stores.

Of course, as with any financial story it isn’t just a matter of saying “things have improved to some extent” and leaving the statement there. There is considerably more to it, not least the fact that the findings of the study are contentious, having been opposed by the Consumers Association of Canada. The report itself was unveiled by Doug Porter, Deputy Chief Economist at BMO Capital Markets. In their study last year, BMO found an average price difference between selected products that stood in favor of the US shopper to the tune of eighteen per cent. This year, with the American economy having suffered severe blows, that gap has receded to 6.8 per cent.

Porter puts a lot of this narrowing down to the strengthening in the loonie, which has comparatively thrived while the US dollar has struggled. As the value of the loonie rises against its Southern counterpart, Canadians have comparably more buying power, and it is normal for prices to fall so that business does not go South.

Nonetheless it still depends very much on what your planned purchases are. For example, if you want to drop into Starbucks and enjoy a latte (tall, nonfat) then for the first time it is cheaper to do so on this side of the border. If you are buying a camera, expect to pay slightly more than your Southern neighbor, but only to the tune of about 2%, which is considerably less than once it was. However if you have your heart set on a chainsaw, you might be well advised to check import costs, as they are still 25% more expensive in Canada. Going to the US and bringing it back across the border might have its own problems, too.

Porter insists that this is a sign that Canada’s stronger anti-recession policies have made things better for the Canadian consumer. The Canadian consumer, represented by the Consumers Association of Canada for the purposes of this article, disagrees. Its president Bruce Cran states that there are huge disparities on a number of other products, not least magazines, which differ in price by a massive 28 per cent – double what the report says. The Association argues that as things stand, Canadian retailers are failing to pass on savings they have made importing US-made products to their customers. Nonetheless, the BMO posits that this will always be the case due to institutional differences, but that the gap is narrowing.

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Good News – Growth Is Here!

It is slightly too early to say that the recession is in its final throes, and those of us who wish to avoid tempting fate would never dream of creating such a hostage to fortune, but the announcement by Finance minister Jim Flaherty on Thursday that stability and recovery have arrived must at least be a positive sign for those of us who had begun to wonder if the positive forecasts blowing around were part of some mirage. Of course, until we see two consecutive periods of stability and growth it will be hard to say for sure that the recession is receding. At the present time, however, it is good to hear the central bank issuing positive news on growth.

The projections by the Bank of Canada are that after three consecutive quarters of contraction in the national economy, this quarter will see growth of 1.3%. The figures may not be earth-shattering, but it is what they represent that means good news for the country. After a sustained period of contraction, any quarterly growth can be seen as a sign that things are warming up. With better growth, the opportunity for new jobs to be created will be higher, and Canadians left unemployed by the effects of the recession can begin to look ore hopefully for jobs.

This means a welcome vote of confidence for the reading which argued that due to Canada’s more reserved economic approach, the nation would be among the first to step out of the recession and do it in a stronger way. It does not, however, mean that the global recession is over or that a domino effect will see growth kick off in the United States, Europe or Japan. Indeed, some of the financial systems in the world’s other countries may cause more ripples in the global economy for a while yet – meaning that international trade may be stymied somewhat.

The central bank has been keen to point out that the recovery in Canada is, as yet, in its infancy and not something to be taken for granted. This may not yet be the time to take even a calculated financial risk. The financial recovery is at the moment still reliant on stimulus spending from the government – the equivalent of a sportsman whose knee injury has healed but still requires crutches.

The US, meanwhile, is believed by its bankers to be on its way to recovery, with the pace of decline slowing and growth predicted to begin by the end of the year. As Canada’s nearest neighbour this will undoubtedly affect the recovery here, so it is worth keeping an eye on the financial news from south of the border. Although the economy is still vulnerable it is looking in much better shape than a year ago. The global recovery may yet be painfully slow, but the good news is that it is at least set to happen, and that the contraction is beginning to die down. Given the doom and gloom in the immediate aftermath of the credit crunch in 2008, that we may be out of recession by the end of 2010 is positive news.

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Government credit bad, Consumer credit good?

As the danger of a third election in four years hangs over a nation considered by the rest of the world to be so stable it is “boring”, it would be entirely understandable if the alarm bells in the brain of every Canadian started to ring right about now. After all, the prospects of the nation trading at a deficit any time soon are at present not amazingly good. This, however, has not stopped the press from suggesting that now is the time, if ever the time existed, to get out there, dust off your credit card and prepare to hit the shops with a vengeance. This advice comes via the newspapers from the Finance Minister Jim Flaherty.

If it sounds a little bit reckless for something a Finance Minister might say, this is with very good reason. The minister’s words were somewhat more considered, but by the time the press had had their way with them, it did sound a little bit more like incitement to spend the inheritance. What he actually said was “positive signs in financial markets give us cause for cautious optimism that a global recovery may not be far behind”. He added that Canada would lead this recovery and be at the front of the queue to boost business. There is, perhaps, some amount of mockery in the words as set out in the press, with some journalists not quite sharing the Minister’s optimism for the future.

Much of the implication behind the press reaction to what Minister Flaherty has said seems to be that the minister is saying everything he can think of in order to stimulate consumer spending in a time when the nation’s financial sector could do with a helpful push or two. This is not exactly an untried initiative, of course, but the average family may well be heartened by what they hear from the government. The theory of consumer spending stimulating the economy is a self-perpetuating one. Sure, it’ll boost the flow of cash through businesses. It will, however, only operate that way if it is allowed to, and this means that banks need to be as willing to lend as customers are to spend.

The next year to eighteen months will be interesting for those who like to read the global response to financial situations. Many countries in the developed world, including the United Kingdom, are due to hold general elections to decide on the makeup of their next government. Good governmental marshalling of the global economies in the next year and a half will see more incumbent governments re-elected, but to drop the ball now would be to almost guarantee and end to a government’s hold on power. Indeed, with one country’s economy affecting those of its neighbours, it could be that decisions taken in one country affect the election in another. Should you go out and spend, spend, spend in order to keep a few governments in their seats? Well, only if you can afford it. Now is still not the time for major borrowing.

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US Jobless Claims Fall And Canadian Finance Blog

Yes, this is a Canadian personal finance blog, and yes, the headline is about unemployment in the US. So yes, there may appear to be a contradiction in writing about that issue in this blog. But as we have all become more aware than we ever needed to be, the influence that one country can have on another is all the more when it comes to financial issues. Therefore, even though the figures may be coming from south of the border, it should be cause for reassurance and satisfaction to hear that the US Labour department has reported that jobless benefit claims fell to their lowest point in three months this week.

The news is, as ever, not all good. The number of people living on unemployment benefit has reached its highest level yet, but the number of new claims falling is a sign that the wave of layoffs has possibly reached its peak. The motto of the last few months where money issues are concerned is again relevant – “This is an encouraging sign, but we’re not out of the woods yet”. But living as we do in an age where perception is almost as important as hard reality, it is important to look at encouraging news as a potential springboard to a sustained improvement. Figures will not improve the situation by themselves, but investors, employers and job hunters can all play a part by showing optimism and helping to drive the economy forward.

OK, so no doubt some will be saying “this is all very well and good for America, but how does it really affect Canada?”. It is a good question, but there is an answer to it. The fact is that the US and Canada are linked not only geographically, but in business terms too. From simple matters like Canadian and US citizens in border regions crossing over the border to commute to work – then spending their wages in their home country while paying taxes in the other – to things like trade tariffs, the two countries have a mutual interest in seeing that things run smoothly with their neighbours. The worst case scenario would be protectionism in times of financial stricture, where either country moves to shore up its own interests. The likelihood of this increases in parlous economies, and decreases when news improves.

Canada, as we have discussed previously, has a lot to be proud of where handling of the recent financial crises has been concerned. Panicking will help no-one, and Canada has certainly avoided panic. Taking great care to ensure that the way we move out of the crisis is not just the quickest, but the most secure, is the only way forward. The potential for things to go badly wrong is never far away, and an increase in serenity south of the border will mean that Canadian economists can continue to steer the best path forward without the worrying distraction of things getting worse down South. And that affects everything in Canada – housing, employment, lifestyle, it all adds up.

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Canada Will Emerge From Global Crisis First

For a long time now Canada has had to put up with jibes about being a boring country. This is something that Canadians have come to live with in a sense. Being called boring isn’t nice, exactly, but there comes a point where you cease to care what people think about you based on your nationality. Equally, ask an Irish person if it bothers them to be called “stupid”. This clichéd image of friendly, but drunken and unintelligent Irish, people was common currency for years. That Ireland had turned out Oscar Wilde, George Bernard Shaw and W.B. Yeats was ignored. Now Irish people are happy for someone to underestimate them – as it means the advantage is with them.

Equally, while Canada was carrying on being “boring”, other more “exciting” nations were mortgaging their futures on the wave of credit that never seemed to slow at all. While the banks were taking on customers in their millions, and those customers were buying expensive goods, houses and cars, there may well have been many people who looked at Canada from the outside and considered its financial caution to be boring and pedestrian. But looking at Canada’s financial position, which has attracted somewhat envious compliments from US President Barack Obama, who would swap places with the “exciting” countries now?

Yes, there is a recession in Canada, and it will not be here today, gone tomorrow. There are hurdles to clear, and right now it is a little more difficult to get a home loan than it was a few years ago. But with the government’s financial policies having stipulated caution while all around were deregulating and hiding behind credit – very shaky credit at that – the Canadian banks have not required bailouts like in the US, Britain, Germany and elsewhere. This means that while those countries are still recovering from the battering that their economies took, and looking at a tax burden that could persist for some time, Canada will emerge in a better position.

Finance Minister Jim Flaherty has recently expressed an opinion that will probably write a thousand headlines between now and the end of the global crisis. Speaking to a seminar in Chicago on financial literacy he gave the opinion that “boring is the new sexy”. There are very few countries in the world that would not love to be where Canada is right now, and fewer still who wouldn’t like to be where Canada is going. Having succumbed last to the crisis, Canada is due to escape it first – and then, the possibilities are intriguing.

Sure, nothing is guaranteed in this climate, and even if there are positive signs, it would not be a typically “Canadian” attitude to crow about the relative strength of our position. But if the current global situation shows us anything, it is that being “boring” while everyone else is counting on the goose to continue laying golden eggs can be a very wise decision. Just watch the other global economies once they are back on their feet. They’re likely to be a lot more “boring” than before. Especially now that they know how sexy it is.

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Canada will be one of the first countries to climb out of the mess

As things stand today, there are few parts of the globe that have not been touched by the problems in financial markets – problems which began in earnest over a year ago now and have been worsening ever since. The situation right now seems to point to a global recession which will only begin to lift during the latter part of next year. While playing the blame game is certainly not going to help anyone, there is a lot of blame flying around anyway, most of which is being aimed at the most acquisitive economies, and a large amount of that is directed squarely at the United States. Conversely, experts seem to have mostly good things to say about Canada.

There is little doubt that part of the reason for this is the proximity with the United States, which allows a side-by-side comparison between neighbours. While the crisis itself has been attributed to the sub-prime mortgage lending crisis in the US – although this is only part of the story, and the sub-prime market’s collapse was more catalyst than cause – the global nature of the markets ensures that when one economy takes a blow, the businesses which have investments in that economy suffer also. Hence, it was not just US banks that suffered in the light of the credit crisis, and when the problems precipitated a comparatively small gust of wind, those businesses which were not built on the strongest of foundations began to collapse.

The credit crisis, therefore, may have been catalyzed by what was happening in the US, but it immediately affected banks in the United Kingdom, Germany, Japan (which was already having problems) and beyond. To date it has even caused governments to be recalled, including that of Iceland, which had been surfing a wave of financial well-being. Canada itself has been far from untouched, but the current suffering here has been more of an inevitable outcome of global problems than a headlong plunge precipitated by failure to plan. While other countries pretty much dived head first into the cracks, Canada was slowly sucked towards them before sliding over the edge. Therefore, when the markets begin their definitive improvement, Canada will be one of the first countries to climb out of the mess.

There are so many stereotypes about supposed national tendencies, and some of the more unkind ones seem to imply that Canada is a country where nothing much happens, and what does happen is not that exciting. Anyone living here can see how inaccurate that is. The upside, however, of that stereotype is that Canada tends to find itself in better shape than others having refused to gamble away everything it owns.

Things right now are shaky – not just in Canada, but in most of the world – but this does mean that if you have cash to invest, prices now are at their lowest in some time and may not have far to fall. And once the economic indicators dictate that we are on the way to recovery, watch those numbers climb. Much better to watch it from Canada than anywhere else.

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