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Strap in, it’s going to be a bumpy ride

Feb. 6: Oil and the loonie are swinging wildly on Jobs Day in Canada and the U.S., plus, RadioShack bites the dust


 

MORNING-PLAYBOOK-STORY
Happy Friday, and welcome to today’s economic whiplash.

The price of oil, the Loonie, and the TSX all saw a bump yesterday after the previous day’s calamitous drops. After losing more than a cent on Wednesday, the Loonie gained almost a cent yesterday, while the price of oil, after dropping to the south side of $48 yesterday morning, is back above $52 today (with Brent above $58), although who knows where it will go next.

Is there a clear cause behind yesterday’s jump? There are plenty of factors, but the over-arching cause might just be “general confusion”.

Today is also Jobs Day, as both Canada and the U.S. report their January job numbers. There are also housing permit numbers for Canada. In yesterday’s news, the Bank of England announced they would keep their benchmark rate at 0.5 per cent.

How bumpy is the Canadian job market? Today will be the first month we get to see jobs numbers after getting revised numbers for last year’s – which had the slowest rate of job growth since 2009 – with 121,000 jobs created. Full time jobs went disproportionately to men over 25, and Western Canada. As companies have started promising layoffs, keep an eye out for how the oil rout could change the demographics of job gains.

How reflective are U.S. job numbers? Growth in the American job market has been fairly rapid (at least compared to slow downs in much of the rest of the world), and so today is a chance to check in with growth, and give predictions on when the Fed could raise interest rates. That said, when looking at U.S. jobs numbers (or any jobs numbers) there are a few caveats: last month’s numbers reflected the holiday season, which means a growth in temporary jobs that typically fall off after the season ends. As well, the U.S. jobs numbers come with a few blind spots, including chronic unemployment, otherwise known as discouraged workers. If someone has given up looking for a job, even over the course of the last month, they aren’t counted as unemployed. Extreme underemployment, which could mean working as little as a couple hours a week, also counts as employment. Even as unemployment rates in the U.S. have dropped, weekly wages have not risen proportionately. So the deeper question is not just the number of jobs, but the quality.

Pain for Greece and Ukraine. Greece and Germany can’t even “agree to disagree.” Yesterday’s meeting between the Greek and German finance ministers hit a terse note, as Wolfgang Schäuble noted in a joint press conference that the two had “agreed to disagree” and Yanis Varoufakis refuted that claim – no agreement was yet on the table, he said. There’s high-drama between Greece and the ECB – others may call it a game of chicken – as Greece asks for bonds tied to their growth, and the ECB tightens the screws on Greece’s access to cash. But save a thought for the economic hole that Ukraine is in: yesterday, the government hiked interest rates by five per cent to try to prop up the currency, which nonetheless fell by more than a third, down to 2009 levels. The country has already received a bailout, but this increases questions on how much further aid they need.

An obituary for RadioShack. The American company filed for bankruptcy protection in the U.S. yesterday. The chain – which began as a mail-order service for radios (needless to say, not the source of its business these days) – has been dying a long, painful death for a while. But the chain still has thousands of stores and employs more than 20,000 people, with $1.2 billion in assets and $1.39 billion in debts. The bankruptcy was foretold in this brilliant first-person feature by Jon Bois, about the misery of working at a fading empire, with a sub-head that calls the chain a “strange, craven, five-thousand-fingered strip-mall monster from a forgotten age.” Hey, his words, not mine.

Another casualty for Sony. The company didn’t only get a $15 million bill for the fallout from The Interview, including legal costs, they also inherited an embarrassing scandal (and now, a top vacancy) from emails leaked between the co-chair of Sony Pictures, Amy Pascale, and another producer. The emails traded racist jokes about Obama and barbs about Angelina Jolie’s talent. But while Pascale has resigned from her position, she still has a four-year production contract with the company.

Need to know:
TSX: 15, 124.92 (+129.27), Thursday
Loonie: 80.49 (+0.9 cents), Thursday
Oil (WTI): $52.22, Friday morning (4 a.m.)


 

Strap in, it’s going to be a bumpy ride

  1. One report this morning had US enjoying the “economic benefits” of a low oil price. Canada not so much. Oh yes, we’ve had inept economic managers for the past 10 years.
    In UK with a Con PM as well, things are looking pretty good with diversity some stimulus and decent management. Apparently so much money coming in to the treasury they don’t know how to spend it all.
    Economic benefits everywhere you look. Low oil good. High oil bad.

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