The Curious Case of Canadian Jobs

Yesterday was a bumpy day for the Canadian economy: StatsCan revised last year’s labour estimates, and it turns out that job growth was a third lower than expected. In the meantime, the price of oil dropped below US$45, and the loonie slid below 80 cents.

To the south, the Big News was No News: the Federal Treasury stayed the course on their pledge to be “patient” with rate hikes, keeping the rate at a record low of 0 to 0.25 per cent.

In company news, however, this week has been jam-packed. Tech Week continues: yesterday, Facebook reported earnings, South Korean electronics giant Samsung reported this morning, and Google and Amazon are also due later today. But there are plenty of reports from big global companies outside tech due today: this morning in Europe, Royal Dutch Shell was the first major world oil company to report fourth-quarter earnings (they announced more than US$15 billion in cuts), and companies from Ford to Visa to Time Warner Cable are also on the calendar.

The Canadian job market is rougher than it looked. Following revisions to 2014 labour numbers, Stats Canada said yesterday the unemployment rate is actually 6.7 per cent, not the 6.6 per cent originally predicted. Job growth was actually 121,000, compared to the estimate of 186,000, which means 2014 had the lowest rate of job growth since 2009. Most of that job growth was in Western Canada.
There are some interesting demographic elements to this, however: some of the drop was because the adult population actually grew faster than the jobs available, and Statistics Canada also blamed an aging population for a lower rate of participation in the job market. There were major gender differences, too: men older than 25 gained the majority of the jobs (75,000), mostly in full-time work, and women made up almost all of the one per cent gain in youth unemployment (a gain of 26,000 jobs).
Today, we get the payroll, employment, earnings and hours for November 2014, and hopefully a sense of where wages are heading. Average weekly earnings have so far remained largely unchanged since July.

Oil heads below $45. Yesterday, West Texas Intermediate (WTI), the U.S. benchmark, dropped below $45 again, remaining there this morning and flirting with six-year lows. The drop came on news that the U.S. is now producing 9.21 million barrels a day, the most it has produced for more than 20 years – the last record was in 1983. There were broad sector losses on the S&P 500, and in Canada, the TSX/S&P Composite fell by more than 200 points.
This morning, Royal Dutch Shell announced their fourth-quarter earnings, coming in below expectations at $3.26 billion (though more than they were making the year before), and saying they would make $15 billion in cuts and freeze their dividend, causing shares to fall.

The ballad of Samsung and Apple. Apple produced the GDP of Honduras in a single quarter, largely pushed by the iPhone. Samsung … well, Samsung’s revenue fell 11 per cent, and their mobile business fell 21 per cent, hitting forecasts at $48 billion profits in the final quarter (nothing to cough at, that’s the GDP of Ghana). But while the mobile business fell, the components business – including chips – gained to make up more than half the company’s revenue, and this is an area where Samsung can sell to its rival: the iPhone. Amazon and Google will also report today.

How much did Facebook get from the ads on your iPhone? The company reported final-quarter earnings yesterday: and announced they made $12.5 billion in revenue last year– $3 billion in profits (that’s about Guyana’s GDP). It may be pebbles compared to Apple and Samsung, but the it marks the company’s first year with over $10 billion in revenue, and that revenue jumped by more than half last year – largely because of mobile ads. The next challenge: making money off WhatsApp, Instagram and Facebook Messenger.

McDonald’s CEO gets the boot. First it was Mattel’s CEO, now it’s McDonald’s – what head of an iconic American brand beloved by children could be next? The golden arches have been looking a little dim for a while, as the world’s biggest fast-food chain bumped up against changing tastes, meat-safety scandals in Asia, and Russian politics. Despite McDonald’s massive size, the numbers don’t look good: here’s a fun YouTube video that explains why (also, it took the company two years to design a new chicken wrap – by then, teens were eating burritos.)

Need to know:
TSX: 14,602.88 (-231), Wednesday
Loonie: 79.86 (-0.75 cents), Wednesday
Oil (WTI): US$44.52, Thursday morning