Zooming out on the global economy

April 13: The new picture of Canadian job growth, breaking down Conservative economic policy, and watching the world's cash pile

MORNING-PLAYBOOK-STORYThis week is all about the big picture.

In a world where economic policy is diverging widely, amidst a mixed bag of slowing growth, volatile oil prices and political instability (and don’t forget the Greek bailout talks!), you could safely ask if there’s a week that’s all about the small details. But this one will be busy: the IMF and the World Bank are readying for spring meetings, which begin late this week in Washington, and on Wednesday, both the Bank of Canada and the European Central Bank will have monetary policy meetings.

Last week ended on a high note for equity markets: the TSX/S&P Composite closed up for the seventh straight day, by more than 60 points. It was the longest rally since June, spurred by gold companies and a spicy public offering for Cara (which owns restaurants including Milestones, Harvey’s, and Swiss Chalet), and closing at the highest point since September, before the oil crash really began to crunch. The TSX wasn’t alone: Asian markets were roaring (we noted on Friday that the Hang Seng Index in Hong Kong was seeing an influx of mainland investment), and the rally extended to Europe, with the main European index hitting a 15-year high. Oil also ended a volatile week with a weekly gain over uncertainty about how the Iran nuclear deal would be resolved, and news that U.S. oil rigs has fallen (although so far we haven’t seen this equate whatsoever to falling production). Expect more swings this week as reports come out from both OPEC and the International Energy Agency on production levels. In Canada, we also saw better-than-expected jobs numbers on Friday, which we’ll recap below.

This morning, we have some economic data out from Asia already, including numbers showing exports are down 15 per cent year-on-year in China, and the producer price index – which measures wholesale prices – due from Japan. In the U.S., there will be trade deficit numbers, as well as the start of the World Strategic Forum in Miami, which brings together big economic names to discuss the economic future for the Americas. Finance minister Joe Oliver is also expected to address mobile transactions and credit card payments in a speech today, according to the Globe. Other things to watch for this week are the world economic outlook from the IMF tomorrow, Chinese GDP on Wednesday, a meeting of the G20 finance ministers and central bankers in D.C. on Thursday, and earnings reports from some of the world’s big banks, including Goldman Sachs and JPMorgan Chase.

The country according to Jobs Day. Are you a woman over 55 who has recently begun working again, taking up a part-time job in the service industry? If so, you may very well be the face of Canadian job growth in early 2015. The unemployment rate held steady in March at 6.8 per cent, with about 29,000 new jobs, and it was a better result than expected, particularly as layoffs have hit Alberta’s energy sector and given the retreat of some major retailers (ahem, Target.) The job growth was fuelled by part time work, with a push of 57,000 jobs – 18,000 going to women over 55 – or roughly double the number of full-time jobs that were lost. The shift in the kind of employment people are finding is significant: service jobs are at a record high – 78.4 per cent of jobs, which includes education and health care – as manufacturing jobs hit a record low – at 9.4 per cent. But the picture largely follows some of the structural and demographic changes we’ve seen in recent months, as part-time work attempts to paper over losses in full-time jobs, and older women appear to be re-entering the workforce. The question remains one of quantity versus quality. While growth in the job market is still a good sign amidst economic pressures, if our case woman above had already retired, and now feels compelled for money reasons to re-enter the job market with a retail job (one she may prefer was full-time), the picture tells a less optimistic story – especially if her husband has recently lost his job in manufacturing. It is also important to note the riskiness of taking a month of the survey by itself, as well as the robust debate going on about the robustness of the survey itself. This includes at least one significant blind spot: about half of First Nations people are not included in the data, due to what Statistics Canada says is the difficulty of collecting data from reserves.

How fiscally conservative is Stephen Harper? In the lead-up to the federal budget – which will be presented next week – Maclean’s latest cover story is a crucial read (yes, I’m biased.) John Geddes’s story, “Steven Harper: Conservative? Maybe not”, breaks down the government’s economic record, from tax policy (is the oft-repeated statement that Conservative tax policies favour the rich true?), to assessing the quantity versus quality shift in job creation (see: above), to the “innovation policy puzzle,” and yes, spending. In the process – and amidst pledges by John Oliver to both eliminate the deficit and legislate balanced books – Geddes highlights some of the contradictions in the Canadian economy that we see consistently in everything from economic data, to Bank of Canada pressers, to the political spectacle of the budget announcement. He writes: “Taxes are down, but the tax system is messier. There are more jobs and higher incomes, but regional and sectoral imbalances create as much anxiety as optimism. Exports haven’t been stellar, but show signs of promise. Canada’s chronic innovation anemia hasn’t been cured, but nobody expected a miracle.” (Also check out his behind-the-scenes take on writing the story, including a chat with a Vancouver entrepreneur, here.)

The great big pile of cash. This morning, German 10-year bond yields are set to dip into negative territory (more than half of German sovereign debt with a year or more of maturity now have negative yields). This comes after the Swiss started selling negative 10-year bonds last week, a sign that high-quality debt is in enormous demand. Across the atlantic, U.S. shareholders could be facing a record $1-trillion wave of cash, as major companies (including General Electric) push buybacks and dividends. What do the two stories have in common? It’s all about the cash: lots and lots and lots of cash. This is part of what Quartz calls the global economy’s “bizarre problem,” otherwise known as what happens when governments print lots of money in stimulus programs (quantitative easing), companies remain reluctant to invest, and interest rates stay incredibly low. Too much money. Ben Bernanke calls this this idea the “global savings glut,” and Quartz argues that one consequence is reserve-rich countries – like China – are redirecting funds to more unconventional investment projects. This could include the Asian Infrastructure Investment Bank, a supposed competitor for the World Bank, and an oft-used symbol for the geo-political shifting of the winds.

Need to know:
TSX: 15,388.43 (+62.12), Friday
Loonie: 79.49 (+0.07), Friday
Oil (WTI): $52.17, Monday (7 a.m.)