Economists say that Bank of Canada governor Mark Carney isn’t going to increase interest rates tomorrow.
In these sensitive times, as economic and job growth stall, few see any reason to raise the rates at the central bank’s next meeting.
Analysts say the big question is when to raise rates.
Douglas Porter, of B-M-O Capital Markets, says some people want the rates to rise as early as January while others think 2012 is a better idea.
David Madani, an analyst at Capital Economics, says Carney should not rule out cutting the rate if conditions don’t improve.
He says there is clear evidence that the high loonie is causing serious damage.
– Canadian Press
Finance ministers tackle debt crisis
European nations wrestled over whether to commit more money to help stabilize the euro, as finance ministers gathered in Brussels to find ways to fight the debt crisis that has rocked the currency bloc.
The head of the group of 16 countries that use the euro, Jean-Claude Juncker, along with Italian Finance Minister Giulio Tremonti, called Monday for the creation of pan-European bonds to boost much-needed confidence in the euro.
But Germany, Europe’s bankroller, quickly ruled out the bond notion and said the bailout fund was big enough.
European finance ministers have to figure out how to fund a new crisis tool that is supposed to support countries that run into financial trouble after 2013, when the current euro750 billion (US$1 trillion) bailout fund runs out. Greece and Ireland have already been bailed out after high borrowing costs shut them out of the bond market, and many fear Portugal or even much larger Spain could follow.
Crucially, this so-called European Stability Mechanism will force private creditors to share the pain if a nation is demmed insolvent _ that is, if its debts are too big to repay. However, if a government merely faces a liquidity crisis – it can’t access funds fast enough to meet payment deadlines – it is supposed to get rescue loans from the new mechanism.
The ministers agreed on the broad outlines of the new mechanism late last month, but didn’t say where the money for the emergency loans would come from.
The threat of potential losses for private bondholders like banks and hedge funds, which were spared in this year’s bailouts, has spooked government debt markets in recent weeks and reopened debate on whether the existing bailout fund will big enough in case large economies like Spain or Italy run out of money.
Belgian Finance Minister Didier Reynders said over the weekend that eurozone countries should increase the existing fund now and not wait until the new stability mechanism has been set up. On Monday, he said the size of the current fund would be on the table at the finance ministers meeting.
“First we have to discuss how to set up the permanent mechanism and based of that we’ll see if there are changes to the provisional mechanism,” he said.
In an editorial in the Financial Times, Juncker and Tremonti wrote the European Union should issue its own bonds to fund emergency loans to countries that run into trouble after 2013.
A European Debt Agency could eventually issue bonds worth up to 40 per cent of EU economic output, Juncker and Tremonti wrote. The agency should finance 50 per cent of all bonds sold by EU states and _ in cases where debt markets seize up like they have in recent weeks for countries like Ireland and Portugal _ it could fund the entire bond issue, the two officials wrote.
However, Germany quickly rejected the idea of European bonds. Chancellor Angela Merkel said such bonds were legally impossible under the current EU treaties.
“It is our firm conviction that the treaties do not allow joint eurobonds, that is no universal interest rate for all European member states,” she told journalists in Berlin.
– Associated Press
Job gains for Ontario
Ontario employment rates have received their first significant bump since the summer.
Employment in Ontario totaled 6.69 million persons in November, up 31,200 (0.5%) from October. That is the first significant gain in jobs since June as economic growth was minimal in the third quarter. November’s employment growth included full- and part-time payroll jobs in the public and private sectors.
Hours worked in the Labour Force Survey reference week totaled 225.2 million, up 1.4% from October’s survery, and the highest since September 2008.
Overall, Ontario’s unemployment rate declined from 8.6% of the labour force in October to 8.2% in November, with employment numbers increased and the labour force remaining little changed. That is the lowest unemployment rate since January 2009.
Unfortunately, employment among younger persons aged 15 to 24 years was virtually unchanged and the labour force of younger persons declined by 2.3%, driven away by discouraging job opportunities. While total hours worked by older persons has recovered to pre-recession levels, total hours worked by younger persons is stuck at recession lows.
By industry, employment increased in November in retail/wholesale trade, health care/social assistance, business/building support services and agriculture. Gains in these industries were partly offset by declines in finance/insurance/real estate services, manufacturing and miscellaneous services.
Regionally, employment growth over the last three months has been in the Greater Toronto, Hamilton- Niagara and northern areas of Ontario. Meanwhile, employment has declined in the Kitchener/Waterloo, Ottawa, London, Windsor/Sarnia and Stratford/Bruce regions.
UBS: U.S. looking good
The November employment report pointed to the slow growth of the U.S. economy and the job market, highlighting such statistics as the nonfarm payrolls expanding by just 39,000 in November, as a 50,000 increase in private payrolls was only partially offset by continued job cuts in the government sector. In addition, upward revisions added another 38,000 jobs over the previous two months.
The unemployment rate rose to 9.8% from 9.6%, and the workweek was unchanged at 34.3 hours, with average hourly earnings remaining flat month-on-month. Although year-over- year labor income growth remained positive, it also slowed by more than one percentage point, to 4.1%.
However, in contrast to the November jobs report, withheld income tax data suggested further gains in labor incomes in November. This is also consistent with relatively jolly spending despite the fear that the employment report would reduce consumer confidence.
A key reason for what has been considered to be a relatively optimistic U.S. growth outlook has indeed been the viewpoint on consumer spending. Store sales were strong in November and data for store sales in December should remain positive since most shoppers admitted that they have done less holiday shopping at this time of the year than they had in the last two years. During December, the malls will still be packed with eager shoppers.
As a result, the UBS’ 3.1% real personal consumption expenditures projection for next year is 70 basis points over the November Blue Chip consensus forecast. Two other key reasons are our continued outlook for better job growth and our expectation of a modest decline in the personal saving rate.
Desjardins celebrates anniversary
“We are celebrating the 110th anniversary of a genuinely visionary gesture – a gesture that, thanks to the commitment of millions of cooperators, really changed how the North American financial sector operates,” said Monique F. Leroux, Chair of the Board, President and CEO ofDesjardins Group. “We’ve come so far since that meeting on December 6, 1900.”
Alphonse Desjardins was a stenographer in the House of Commons. While working there, he heard the disturbing revelations of a case of a borrower who had been sentenced to pay interest fees of $5,000 on an original loan of $150.
After hearing about this case, Desjardins was determined to counteract the practice of loan sharking. Eventually, Desjardins created a made-in-Canada savings and credit cooperative model, which drew from the experience of Italian and German popular banks, German, French and Belgian rural caisses and North American savings banks.
On December 6th, 1900, in a small community hall on BéginStreet in Lévis, QC, Desjardins Group was born.
Alphonse Desjardins, his wife, Dorimène and one hundred their fellow citizens unanimously agreed that day to adopt the constitution and regulations of Caisse populaire de Lévis. The objectives of this savings and credit cooperative, the first in North America, were to provide its members with access to savings and credit services thereby equipping them with a tool for local development.
The Desjardins Group now boasts 5.8 million members and clients and is currently the largest financial institution in Québec, the leading cooperative financial group in Canada and sixth in the world, with assets of more than 175 billion dollars.