These are stories Report on Business is following today. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Flaherty on economists Finance Minister Jim Flaherty believes the crystal balls of economists go only so far. Mr. Flaherty was asked today on CBC's The Current about critics who said Canada was slow to see the looming recession and a bit too quick to forecast the recovery, and about how confident he is in his current assessment. Here's what Mr. Flaherty told the radio interviewer: "No disrespect to people who offer economic opinions, but none of them - I mean not one of them - predicted the recession coming to Canada in the last quarter of 2008. And I consult with economists regularly as Minister of Finance, and I respect the views expressed, but their predictive power is limited, and that's based on the past few years."
Is the bull aging? The recovery in stock prices from the lows of the recession now look more normal given the recent correction, BMO Nesbitt Burns says. Previously the strongest rebound of the postwar era, BMO economist Robert Kavcic illustrated how after indexing each rally to the trough, the Dow Jones industrial average is now in the middle of the range after some 70 weeks, trailing the rebounds of 1974 and 1982 and outpacing five others. Mr. Kavcic noted that the chart above shows "that a period of sluggish stock market performance is completely normal after a post-recession sprint, as growth expectations moderate."
Krugman warns of long 'siege' Paul Krugman, the Princeton professor and Nobel laureate who got tongues wagging last week when he said he fears the U.S. is in the early stage of a depression, warns of a long "siege" that will require forceful government action. "We are looking at what could be a very long siege here," Mr. Krugman told Bloomberg Television yesterday. "We really are at a stage where we should have a kitchen sink strategy. We should be throwing everything we can get at this."
Mr. Krugman said the government should "go out and hire people" and needs to be unconventional.
Chief economist David Rosenberg of Gluskin Sheff + Associates, agrees with Mr. Krugman on his depression fears, but said today that the kitchen sink strategy assumes the U.S. government is the answer. "The question he has to answer on behalf of the Administration is why their forecast of an 8-per-cent unemployment rate, given all the stimulus it was going to provide, never did materialize, and what exactly is the long-term benefit to the economy of paying people to be out of work for two years," said Mr. Rosenberg. "That's our jobs strategy?"
China rules out reserve 'nuclear weapon' China warned the United States and other countries today to take "responsible measures" to protect their currencies and, in a move seemingly aimed at calming fears, said it would not use the so-called "nuclear" weapon of dumping the hundreds of billions worth of U.S. Treasury paper it holds.
The State Administration of Foreign Exchange posted a statement on its website saying that "U.S. Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs."
It marks the second time this week that SAFE has posted statements related to handles its huge reserves. Today, the statement was in the form of a question-and-answer session that asked "Are China's foreign reserves a 'secret weapon' or a 'nuclear weapon'?" SAFE said it would not use such power, adding that reserves should not be "politicized."
The Chinese agency pointed out that investors were, at one point, worried that the U.S. dollar could sink given the U.S. government's huge borrowing, but that developments in other countries also play a role in the value of the greenback. "We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.
The U.S. and other governments have long pressured Beijing over its currency, urging it to allow the yuan to rise, which it did just prior to the G20 summit in Toronto.
How long-term unemployment doubled Long-term unemployment in Canada almost doubled during the financial crisis and recession, the OECD says, and it warns the government to closely monitor job-search efforts to avoid "dependency" on jobless benefits. In a report today on the employment in its member countries, the Organization for Economic Co-Operation and Development said the proportion of workers unemployed for at least 12 months stood at about 8 per cent last year, far below the OECD average of almost one in four. "However, as a percentage of the labour force, the number of long-term unemployed has almost doubled in the two years to the end of the 2009," it said.
Overall, the report said the jobless rate for the OECD stood at 8.6 per cent in May and, in a welcome sign, may have peaked. But 17 million jobs are needed to bring employment back to pre-crisis levels, it added.
It projected Canada's jobless rate will now fall faster than it did in the recession of the early 1990s, sliding to 7 per cent by the end of next year. As for long-term jobless levels, it said that the temporary extension of Employment Insurance should have created a "much-needed buffer" and should be maintained until that specific category falls significantly. "But it is becoming even more important to make sure these extensions are accompanied by close monitoring of job-search efforts to avoid benefit dependency," the report warned.
Statistics Canada disputed the findings and said it asked the OECD about its methodology. It said long-term unemployment as a share of the overall jobless level was 7.5 per cent in 2009, 6.7 per cent in 2008 and 7.1 per cent in 2007. As a share of the total labour force, long-term unemployed represented 0.6 per cent in 2009, and 0.4 per cent in 2008 and 2007.
Total strikes deal for UTS French oil giant Total SA has joined the rush to snap up the last remaining oil sands projects with a cash bid for Calgary's UTS Energy Corp. worth $3.08 a share - a 46 per cent premium to Tuesday's closing price. Taking UTS's cash on hand into consideration - $355-million - the bid's cash cost to Total would come to $1.15-billion.
The UTS purchase, which was recommended by the UTS board, will give Total a 20 per cent stake in the big Fort Hills oil sands mining project, whose reserve estimate is 3.4 billion barrels of bitumen. The project is 60 per cent owned by Suncor Energy Inc. , which said Wednesday that it is happy with that ownership stake, with the remaining 20 per cent held by Vancouver's Teck Resources Inc.
The remaining UTS assets, which contain more than 2.5-billion barrels of recoverable bitumen, according to the company, will be placed into a new entity called SilverBirch Energy Corp. SilverBirch will be funded with $50-million, enough to operate it for 18 to 24 months. Read the story
Agriculture ministers meet amid troubles Canada's agriculture ministers begin two days of meetings in Saskatoon today amid warnings of a farming crisis and rising wheat prices. Farmers on the prairies want help after heavy rainfall flooded crops and crimped planting, The Canadian Press reported. Saskatchewan, Alberta and Manitoba have all been affected.
Weather problems in Canada, Russia, and Kazakhstan have pushed up wheat prices for days, The Associated Press said, quoting analysts warning that they could persist and hurt this year's harvest. "It's too wet in Canada and too hot and dry in Russia," analyst Jason Ward of Northstar Commodity in Minneapolis told the news agency.
Montreal's Ogilvy sold to investors The iconic Ogilvy store in downtown Montreal has been sold to a group of investors who plan to open more upscale shops under its banner. The group - led by the Fonds immobilier de solidarite FTQ - includes Champlain Financial Corp, BB Real Estate Investment Trust and a number of private investors. The consortium acquired the store from private equity funds in Ontario. Ogilvy's store in downtown Montreal was founded in 1866 by James A. Ogilvy, and has been a fixture for high-end shoppers ever since. Read the story
BP reportedly open to selling stake The embattled chief executive of BP-PLC would be open to selling Abu Dhabi up to 10 per cent of the energy giant after meeting with Crown Prince Mohammed bin Zayed Al Nahyan this week, The Wall Street Journal reports. Tony Hayward met yesterday with officials and, according to one person, "he'd be happy for Abu Dhabi to take a 10-per-cent equity stake."
From today's Report on Business
- In Albania, shadowy memo haunts Calgary energy firm
- In Quebec, IBM finds a better way to get things done
- TransCanada pipeline faces new hurdle
- Is Microsoft heading the way of the dinosaur?