Alex Carrick: It’s Finally Time to Chill Dude and Cut Back on the Worrying


I know this is a risky proposition and many people won’t be able to make the leap, but it may be time to put away our frowns and start smiling about the economy.

The economy runs on psychology to a greater extent than many would suppose. That’s why so much importance is placed on consumer confidence. When consumers are feeling optimistic, they’re more open to spending which creates jobs, leading to more hiring and “in the great circle of life”, even more confidence.

Actually, the co-dependence between mood and outlook is even more extensive. There’s a collective psychology about how the economy is performing – whether it’s doing okay or not. For a long time, that general sentiment has been quite negative.

The failure of U.S. sub-prime mortgages started the downward slide in August 2007. First to be affected were capital markets. Then the stock market crashed in October 2008. Internationally, the situation continued to deteriorate to varying degrees depending on location.

The ensuing problems have been many and varied, including world-wide banking failures, the Greek debt crisis, oil price shocks, the U.S. housing collapse and financing gridlock in Washington.

Add in such natural and man-made disasters as the Gulf oil spill and the tsunami off the coast of Japan and recent history has served up quite the unpalatable bouillabaisse. Keeping one’s hopes alive has often been a challenge, to say the least.

I’m sure I’ve left out a few zingers. To use a boxing analogy, the blows have left me battered and suffering from short-term memory loss. Suffice it to say, we’ve all been on the canvas too long. 

The main proposition of this article, however, is that it’s now time to put away the burden of our concerns. Sure, the potential for further grief has not evaporated, but the overriding feeling should now be one of optimism.

Skipping around the globe, let’s consider some of the transformations from the negative to the positive.

Yes, there are still debt problems in some of the countries in Europe. But is the situation as dire as it was a year or two ago? The answer is clearly no. Financial institutions have had time to repair their capital bases. The stability fund has been topped up. The European Central Bank is now aggressively supplying funds to countries (i.e. Spain) in need of loans.

And legislation has been brought down in many of the weaker Euro-zone members to set fiscal policies on more viable long-term paths.

Yes, the U.S. continues to run a huge government deficit. But the presidential election is no longer way in the future. November 6 is only half a year away. The gridlock will soon be resolved. The Republican contender has been confirmed and the platforms of the two opposing parties are clearly defined.

Whichever side wins the election, there will be greater emphasis on reducing Washington’s funding shortfall, through targeted tax increases and/or less spending. Besides, a dramatic transformation is underway in the U.S. economy.

There may still be some “yield” signs along the road to expansion, but the American roadster has slipped into a higher gear. After a gap of about a decade, the U.S. is once again acting as the engine of growth for the world economy.

Nor should it be underestimated how much a stronger economy will contribute to straightening out the nation’s finances. The post-World War II 1950s period serves as a prime example.

U.S. manufacturing is on a modest comeback trail, thanks largely to auto sales and exports. The former is a remarkable success story, given that two of the old Big Three U.S. car makers descended into bankruptcy in 2009.

The latter have received a boost from sales of construction and agricultural equipment to emerging nations that are striving to upgrade their farming sectors and modernize their infrastructure. China’s growth has slowed, but that still means a rate of gross domestic product increase (over +8.0 per cent) that is the envy of almost every other country.

The U.S. housing sector has been down so long (six years) the bottom must surely be at hand. In fact, the multiple-unit segment (i.e., rentals) is leading a turnaround. Legal issues surrounding some shoddy mortgage foreclosure practices have been resolved and the banks are easing credit.

On the subject of credit, the Federal Reserve has injected $2.3 trillion of extra cash into the money supply through QE1 and QE2. Yes, this may contribute to an inflation problem further out, but in the meantime prices remain retrained and the economy is benefitting from a kick start.

Although the extent of that jolt has been less than expected because banks and business firms are sitting on huge amounts of cash. The very large profits that firms have been earning – which are coincidentally driving up equity prices – have largely remained unspent.

They’ve been accumulating in stockpiles of cash that are sitting underutilized. When more of such money is freed up for investment and hiring, the beneficial effects will be widespread.

Alcoa is the first company to report earnings each quarter. It was a great kick-off to first quarter 2012 results when the firm announced a profit (10 cents per share) in the face of most analysts’ expectations of a loss.

The U.S. is creating new jobs at a healthy pace. Yes, the March figure (+120,000) was lower than expected, but it still contributed to 1.3 million new jobs being created in the last seven months. Since March 2009, the net gain has been 3.5 million new positions.

Is there a reason to be worried about oil prices? No doubt. Gasoline in the U.S. is hovering around $4.00 per gallon and in Canada, $1.40 per litre.

But the overall world energy situation is changing dramatically. North American energy self-sufficiency is nearer at hand. Shale gas and oil are adding immensely to reserves. Canada is already in a position to be exporting more of its energy to overseas markets and the U.S. is moving in that direction, especially in natural gas.

So what about Canadians? How should we be feeling? We’ve had our moments of doubt. And there are sure to be more. The outlook, nevertheless, must be considered encouraging.

Our housing market may be set for a correction. Condo construction in a couple of urban cores is super-charged. To a degree, that’s thanks to how positively the rest of the world views us. The newly rich in Asia and elsewhere are buying homes here.

We’re a desirable haven for investment funds. Our financial sector has been judged the most financially sound on the planet. How can that not be a source of feel-good pride?

We have the raw materials the rest of the world wants, from fossil fuels and agricultural products, to precious and base metals, coal, potash, uranium, iron ore and forestry products. Construction activity, to build resource projects, is sure to be a mainstay of the economy for many years to come.

Let’s conclude by looking at Canada’s energy equation. There are a great number of pipeline proposals in the works, heading south, west and east – to refineries on the Gulf Coast, to Kitimat in order to supply new customers in Asia and to the East Coast.

The latter may involve direction-of-flow reversals and even conversions of gas lines to oil in order to provide alternative means to ship product offshore. No matter how the approvals process shakes out, it’s clear we’re about to become plugged into a greater global energy market.

Raw materials, construction and the service sector will continue to provide good growth potential in Canada. Add new skilled jobs in high tech and environmental good practices and it’s an exciting world of opportunities for our young adults. 

Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit

Mr. Carrick’s lifestyle blog is at and he would welcome a follow on Twitter (Alex_Carrick) or Facebook.