Roy Green: Calling Ford! Paging Edison!
Whether the words are those of Bank of Canada Governor Mark Carney, or United States Federal Reserve chairman Ben Bernanke their message remains identical. The Great Recession continues with prospects for short term recovery virtually non-existent, while longer term international economic stability may at best be expected years from now.
Years from now? Feel the wind leaving your emotional sails when those three words are delivered as best case scenario and one which relies on Europe’s collective economy not rolling into an abyss, dragging present wobbly containment strategies with them into a downward spiralling free-fall?
And what of such containment strategies? The debate continues over whether federal stimulus spending – $60 billion in Canada – coupled with setting the benchmark interest rate at 0.25 per cent was the correct approach.
Some argue that without the trillion dollar financial injection from Washington that the U.S. would not be praying for recovery from recession today, but rather still attempting to apply the brakes to a worsening depression. Others maintain government austerity programs supplemented by inducements to shake loose massive corporate capital reserves was the only approach which may have offered a realistic chance of structurally sound success.
In Canada this debate is somewhat muted, the nation having suffered less than most. A cursory review of international employment statistics, coupled with a nightly news dose of social unrest and violent protest in more heavily fiscally encumbered nations reminds Canadians of our relative good fortune. Months of virtually non-stop rioting in Greece and running street battles in France over expectation of a national retirement age moved from 60 to 62 resulted in a collective rolling of eyes hereabouts. This was particularly so when video of the rioters showed they appeared to be mostly made up of the young, instead and perhaps surprisingly of those about to enter the national retirement pension lottery.
The young in nations like Spain, Greece, Ireland and Italy – but not exclusively – are particularly restive. The issue for them is employment, or more accurately unemployment. We have all heard that youth unemployment in Spain, for example, is at, or close to 50 per cent.
The roiling seas of international economy and commerce appear to not be of greatest importance to Canadians who credit card in hand and increasingly viewing low single digit interest rates as the norm, have recently underpinned our national economy by, if I may coin a term, “borrow-buying”.
We may not have the cash, yet whether we are well employed, under or unemployed we mostly do have available credit. We roll into the mall parking lot in our new or nearly new vehicles and stock up on consumer goods rationalizing “as long as I can make the monthly payment, I’m OK.” Well maybe, sort of.
We’re “OK” as long as global worst-case or nearly worst-case economic failures don’t come to pass, as long as we retain our jobs and as long as interest rates remain at current, yet temporary lows for some period of time. Perhaps I should add and as long as we continue to ask only “can I make the monthly payments” and not “what does this thing actually cost”?
How alarmed, if at all, should we be? Canadians have borrow-bought ourselves into a total household debt of approximately one and a half trillion dollars, or roughly $1.52 of debt for each $1.00 of income. We ignore Euro unemployment stats which can and do hover near 25 per cent in some nations and believe this can never happen here. Some experts warn we are hoping against hope and Mark Carney continues to caution Canadians to pay down, not borrow up.
Let’s look at that $1.52 of debt for each $1.00 of income a little differently. Let’s call it what it is: the ratio of household debt to disposable income. So today in Canada it stands at 152 per cent.
There is also the debts to assets ratio which improves the picture for many, although not all Canadians. Usually the family home is the most significant asset and if federal Finance Minister Jim Flaherty has it correctly, no Canadian housing bubble is lurking. Others are not so sure. In fact, a Macleans headline in February virtually screamed “Time to Panic about the Housing Market.”
The intent of this column was to examine the effects of long term unemployment; to review what the chronically unemployed have to say and to determine whether this international recession is likely to stick around for many years, thereby assuring negative employment numbers and perhaps give truth to the dire prediction of unemployment for life, for some.
It is impossible though to properly deal with the human effects of chronic unemployment without reviewing economic storm clouds which change direction with the unpredictability of an Atlantic hurricane as it lingers at sea, terrifying all within its reach with the prospect of hitting land, where and when it decides. The only certainty? There will be damage and considerable damage more than likely.
The worst of this economic hurricane may have missed Canada, but there has been damage. TD Bank reported in March that 250,000 fewer young Canadians (15-24) have jobs than did prior to the recession. A number made even more concerning when Statscan revealed almost one million young Canadians are unemployed and approximately half are not actively seeking work. Canada’s official national unemployment rate in June was set at 7.2 per cent.
It isn’t just the young who have given up seeking work. A Google search on the topic leads to many such stories. Samples from the U.S. include a 55-year-old former executive assistant writes “I’m very flexible but nobody makes an offer. Not even an interview, and I’ve applied to over 600 jobs.” A 29-year-old marketing manager who moved back in with her parents adds “I started diligently applying for jobs. I kept track. I’ve applied for 750 jobs, have heard back from 23 and interviewed with two,” while a former bank mortgage loan officer relates “I would spend about four hours each morning on my computer getting my profile out there. I registered with a temp agency but I walked in and there must have been 50 people in there – you could hardly get in the door. In the past few weeks I’ve kind of let it go.”
Catherine Swift, Chair of the Canadian Federation of Independent Business though sees employment opportunity going wanting, saying “as a result of the aging population, labour shortages have already begun to appear despite the sluggish economy. As the baby boomers retire over the next 10 years or so, these shortages will worsen. Unemployment will not fall significantly though as a result of mismatches between supply and demand and an EI system that does not sufficiently encourage the unemployed to get back into the workforce.”
An entry in the Small dead animals blog makes Swift’s point perhaps. “Various companies have offered me jobs that were (sic) almost exactly the amount of my unemployment compensation. But why in the world would I want to take one of those and work for 40 hours a week when I could get the same amount by staying home and learning how to cook Peking Duck and watching old episodes of Monty Python. Where were the incentives”?
This stay-at-home EI collector may learn from CFIB Chair Swift’s concluding words. “Research has consistently shown that the attributes most valued by employers in a prospective employee are more like character traits – a good work ethic, willingness to work, conscientiousness and flexibility to do different things. Although certain specific skills are often sought, in general, employers are willing to train new employees in the skills needed when the basic character traits are there.”
Poke about behind the headlines, statistics and worry-notes and you may discover that the only certainty appears to be uncertainty. The real hope is a return to the fundamentals of honest, not crony capitalism. The solution to economic stagnation is to permit entrepreneurs to grow their businesses without unhelpful government interference.
What we need is the spirit of Henry Ford and Thomas Edison. What we don’t need is what we have so much of. The likes who would have told Ford and Edison “you know this will never work, don’t you?”
Roy Green is host of The Roy Green Show, a national program heard weekends on Corus Radio. Follow Roy on Twitter @theRoyGreenShow.