Are we ready for that double dip?

By Philippe Bergevin and Finn Poschmann

In Ottawa Friday, Minister of Finance Jim Flaherty and Bank of Canada governor Mark Carney gave their updates on the Canadian economy. The big question: How does the darkened global picture affect Canada’s economic prospects and the federal government’s ability to return to a balanced budget on schedule?

By most accounts, the Canadian economy is doing well. The United States entered recession, defined as a significant decline in economic activity, in December 2007 (see graph above). Canada entered recession later, in fall 2008.

And Canada’s recession was shorter: the U.S. economy contracted for 18 months, while the Canadian economy was starting to grow again in June 2009, less than 10 months after its recession’s start. And while the United States is still short of the employment numbers seen before the start of the recession, Canada has not only recouped lost jobs, but added close to 600,000 since summer 2009.

Other indicators give cause for concern over the current recovery’s sustainability. The volatility that recently gripped financial markets — with the Dow Jones average showing lows and highs 1,000 points apart in the past 10 days, and gold hitting record highs Friday — is only a symptom. The global economic recovery lacks momentum.

The most worrisome prospect for Canada and the world: a double-dip recession in the United States. This outcome, while not yet the most likely one, is becoming more probable: The U.S. manufacturing index just posted its worst reading since July 2009.

What does this mean for Minister Flaherty and governor Carney, or for the federal budget and Canadian monetary policy? Budget 2011 assumed real GDP growth of between 2½% and 3% from 2012 to 2015, which still appears doable, although risks are on the downside. The United States’ dipping back into recession would require revising these numbers downward, delaying Canada’s planned return to a balanced federal budget, otherwise expected by 2015.

And events put governor Carney, too, in a difficult position. The U.S. Federal Reserve has all but promised to keep the federal funds rate, its policy rate, at close to zero through at least mid-2013. In Canada, the overnight rate already stands higher, at 1%. In theory and mostly in practice, Canadian monetary policy is independent of the United States, but the bank is always wary of big interest rate differentials, because a rising exchange rate feels like tight monetary policy from the point of view of Canadian exporters, which puts a damper on growth.

Further, inflation has sailed uncomfortably above the bank’s 2% target for three consecutive quarters. Interest rates will eventually need to go up, regardless of what the U.S. Fed does, but as governor Carney said Friday, recent “considerable external headwinds” justify caution over how soon and how fast rates here should be raised.

Abroad, a slowdown brings a mixed message for the Canadian economy, yet there are reasons for optimism. Domestic financial-market conditions are sunny for borrowers and lenders. Worries over high debt are well founded, but the housing market continues to shine. Labour markets likewise radiate a fair-weather story. Global weakness that depresses energy and commodity prices will pinch domestic earnings in those sectors, but won’t push resource profits into negative territory. Lower commodity prices will put downward pressure on the loonie, improving price competitiveness for our exporters.

Meanwhile, sales of Canadian goods and services in the United States still account for more than a fifth of our output: a drop of 5% in U.S. demand could translate to a 1% hit to real growth here. Canada is not an island, and positive market factors cannot undo the arithmetic of globally interlinked economies.

The financial crisis was painful and economic recovery will be slow, punctuated by ups and downs. Pauses or reversals routinely emerge during recoveries, as people and businesses try to make sense of new and volatile economic realities. Yet those are the vagaries of economic life — policymakers’ job is to provide the prudent fiscal foundation and supple monetary environment within which the rest of us can do our own best planning.

Financial Post

Philippe Bergevin is a policy analyst at the C.D. Howe Institute; Finn Poschmann is vice-president, research

Are we ready for that double dip?

By Philippe Bergevin and Finn Poschmann

In Ottawa Friday, Minister of Finance Jim Flaherty and Bank of Canada governor Mark Carney gave their updates on the Canadian economy. The big question: How does the darkened global picture affect Canada’s economic prospects and the federal government’s ability to return to a balanced budget on schedule?

By most accounts, the Canadian economy is doing well. The United States entered recession, defined as a significant decline in economic activity, in December 2007 (see graph above). Canada entered recession later, in fall 2008.

And Canada’s recession was shorter: the U.S. economy contracted for 18 months, while the Canadian economy was starting to grow again in June 2009, less than 10 months after its recession’s start. And while the United States is still short of the employment numbers seen before the start of the recession, Canada has not only recouped lost jobs, but added close to 600,000 since summer 2009.

Other indicators give cause for concern over the current recovery’s sustainability. The volatility that recently gripped financial markets — with the Dow Jones average showing lows and highs 1,000 points apart in the past 10 days, and gold hitting record highs Friday — is only a symptom. The global economic recovery lacks momentum.

The most worrisome prospect for Canada and the world: a double-dip recession in the United States. This outcome, while not yet the most likely one, is becoming more probable: The U.S. manufacturing index just posted its worst reading since July 2009.

What does this mean for Minister Flaherty and governor Carney, or for the federal budget and Canadian monetary policy? Budget 2011 assumed real GDP growth of between 2½% and 3% from 2012 to 2015, which still appears doable, although risks are on the downside. The United States’ dipping back into recession would require revising these numbers downward, delaying Canada’s planned return to a balanced federal budget, otherwise expected by 2015.

And events put governor Carney, too, in a difficult position. The U.S. Federal Reserve has all but promised to keep the federal funds rate, its policy rate, at close to zero through at least mid-2013. In Canada, the overnight rate already stands higher, at 1%. In theory and mostly in practice, Canadian monetary policy is independent of the United States, but the bank is always wary of big interest rate differentials, because a rising exchange rate feels like tight monetary policy from the point of view of Canadian exporters, which puts a damper on growth.

Further, inflation has sailed uncomfortably above the bank’s 2% target for three consecutive quarters. Interest rates will eventually need to go up, regardless of what the U.S. Fed does, but as governor Carney said Friday, recent “considerable external headwinds” justify caution over how soon and how fast rates here should be raised.

Abroad, a slowdown brings a mixed message for the Canadian economy, yet there are reasons for optimism. Domestic financial-market conditions are sunny for borrowers and lenders. Worries over high debt are well founded, but the housing market continues to shine. Labour markets likewise radiate a fair-weather story. Global weakness that depresses energy and commodity prices will pinch domestic earnings in those sectors, but won’t push resource profits into negative territory. Lower commodity prices will put downward pressure on the loonie, improving price competitiveness for our exporters.

Meanwhile, sales of Canadian goods and services in the United States still account for more than a fifth of our output: a drop of 5% in U.S. demand could translate to a 1% hit to real growth here. Canada is not an island, and positive market factors cannot undo the arithmetic of globally interlinked economies.

The financial crisis was painful and economic recovery will be slow, punctuated by ups and downs. Pauses or reversals routinely emerge during recoveries, as people and businesses try to make sense of new and volatile economic realities. Yet those are the vagaries of economic life — policymakers’ job is to provide the prudent fiscal foundation and supple monetary environment within which the rest of us can do our own best planning.

Financial Post

Philippe Bergevin is a policy analyst at the C.D. Howe Institute; Finn Poschmann is vice-president, research

Canadian wages up 3% from year before

Financial Post Staff  Aug 25, 2011 – 10:38 AM ET | Last Updated: Aug 25, 2011 1:09 PM ET

OTTAWA — The average weekly wage of Canadians edged up 0.3% in June from the previous month, and rose 3% from a year earlier, Statistics Canada said Thursday.

The federal agency said earnings on average totalled $876.27 per week in June, compared to $873.47 the previous month and $850.53 in June 2010. The average hours worked per week were 32.9, unchanged from a year earlier.

“The 3% (year-over-year) increase reflects a number of factors, such as wage growth and changes in the composition of employment by industry, by occupation and by level of job experience,” the agency said.

Weekly earnings were up in all provinces in the 12 months to June, with the biggest gains in Alberta, up 5% to $1,041.45, and British Columbia, up 4.5% to $849.69.

“Alberta has recorded year-over-year growth in earnings above the national average since March 2010,” Statistics Canada said.

Saskatchewan and Prince Edward Island saw the slowest wage growth, up 1% to $854.60 and up 1.7% to $723.15, respectively.

Meanwhile, the number of employees on payrolls totalled 14.92 million in June, a gain of 1.8% from a year earlier.

TABLE
Average weekly wage in June / percentage change from year earlier:

Nationally $876.27 / 3.0

Newfoundland and Labrador $862.60 / 3.2

Prince Edward Island $723.15 / 1.7

Nova Scotia $773.89 / 2.0

New Brunswick $790.59 / 3.9

Quebec $815.91 / 3.0

Ontario $899.45 / 2.5

Manitoba $809.81 / 3.4

Saskatchewan $854.60 / 1.0

Alberta $1,041.45 / 5.0

British Columbia $849.69 / 4.5

Source: Statistics Canada

Posted in: Economy  Tags: Employee Compensation, Jobs And Labor, Statistics Canada

Critics decry outsourcing of visa processing

By Kristen Shane  Published August 24, 2011 Source: http://www.embassymag.ca/page/view/visa-08-24-2011

The federal government is working to create a global network of visa processing offices, many of which are now privately run—a move that critics say raises concerns over information security, privacy and oversight.

The government is set to almost double the number of countries in which it outsources the operation of visa application centres, from 20 to 35. During Prime Minister Stephen Harper's visit to Latin America earlier this month, he announced the opening of one in Costa Rica, and three in Brazil.

These are in addition to six more scheduled to open this month and seven next month, all in South and Central America. They add to those already running everywhere from Mexico to Moldova, Kenya to Kazakhstan.

Citizenship and Immigration Canada says it wants to continue to expand its use of these centres globally, although a spokesperson says no final decisions have been made yet. Some centres could also collect and transmit biometric information, such as fingerprints, in the future.

Business sees efficiencies, convenience

Canadian missions abroad process applications for temporary visas to Canada. But since 2000, they have been striking agreements with third parties to outsource more and more of these activities.

Most service providers are businesses. They include a Canadian subsidiary of Computer Sciences Corporation, a Fortune 500 American information technology company that will run the new visa application centres in 15 Latin American countries, and the India-based VFS Global. Embassy tried to reach someone with VFS Global but did not receive a response. A CSC spokesperson referred comment to CIC.

The Canadian government also works with at least one non-profit group. The International Organization for Migration is an intergovernmental organization that runs application centres for Canada in Vietnam and Tajikistan.

On top of the Canadian government's processing fee, application centre operators charge a service fee to each applicant for accepting their application and supporting documents such as passports, making sure it's complete, tracking it, sending it to a Canadian embassy or consulate and returning documents after a government visa officer has decided whether to accept or deny the application.

CIC approves fees as part of a formal agreement it signs with each service provider. They differ depending on the country. The base fee is about $14 CAD in India and $36 in China.

Countries such as the United States, UK and Australia also outsource visa application processing.

Business groups and the tourism industry like it because it makes the process more efficient by ensuring there's less chance of being rejected for incomplete or incorrect forms, and more convenient because visa application centres may be easier to access than consulates and are typically open longer hours.

Stephen Cryne is president and CEO of the Canadian Employee Relocation Council, which helps its member firms address workforce mobility issues. It serves 400 companies with activities in Brazil. "Any way that we can make it easier for those companies to move their people between Canada and the US is welcome news," said Mr. Cryne. "It goes a long way to helping our economy."

He sees the Latin American visa centre boom as part of the Canadian government's larger trade agenda in the region.

David Goldstein, president and CEO of the Tourism Industry Association of Canada, said economically and demographically, Mexico and Brazil have the fastest-growing upper- and middle-class populations in the hemisphere—people who can now afford to travel the world. His lobby group would like the Canadian government to stop imposing visas on them altogether, but if they have to be there, he said, a faster visa process is "the semi-perfect solution."

While critics may complain about the inflated cost of getting a visa through a privately-run application centre, Mr. Goldstein said consulates are still open to take visa applications directly.

"In the grand scheme of things, if you're booking a trip from São Paulo to Toronto, you're going to spend thousands of dollars between airfares, hotels and restaurants. Another $20, $30, $40 for convenience is not a significant investment," he said.

Visa application centres improve the productivity and processing times of visa posts for temporary resident applications, said Phil Mooney, president and CEO of the Immigration Consultants of Canada Regulatory Council.

"In most of the cases where they've been introduced the wait times for temporary resident applications have decreased," he said.

Concerns over adequate safeguards

But Mr. Mooney also said some immigration consultants have raised concerns. For example, visa application centre officials are to ensure applicants' forms are filled out correctly, but not to offer advice. The federal government passed a law this year to strengthen penalties against people who charge money but aren't authorized to give immigration advice.

CIC spokesperson Nancy Caron said that under the terms of the agreement signed between CIC and each centre operator, the service is subject to inspection and audit. If an operator doesn't comply, CIC could cancel the agreement.

"The government should be more open in how they monitor these facilities and there should be reports that are readily available to individuals about that," said Mr. Mooney, adding that this would help maintain the integrity of the system.

He also raised concerns about sensitive personal information falling into wrong hands, for example if the business running a visa application centre must be licensed by the country in which it operates, and the state security service requires access to the company's files.

NDP immigration critic Don Davies said there are certain government functions that it must do itself, such as adjudicating income tax returns and visa processing. Every deviation from that direct relationship between the government and its client, he argued, raises the potential for risk in dealing with sensitive information such as bank records.

"If you're in India and you're handing this information to a third-party provider, what kind of guarantees do you have? That company could go out of business next week and flee the country," he said. "They could be selling that information to someone else. They could have a breach of security."

VFS Global, which runs Canadian visa application centres in eight countries including China and India, did come under pressure in 2007 when a security breach meant the personal data of people applying online through VFS for a visa to the UK were visible to others visiting the site. VFS has since said it has improved information security by following industry best practices.

Vancouver immigration lawyer Richard Kurland said he's concerned that contractors or subcontractors in other countries might flout legislated privacy safeguards that the private and public sectors in Canada must both follow.

Monitoring should be done by third parties, he also argued, not "the foxes guarding the foxes." And there should be accessible means of recourse for users if something goes wrong.

Anne-Marie Hayden, a spokesperson for the federal privacy commissioner's office, outlined similar concerns. She also said there are plans for some visa application centres to collect and transit biometric information, such as fingerprints, which is especially sensitive personal information. CIC should work to mitigate and manage such "privacy challenges and risks," she said.

She noted that CIC has sought and is seeking advice from her office as it establishes visa application centre management contracts. The office is currently reviewing a CIC privacy impact assessment for some of its visa application centres. And privacy and security requirements will be built into CIC's assessment of candidates in a coming request for proposal process related to the creation and management of a global visa application centre network.

Ms. Caron noted that safeguards on the protection of personal information are built into agreements with application centre operators. Background checks and screening are done on all centre staff, she said, and they must be given proper training as provided or authorized by CIC.

Mr. Davies suggested the government open small satellite offices to process applications rather than use outside providers.