TORONTO–Nearly 500,000 more Canadians will be unemployed this Labour Day than last, and while economists say the recession is over, job losses are expected to continue well into next year, and many of those who lost their jobs don’t qualify for Employment Insurance.
Labour leaders say even those who still have jobs are fighting cuts to pension benefits and other attempts by employers to get concessions, including moves by some companies that unions say are "taking advantage" of the economic downturn to cut costs.
"People that can’t collect EI are being forced to go on welfare, which is driving them further into poverty," said Canadian Labour Congress president Ken Georgetti, who speaks for Canada’s largest federation of unions.
While nearly 500,000 jobs have been lost in the last year as a deep restructuring took place in the automotive, forestry and machinery sectors, Canadian workers are starting to feel more confident that they have seen the worst of the job losses and the employment picture is starting to brighten.
A Labour Day conducted poll by Harris-Decima and commissioned by online job search firm Monster.ca shows 46 per cent of Canadian workers feel they have more job security today than they did a year ago. That compares with 38 per cent of respondents who feel less secure.
The feeling increased among public sector workers, with 53 per cent feeling secure with their employment.
The survey, conducted in mid-August, also found that 88 per cent of Canadians were satisfied with their current job situation.
For unions, the biggest issue facing laid-off workers is EI reform, and unions have been pressing the federal Conservative government to raise benefits and loosen up eligibility requirements guaranteed approval cash loans.
The EI fund had a $57 billion surplus that was spent by Liberal and Conservative governments, complained Georgetti.
"The understanding was that they could spend the surplus, but when the funds were needed they would borrow money if necessary and not cut people off (EI benefits)," he said.
CAW president Ken Lewenza, in a Labour Day message Thursday, said that in the last recession of the early 1990s, only two in 10 laid off workers failed to qualify for jobless benefits. Today it is five in 10.
"What we need to improve this system is a change to the number of qualifying hours, an extension of the benefits period and increase in the benefit level, and an elimination of the waiting period and the severance clawback," he said. "Political parties of all colours must recognize the necessity of these reforms."
Georgetti said workers know they didn’t cause the recession and that’s why they’re willing to strike when necessary if they think an employer is demanding concessions that aren’t really necessary.
A bitter strike has shut down Vale Inco’s nickel mines in Sudbury over company concession demands. Recent municipal strikes in Toronto and were also sparked by concession demands.
Almost 25 per cent of Canadians are working more than one job to make ends meet, says Don Thibert, director of academic affairs at Everest College.
He said some workers are taking advantage of the recession to bolster their skills with some post-secondary education, noting employers want staff with a good work ethic, which people who are already working two or more jobs clearly demonstrate.
G20 finance leaders pledged on Saturday to keep economic life-support packages in place until a recovery is firmly secured, but reached no deal on putting limits on bankers’ pay.
Finance ministers and central bankers meeting in London agreed fiscal and monetary policy would stay “expansionary” until recovery from the worst financial crisis since World War II was certain, a draft of their joint statement seen by Reuters showed.
The global economic outlook is certainly a lot better since leaders last meeting on the economic crisis in April, but policymakers are worried about derailing that recovery by pulling the plug too soon.
“We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies consistent with price stability and long-term fiscal sustainability until a recovery is firmly secured,” the draft said.
With politicians looking for someone to blame for the recession, the rhetoric leading up to the meeting had been directed firmly at bankers and their lavish multi-million dollar bonuses.
But the ministers could not agree on putting an actual cap on bonuses as had been advocated by some countries and leading charities.
Instead, they agreed to create a global structure for imposing tighter controls on pay at financial institutions to discourage bankers from making the kind of risky bets that started the crisis back in August 2007.
These included deferring bonus payments over time and subjecting them to “clawback” in case things went sour. The compromise was that the Financial Stability Board, a global regulatory council headed by Bank of Italy chief Mario Draghi, would study caps and the whole issue of pay further auto loan rates.
“Pay and bonuses cannot reward failure or encourage risk taking.” British Prime Minister Gordon Brown told the start of the meeting. “It is offensive to the public whose taxpayers’ money in different ways has helped many banks from collapsing and is now underpinning their recovery.”
CHANGING WORLD ORDER
The draft statement showed agreement that emerging nations like India and China should have a greater say in the running of the International Monetary Fund and World Bank but did not offer up any formula of how this should be achieved.
It said only that their voice in global economic policymaking would grow “significantly” and that it expected “substantial progress” to be made on the issue at a summit of world leaders in Pittsburgh later this month.
The BRIC group of leading emerging powers — India, China, Russia and Brazil — had laid out on Friday concrete targets for how much movement they wanted in IMF and World Bank quotas.
Nor was there much clarity yet on a U.S. proposal for increasing the capital that banks hold in order to prevent a rerun of the crisis that led to the collapse of some of the world’s biggest banks.
While G20 countries agree that banks need more money set aside in reserves to cushion against losses, how much is needed and how that is calculated appears to be in dispute.
Last year Andrew Hall, the head of Citigroup’s energy trading unit, made over $100 million, making him one of the highest paid people on Wall Street.
Meanwhile, Corey Carter, resident of an Alabama county where consumers’ gas price burden is greatest, spent more than 25% of his $240 weekly pay on gas.
Some experts argue that the experiences of people like Hall and Carter are linked by the economics of oil trading. They say it’s not a coincidence that Americans are paying more at the pump in an era when Wall Street has taken a greater interest in energy trading.
Even the government is reassessing its opinion of speculation’s impact on oil prices. In what could be a significant reversal, the United States may tighten the rules on energy trading.
"Using an essential commodity as [an investment tool] is crazy," said Judy Dugan, research director at Consumer Watchdog. "If you want a double dip recession, let’s just get $100 oil again."
Dugan is part of a growing chorus of people calling for greater government oversight of the commodities markets, where oil contracts are traded. The government agency that regulates those markets, the Commodity Futures Trading Commission, is starting to listen.
Last month, the agency held hearings about what it could do to restrict speculator activity. Possible measures include setting stricter limits on the amount of contracts people are allowed to trade, increasing the amount of money investors have to put up to buy contracts, or simply better reporting on who is buying what.
On Wednesday CFTC said it will begin listing speculative money in more detail in its weekly energy market reports starting this Friday, while additional hearings on broader market regulation continued Wednesday and Thursday.
The fact that the CFTC is even considering changing the rules is a big departure from its stance under the Bush administration. Last year the CFTC was adamant that speculators were not driving up the price of oil, with its then-director testifying as much before Congress several times. Now, under President Obama, the agency has a new head and that position may change.
It was reported last month that CFTC would soon reverse itself and say speculators were at least partially to blame for the $147-a-barrel prices seen last summer. Then the agency said those reports were not true. Now they will only say they will be "putting out additional elements of information."
Most analysts think additional restrictions will be placed on speculators, probably sometime this fall.
"Oil prices can’t triple and then fall by 85% within two years without a political response," Kevin Book, managing director at the research firm ClearView Energy Partners, wrote in a recent research note.
Big users of oil — as opposed to non-users like banks, hedge funds and others who are generally lumped into the "speculator" category — welcome any moves that might limit speculator interest.
"One day [last year] oil prices went up by $11 a barrel," said David Castelveter, a spokesman for Stop Oil Speculation Now, a lobby group made up mostly of airlines and trucking companies. "That’s not supply and demand."
Castelveter isn’t sure if tightening rules on oil trading will result in lower prices and less volatility, but he thinks it’s at least worth a shot business card.
The effect on prices
But what types of restrictions the government might enact and what that might do to prices is an open question.
Ken Medlock, an energy economist at the James A. Baker III Institute for Public Policy, thinks restrictions will bring down prices.
Medlock authored a recent paper looking at investment money influence on the oil market, and said it’s hard to see how it’s not pushing prices higher.
There’s just too much of a correlation between stock prices, the dollar and oil prices to think big investment money - as opposed to supply and demand - is not driving the price.
Specifically, he notes how "non-commercial" players — i.e., banks, pension funds and the like — now hold 50% of the contracts on the U.S. oil futures market. That’s up from 20% in 2002.
He blames a large part of investor interest in oil futures on a 2000 law now known as the "Enron loophole." That rule exempted banks, funds and other non-users of oil from reporting their positions on electronic markets. At the same time, proliferation of electronic exchanges took off, and is now where most oil trading takes place.
"That’s when there appears to be a fundamental shift in the market," said Medlock. "The technology has moved faster than the policy."
The lack of information brought about by the reporting exemption is what makes it so hard to figure out if speculators are unduly influencing oil prices.
Others have made projections.
Last week it was reported that Germany’s Commerzbank thinks oil prices will fall 30% if regulations that rein in speculators are passed.
But there are plenty of people who feel speculators are not behind the runup in oil prices, starting with the Bush-era CFTC and their counterparts in London.
Plenty of people point to the razor-thin margins between what the world was using and what it could produce last year when prices hit $147, and note that as soon as the economy collapsed, oil prices did too. They also say that OPEC and other big oil producers have a role in influencing prices.
The Citigroup energy trading unit did not return calls seeking comment. But others have said increasing market regulation in an attempt to lower prices may be futile.
Deutsche Bank, which engages in energy trading, noted in a recent report that during the recent commodity boom, items that increased most in price were mostly rare metals not traded on an exchange, and thus not subject to speculator influence. And even items like rice and steel, also not traded on an exchange, saw a big runup in prices.
The report noted how the U.S. government has been attempting to regulate speculators for that last 100 years in other commodities markets in an effort to bring down prices, often with little success.
"Alongside speculators we believe fundamental factors should not be forgotten in terms of the rapid rise in commodity prices," the report said, highlighting strong demand and OPEC influence. "Perversely focusing on regulation to curb speculative activity may possibly increase the pricing power of OPEC over time at a time when the U.S. government is attempting to do the exact opposite."
More than nine out of 10 cities are slashing spending this year as the recession wreaks havoc on their sales and income tax revenue, a new study found.
And the future looks even worse, as the housing market’s steep declines continue cutting into property tax revenue, according to the National League of Cities, which issued the update on city fiscal conditions Tuesday.
City finance officers’ pessimism is running at its highest level in the history of the group’s 24-year survey. The economic situation on the local level has grown more dire in the seven months since the group released its last report.
"City leaders know the worst is still ahead of them in terms of revenue declines and service cuts," said Chris Hoene, the league’s director of research.
The Obama administration’s $787 billion stimulus package is expected to help offset some of the cities’ misery, but the money won’t have much impact until 2010, Hoene said.
Spending cuts
To combat declining revenues, 62% of cities are delaying or canceling infrastructure projects, the study found. That’s a 20 percentage point increase from the league’s February status report. Some two-thirds of cities are laying off workers or instituting hiring freezes, roughly the same figure as reported earlier this year.
Meanwhile, officials are also raising taxes and fees, as well as tapping city coffers. Some 45% of cities have increased fees for services, while 25% have upped property taxes. More than one in four have added fees.
Also, cities are expected to draw from their ending balances — which are similar to states’ reserve funds — for the first time since the recession of the early 1990s. Ending balances are expected to decline to 20.8% of budgets, a drop of 3.5 percentage points.
Cities are taking these and other actions to close a projected 2.1% budget gap for 2009, the report found.
In Northglenn, Colo., park lawns are being mowed less frequently and some streets are not being repaired — the results of a $900,000 paring of the Denver suburb’s $18 million 2009 budget. But these moves weren’t enough. Two weeks ago, the city laid off 11 workers.
The coming year will bring more cutbacks, such as the likely elimination of the July 4th fireworks display, said Mayor Kathleen Novak. More details will be unveiled when the budget is presented in two weeks.
"We’re really trying to keep our core services intact, but the extra things we’d like to do are being cut back," said Novak, who is the league’s president.
Property tax pain
While income and sales tax revenues are expected to decline in 2009, property taxes are still projected to grow, albeit at a slower pace. That’s because there is often a few years’ lag in adjusting property tax assessments.
Many cities are still collecting taxes based on the value of homes from 2006 and 2007, the height of the market, Hoene said. In coming years, however, the rolls will likely be adjusted to reflect the steep plunge in home prices.
"It takes awhile for cities’ revenues to catch up to what’s happening in the market," he said.
Sales tax revenues are expected to decline 3.8% in 2009 as consumers rein in spending, while income tax receipts are projected to fall 1.3% as unemployment takes its toll, the survey found.
Cities got more bad news Tuesday when a federal report showed that metropolitan area unemployment worsened in nearly 200 places in July.
Detroit, which has the highest unemployment rate among large metro areas, saw its level rise to 17.7% in July, up from 17.1% in June, according to the Bureau of Labor Statistics. Meanwhile, El Centro, Calif., once again had the nation’s highest metro unemployment rate, coming in at 30.2%, up from 29.4% a month earlier.
Property tax revenues should rise by 1.6% this year, but then decline for the next three years.
Cities are also bracing for reduced aid from state governments, which are facing $26 billion in shortfalls for the current fiscal year. States have been slashing spending for local aid, social services and education as they look to balance their budgets. Neither states nor cities are allowed to run deficits, in most cases.
Stimulus kicks in
Cities are expected to receive billions of dollars in stimulus funds in the next 18 months.
Stimulus dollars will help Riverside, Calif., replace four police motorcycles and 14 patrol cars, as well as maintain the positions of two department staffers. These funds are part of $12 million in stimulus grants the city is expecting to receive in coming months. The money will also go towards efforts including homelessness prevention and energy-saving initiatives.
But little of that will help the city balance its budget, said Riverside Mayor Ron Loveridge. City leaders had to cut nearly $25 million out of the 2009-2010 budget, which totals $190 million. They didn’t even consider stimulus funds when preparing the spending plan.
"The stimulus will help, but boy it won’t be any silver bullet," said Loveridge.
Elsewhere, stimulus funds may do more to make up budget reductions. Some cities will receive money for infrastructure projects in 2010, which will help offset the cutbacks in capital initiatives, Hoene said.
"It will hit the local government level at a time when they are most in need," he said.
Oil prices fell on Tuesday as economic concerns sent investors into safer havens, outweighing positive U.S. manufacturing and home sales data.
U.S. crude for October delivery settled $1.91 lower to $68.05.
Stocks dropped as investors confidence in the economic recovery wavered.
Meanwhile, the dollar rose as the slide in stocks boosted the currency’s safe-haven appeal.
"The dollar is strengthening and equities are coming off hard so (oil futures) did the same," said Tom Knight, trader at Truman Arnold in Texarkana, Texas.
Oil futures had risen earlier in the day as the market focused on a report showing a jump in manufacturing and pending home sales.
"It looks like the whole complex is failing to sustain the gains … basically, the markets not done yet on the downside," said Tom Bentz, senior commodity analyst, BNP Paribas Commodity Futures Inc. in New York.
Oil has risen from a low of $32.40 in December, helped by economic recovery optimism that lifted global stocks to 10-month highs last month.
Oil traders will look for fresh direction from U.S. weekly crude stockpiles data.
Analysts expect the data to show a 400,000-barrel fall in U.S. crude stocks following an increase in refinery utilization, a preliminary Reuters poll of analysts showed.
The American Petroleum Institute (API) will release its weekly inventory report at 4:30 p.m. ET on Tuesday. The Energy Information Administration (EIA) will release its data on Wednesday at 10:30 a.m. ET.
Adding to already high inventories, OPEC has reduced its compliance with agreed production curbs, a Reuters survey on Tuesday found.
OPEC supply in August rose for a fourth consecutive month as Saudi Arabia, Nigeria and Venezuela increased their production, taking overall output discipline to 68% from a revised 70% in July.
The Organization of the Petroleum Exporting Countries meets on Sept. 9 in Vienna to reconsider its output policy.
Microchip king Intel boosted its sales outlook for the current quarter on Friday, signaling an end to the deep PC market swoon.
The company raised its third-quarter revenue expectations to a range between $8.8 billion and $9.2 billion from a range of $8.1 billion to $8.9 billion. The new estimates trump Wall Street’s revenue forecasts for the current quarter of $8.6 billion, according to a Thomson Reuters survey of analysts.
Intel also said its gross margin will be in the "upper range" of its previous guidance of 51% to 55%. Analysts currently expect gross margin of 53.2%.
The tech bellwether said it expected demand for microprocessors and chipsets would be stronger than it had previously expected in the current quarter. That’s largely due to the PC market, which Intel last month said has started to bounce back sharply.
PC sales were expected to rebound this year, but not until the fourth quarter, when Microsoft’s (MSFT, Fortune 500) Windows 7 is set for release payday loan. But a recent Gartner study showed that computer sales are already showing signs of improvement. Apple (AAPL, Fortune 500) released its new Snow Leopard operating system Friday, which could boost Mac sales somewhat this quarter.
Intel already pleasantly surprised analysts last month when its second-quarter sales and profit easily beat Wall Street’s expectations. In its July 14 announcement, the company said it was very upbeat about the future, and its guidance blew past analysts’ long-term forecasts.
A spokesman for Intel was not immediately available for comment.
Shares of Intel (INTC, Fortune 500) rose 4% in morning trading.
Even in this enlightened age of recycling, a majority of all bottles and cans end up in landfills. More than 200 billion beverage containers are sold each year in the U.S., says the nonprofit Container Recycling Institute, but fewer than 75 billion are recycled. That isn’t just bad for the environment — it’s money left on the table.
Eleven states offer refunds on drink containers. The states keep unreturned deposits, and those nickels and dimes add up: New York alone netted $150 million last year.
That’s a golden opportunity for Clynk, a startup in Scarborough, Maine. Clynk’s patent-pending system scans bar codes on bottles and cans so it can return each kind to its maker. In Maine manufacturers must pay Clynk a 35 cent fee per container.
So far the company’s annual revenues are little more than $1 million. But CEO Frank Whittier says his timing is great — especially since New York, Connecticut and Oregon started offering deposits on water bottles this year. (Only six states do so.)
"This culture is starting to wake up to the fact that you can’t just throw away 50 billion water containers every year," Whittier says.
Clynk appeals to consumers’ wallets as much as it does to their consciences. Licensed as a bank in the state of Maine, Clynk offers customers accounts where they can deposit the change from their recycling. Currently the company has 165 drop-off locations in Hannaford supermarkets in New England.
And Clynk plans to start selling its scrap material in non-bottle-bill states too — as quality scrap that manufacturers prize.
"The material you get from curbside recycling is awful," says Tex Corley, CEO of Strategic Materials in Houston, one of the country’s largest glass recyclers. But Clynk’s collection is "extremely high quality with no contamination."
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