Economists, Comment Please: Comparative Unemployment Rates

[Viking]

Do you count the unemployed on vocational training courses?
Do you count the unemployed on vacation?
Do you count the underemployed?
Do you count the partially/fully disabled?
Do you count students between studies?
Do you count those not elligible for financial support?

It all depends on how they get counted.

[Monoriu]

I get asked similar questions all the time.  "Hey Mono, find out why Singapore is doing better than us in this this and that statistic."

The answer is almost always "Boss, there is no way we can compare the two, because the methdologies are all different."

[MadImmortalMan]

Canadian Dollar Climbs Toward Parity as Stocks, Crude Oil Rally
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By Matt Townsend

Oct. 17 (Bloomberg) -- The Canadian dollar rallied for a third straight week, touching a 14-month high and moving closer to parity with its U.S. counterpart as signs of economic recovery pushed commodities and stocks higher.

Canada's currency gained as crude oil, the nation's largest export, surged 10 percent and the Dow Jones Industrial Average surpassed 10,000 for the first time in a year. The Bank of Canada will keep interest rates at a record low level when it meets on Oct. 20, according to all 23 economists in a Bloomberg News survey.

"As long as equities continue to go up, it will be positive for the Canadian dollar," said Maria Jones, a currency trader in Toronto at TD Securities Inc., a unit of Canada's second-biggest bank. Stocks will continue to rally as long as "we are seeing moderate growth in the U.S." and the Federal Reserve holds interest rates near zero.

The Canadian currency, nicknamed the loonie for the aquatic bird on the C$1 coin, appreciated 0.5 percent to C$1.0370 per U.S. dollar yesterday in Toronto, from C$1.0422 on Oct. 9. One Canadian dollar buys 96.44 U.S. cents. The currency climbed to $1.0207 on Oct. 15, the strongest level since July 29, 2008. The loonie and the U.S. dollar last traded on a one-for-one basis on July 22, 2008.

Employment in Canada rose last month six times more than forecast, unexpectedly reducing the jobless rate to 8.4 percent, the government said on Oct. 9. Service industries in the U.S., the nation's biggest trade partner, expanded in September for the first time in a year, an Institute for Supply Management index showed on Oct. 5. U.S. retail sales excluding automobiles climbed 0.5 percent last month, more than forecast, the Commerce Department said on Oct. 14.

Parity Probability

The probability that the Canadian currency will trade at C$1 per U.S. dollar at year-end is 60 percent, according to implied volatility from options trading monitored by Bloomberg. The chance of parity in one month is 42 percent, trading shows.

The Canadian currency pared its advance yesterday, depreciating 0.3 percent, after Statistics Canada said the consumer price index declined in September for a fourth month, the longest stretch since 1953. The report spurred speculation that subdued inflation will allow the Bank of Canada to leave borrowing costs unchanged next week.

The annual inflation rate excluding gasoline and seven other volatile items -- the so-called core rate the central bank uses to discern future price trends -- slowed to 1.5 percent, from 1.6 percent in August.

'To Allay Fears'

The inflation data "will go a long way to allay fears of an early hike by the BOC," David Watt, senior currency strategist in Toronto at RBC Capital Markets, wrote in a note yesterday. The firm is a unit of Canada's biggest bank.

Central bank policy makers restated at their last meeting in September a pledge to keep the benchmark overnight interest rate unchanged through June 2010 unless the outlook for inflation changes. The rate has been at a record low 0.25 percent since April. It was 4.5 percent when the bank began lowering it in December 2007.

Canadian Prime Minister Stephen Harper said yesterday in remarks to reporters in Toronto that he shares Bank of Canada Governor Mark Carney's concern that gains in the country's currency could slow recovery. Carney said in a speech on June 4 that a persistently strong Canadian dollar would "work against" positive factors such as improved trade.

'Rhetoric' Speculation

"The big speculation is that they might increase their rhetoric in regards to the currency," TD's Jones said. "They can talk, but the question for the markets is, are they going to act? If you don't think they are going to act, then the talk really doesn't mean anything."

The Standard & Poor's 500 Index gained 1.5 percent this week as JPMorgan Chase & Co. and Intel Corp. posted better-than- expected earnings. So far, 80 percent of companies in the index surpassed third-quarter earnings estimates.

Should companies continue to surprise investors on earnings, "it will be good for equities and put ongoing downward pressure on the U.S. dollar," wrote Camilla Sutton and Sacha Tihanyi, currency strategists at Scotia Capital Inc. in Toronto, in a note yesterday. The firm is a unit of Canada's third-largest bank.

The Reuters/Jeffries CRB Index, a gauge of 19 raw materials and commodities, rallied 5.2 percent, the biggest weekly gain since May. Canada generates more than half of its export revenue from raw materials, including oil. Crude oil for November delivery touched $78.75 a barrel on the New York Mercantile Exchange yesterday, the highest level in a year.

Government bonds rose this week, pushing down the benchmark 10-year note's yield four basis points, or 0.04 percentage point, to 3.47 percent. The price of the 3.75 percent security maturing in June 2019 increased 31 cents to C$102.26.

Canadian government debt lost investors 1.6 percent this year, according to a Merrill Lynch index.

[The Minsky Moment]

What really adds insult to injury is that while almost every commercial bank in the OECD is struggling to recapitalize, RBC just announced over $1 billion in share buybacks b/c they are over-capitalized.

[Barrister]

What really adds insult to injury is that while almost every commercial bank in the OECD is struggling to recapitalize, RBC just announced over $1 billion in share buybacks b/c they are over-capitalized.

Forget share buybacks, they ought to rollback some of their fees if they have so much money.

[Jos Theelen]

Rising commodity prices.

Correct

SAN FRANCISCO (MarketWatch) -- A far-flung group of countries that have benefited from rebounding commodities prices is getting ready to raise benchmark interest rates before the United States, Europe and some other major, developed countries, economists say.

Those rate hikes are likely to give fresh momentum to five-month rallies to the Australian, Canadian and New Zealand dollars, as well as the Norwegian krone, while weighing on the U.S. dollar, the Japanese yen and, to a lesser extent, the euro.
Higher commodities prices "have allowed Australia and Canada to have a source of strength to have earlier reversals of their monetary policy," said Stephen Gallagher, chief U.S. economist at Societe Generale.
As resource-rich countries benefited from rising metals, oil and some agricultural prices, they also largely have avoided the financial-system convulsions that shook the United States and Europe.
The dollar is coming under pressure from U.S. monetary and fiscal policy, according to Chuck Butler of EverBank World Markets, who also talks about investing in currencies and precious metals. Jonathan Burton reports.
For the commodity countries, "the likelihood of a second downturn is remote and their financial institutions are in better shape," Gallagher added.

[Barrister]

What I am surprised at is why RBC and other Canadian banks didn't take this opportunity to pick up a few toubled US banks and increase their retail presence south of the border.

The Canadian market is pretty solid, and foreign competirors are pretty much shut out, but the big 5 are so big there's little room for meaningful growth.

[viper37]

Do you count the unemployed on vocational training courses?

Yes.

Do you count the unemployed on vacation?

Yes and no...  It really depends on what the employer writes on the statement.
If I declare "lack of work", the employee gets counted in the unemployment rate.
If I declare "vacation" he is not.
If I don't produce any declaration, he is not.

Do you count the underemployed?

No.

Do you count the partially/fully disabled?

Depends.  To be included in the unemployment stats, one must be seeking a job for a period less than 1 year.  After that, you are excluded from the count.
So, if the partially/fully disabled can not or does not seek a job, then he is not considered "unemployed".  He is not part of the active population.

Do you count students between studies?

In theory, no.

Do you count those not elligible for financial support?

No.

[viper37]

What I am surprised at is why RBC and other Canadian banks didn't take this opportunity to pick up a few toubled US banks and increase their retail presence south of the border.

The Canadian market is pretty solid, and foreign competirors are pretty much shut out, but the big 5 are so big there's little room for meaningful growth.

There are a few problems with that:
1- Protectionism from the US.  Buying the assets is one thing.  Buying an entire bank would raise some eybrows in Congress.  Especially when the government is ready to bail out these banks, the management in place would probably prefer the US gov solution rather than seeing a foreigners buying them.  I think our banks would have had troubles buying some of the big banks.

2- Lack of liquidity.  You need money to buy the other banks shares, and you need something to counter-balance that acquisition in case the stock value is further reduced.  Believe it or not, our banks were streched for liquidity during the worst times of the US banks.  The US banks&companies were all borrowing from Canada because of the liquidity crisis in the US.  And we are the ones usually borrowing on the US market, because that's where the money is.

3- since the liquidities were rare, the cost of borrowing money was a little higher than before the crisis.  And there were fears our banks could suffer from overexposure, uncertainty to the US regulations and all that shit.   I'm pretty sure they considered it, but the costs was probably too high for the anticipated profits.  Besides, how do you determine the price of a bank when no one knows if its assets are worth something?  What if you overpay for a near-failed bank?

[MadImmortalMan]

Well, my oil and gold stocks are certainly doing well.

I guess one question is how strong does the loonie have to get before the rebalance starts to weigh heavily on the Canadian economy? Is parity enough to hurt or does it have more room yet?

[citizen k]

China's growth accelerates to 8.9 percent in 3Q
By ELAINE KURTENBACH, AP Business Writer

SHANGHAI – China's economy expanded 8.9 percent in the third quarter, pumped up by easy credit and massive government spending that have ensured a recovery while the U.S., Japan and Europe continue to flounder.

The world's third-largest economy grew 7.7 percent in the first nine months of 2009, bouncing back from a slowdown that began late last year. Officials say they are confident of reaching an annual growth target of 8 percent.

"We can say we have made obvious and remarkable achievements in our economic growth," National Statistics Bureau spokesman Li Xiaochao told reporters in Beijing.

"We have quickly reversed the economic slowdown. The momentum of the recovery is solid and overall, our economic performance is showing signs of improvement," Li said.

China fought off the global downturn with a 4 trillion yuan ($586 billion) stimulus plan involving massive spending on infrastructure such as rail and roads to boost the domestic economy as exports slumped.

The strategy paid off, with growth jumping to 7.9 percent in the second quarter of the year from 6.1 percent in the first quarter.

Since last spring, China's recovery has outshone still feeble signs of a turnaround in other major economies.

Industrial output rose 8.7 percent in the first three quarters of the year, and 12.4 percent in July-September — signaling accelerating demand, the statistics bureau said.

But while surging purchases of coal, iron ore and other materials have aided global miners like BHP Billiton and Rio Tinto, the impact of China's comeback has mainly been one of improving global sentiment than of actually driving growth, said Stephen Green, economist for Standard Chartered Bank in Shanghai.

"Apart from commodities, there's fairly limited benefits for the rest of the world," he said.

Exports collapsed last year and with them imports, mainly of commodities and components used to assemble products for imports. While September data showed a slight improvement, a recovery will depend on stronger growth in the U.S. and other key markets.

Li, the statistics bureau spokesman, described the export climate as "severe."

"Exports remain the key weakness for the Chinese economy," Moody's Economy.com economist Alaistair Chan said in a report Thursday.

The latest data underscore the crucial role investment, accounting for nearly 88 percent of GDP growth earlier this year, is playing in China's growth. Investment in factories, construction and other fixed assets rose by one third in January-September to a record 15.5 trillion yuan ($2.27 trillion).

Even as the economy flourishes, some analysts warn that the heavy reliance on public works and other investment is masking or even worsening weaknesses that are bound to weigh down growth in the long-term.

"We'll see strong growth from China for the next six months, possibly another year," said Green. "The problem is what happens after another year and a half. What will be the growth driver then?"

On Wednesday, China's top leaders signaled their own concerns over imbalances in the economy, with the State Council saying policy will shift to dealing with waste and other problems of high growth.

"In the first three quarters, the pace of economic growth quickened," the State Council said in a statement after a meeting with Premier Wen Jiabao. "At the same time, we also are clearly aware that there are still difficulties and problems in the economic and social development of our country."

The focus in the next few months will be on curbing industrial overcapacity, promote new industries, maintain liquidity and lower unemployment, it said.

While they have ordered curbs on bank lending to some industries, China's planners are not facing any pressure from inflation: despite surging share and property prices, the consumer price index fell 1.1 percent in January-September from a year earlier, the statistics bureau said.

The worry is that wasteful and redundant spending on new factories and unneeded construction will worsen gluts of some products, while inviting financial problems as projects fail to pay off.

Li, the statistics spokesman, acknowledged the concerns, but noted that domestic consumption such as consumer spending accounts for a growing share of growth.

Emblematic of the rise in consumer spending: China's auto market has surged ahead to become the world's biggest, with sales up 34 percent to 9.66 million vehicles in the first nine months of the year. The streets of Shanghai, the financial capital, are full of shoppers, its restaurants busy as ever. Retail sales growth was 15.1 percent in the first three quarters, the bureau said.

"The Chinese are the biggest customers for many countries around the world," said David Cohen, director of Asian economic forecasting for consultancy Action Economics.

"They matter like never before," he said.

[MadImmortalMan]

With credit harder to get in the West and the recession happening, I think a lot of this is cannibalistic growth. Most companies are using what credit they can get to invest in cost-cutting things like moving operations to China.

[Admiral Yi]

According to an article I read the S&P 500 companies generate 50% of their revenue overseas.

[Barrister]

Well, my oil and gold stocks are certainly doing well.

I guess one question is how strong does the loonie have to get before the rebalance starts to weigh heavily on the Canadian economy? Is parity enough to hurt or does it have more room yet?

Strong dollar effects different sectors in different ways.  It is already hurting manufacturers and tourism.  But it tends to be good for the resource sector.

[Malthus]

Well, my oil and gold stocks are certainly doing well.

I guess one question is how strong does the loonie have to get before the rebalance starts to weigh heavily on the Canadian economy? Is parity enough to hurt or does it have more room yet?

Strong dollar effects different sectors in different ways.  It is already hurting manufacturers and tourism.  But it tends to be good for the resource sector.

I'm not sure I understand. Would it not hurt all exports? Resource producers have to pay workers and costs in dollars ...