Hiatus

The blog will be going on a brief hiatus. Big birthday looming, winter in Canada -- I think you can figure it out.

Anyway it's not like there's much happening in the world, unless you count....

• Trump vs Thunberg at Davos (today).  Prediction? Short-term winner: Donald; long-term winner: Greta.

• Bank of Canada decision day (January 22). Prediction? Unch.

• Brexit Day (January 31). Prediction? Short term impact: limited; long-term impact: severe but politically deniable.

• Trump impeachment (ongoing). Prediction?  Short term winner: Trump. Long term loser: rule of law.

• Super Bowl LIV (February 2). Prediction? KC, unless Mahomes is hurt.

Back before you know it.

It's trade week

Fears that the global economy could slide into recession in 2020 have been driven to a great extent by concerns over the impact of Trump-inspired trade tensions. With that in mind, it's worth noting for the record a couple of positive developments on the trade front this week.

Today in a ceremony at the White House, the US and China formally concluded a so-called Phase 1 agreement to reduce some US tariffs on Chinese goods and spur additional Chinese imports from the US. In truth it is only a small step, and getting things back to the pre-Trump status quo is likely to be difficult, not least because of Trump's seeming inability to stick to any course of action for very long. Still, it's a move in the right direction.

In the next day or so, the US Senate is expected to take a rare bi-partisan step by approving the trilateral trade deal -- known as USMCA in the US, CUSMA in Canada -- to replace the existing NAFTA agreement.  Differences between the new deal and the old are largely cosmetic, but please don't tell that to Donald Trump.  It will be good to get this out of the way before the impeachment circus fires up in the Senate next week.  Oddly enough, Canada has still not formally ratified the deal, partly because of last year's Federal election, but that should now be no more than a formality.

As always, of course, two steps forward, one step back -- and it's a big one. Just over two weeks from now the insane act of self-harm known as Brexit will take place. The initial impact on global trade will be very limited, since the UK will enter a transitional phase set to last for the remainder of 2020. However, in the absence of a new EU-UK trade deal, an eventual hard Brexit on New Year's Day 2021 could well prove damaging for trade and investment flows and the overall global economy.

Who's next for the hot seat?

And while we're on the subject of Stephen Poloz, we should note that he is now in the final months of his tenure as Governor of the Bank of Canada -- his term ends on June 2.  If you would like to apply for the job, here's how, but I should warn you that there's an internal candidate who seems to have the inside track for the role: Senior Deputy Governor Carolyn Wilkins.

It is much to Governor Poloz's credit that, in contrast to some of his limelight-hungry predecessors, he has given his senior colleagues, including Ms Wilkins, every opportunity to develop a public profile.  Ms Wilkins has made any number of significant policy speeches in the last couple of years and -- assuming of course that she wants the job -- there's every reason to think that she would be a very good Governor.

The only slight downside for her is that if she gets the job, she might never entirely escape the idea that her appointment was just another example of Justin Trudeau's endless virtue signalling. There are no doubt other good candidates out there -- including former Senior Deputy Governor Tiff Macklem, who was passed over when Poloz got the job and is currently in academia -- but Ms Wilkins looks like the right choice.

What's next for Gov. Poloz?  He is currently undertaking what at least one journalist is characterizing as a farewell tour, giving me the unmissable opportunity to post a link with a picture of Cher in it. Poloz is using his imminent freedom to sound off on a wide variety of topics, from Donald Trump's trade wars to Canada's inter-provincial trade barriers. His example of the latter focuses, bizarrely it must be said, on the design of construction workers' toilet seats.  How exactly did he come to know about that??

Before he took over at the Bank, Poloz was primarily an international trade specialist, so here's a thought.  During the recent election campaign there was some discussion of trying to reduce those inter-provincial barriers.  Poloz, who has grown immensely in public esteem in his current job, would be an ideal candidate for the task of strong-arming the recalcitrant Provincial Premiers and finally bringing true internal free trade to Canada, should Finance Minister Bill Morneau decide to make the effort. Poloz says his wife doesn't want him hanging around the house, and this would be a job that would require a whole lot of travel, so....

For this relief, much thanks*

Weak Canadian employment data for October and especially November led to fears that the economy had stalled, potentially forcing the Bank of Canada into a rate cut early in 2020.  Jobs data for December, released by Statistics Canada this morning, tell a much more positive story: for the first time in many months, the Canadian report is actually stronger than the US non-farm payrolls data. 

The economy added 35,000 jobs in the final month of last year, lowering the unemployment rate by 0.3 percentage points to 5.6 percent.  The private sector added 57,000 jobs in the month, fully recouping a similar decline recorded in November.  This was offset by a fall in public sector employment.  Moreover, the new jobs created in the month were largely full-time in nature.  The only conspicuous weakness in the report was the geographic imbalance in job creation: Ontario and Quebec both posted strong gains, while more resource-oriented Provinces -- Alberta, Saskatchewan, Nova Scotia and Newfoundland/Labrador -- all lost jobs.

For 2019 as a whole, the economy added 320,000 jobs, or 1.7 percent.  This is actually a larger gain than was recorded in 2018, a year which saw much less angst about the possibility of an imminent recession. Most of the year's new jobs -- 283,000 of them -- were full-time in nature.  The services sector more than fully accounted for the annual increase, adding 367,000 jobs even as the goods-producing sector shed 47,000 positions.

The seeming recovery in the jobs market in December will give the Bank of Canada some additional breathing room.  Based on recent comments from Bank Governor Stephen Poloz, that will be a welcome development. Speaking in Vancouver this week, Gov. Poloz expressed concern that the housing market in certain cities (Vancouver and Toronto being the most notable) might once again be turning "frothy".  If weak employment data had forced the Bank into a rate cut, that frothiness would only have worsened.  Today's data, taken in conjunction with Poloz's comments, make a rate cut at the Governing Council meeting on January 22 very unlikely.

*Hamlet, Act I Scene 1. Just showing off.