Canada’s economy sheds jobs but wage growth stays high
, BNN Bloomberg
Canada’s economy unexpectedly shed jobs last month, signaling a softening labor market at the beginning of the second half of this year.
The country lost 6,400 jobs in July, while the unemployment rate rose to 5.5 per cent, the third straight monthly increase, Statistics Canada reported Friday in Ottawa. The figures missed the median estimate for a gain of 25,000 positions in a Bloomberg survey of economists, but matched expectations for the jobless rate.
The still-tight jobs market, however, continues to boost workers’ compensation, with wages reaccelerating to 5 per cent, beating expectations for a 4.1 per cent gain and up from 3.9 per cent a month earlier.
July’s data, which followed a surprise gain of 59,900 jobs in June and 17,300 losses in May, shows an economy starting to gear down under the accumulated weight of 475 basis points of rate hikes by the Bank of Canada. While a string of firm economic data earlier this year prompted Governor Tiff Macklem and his officials to raise rates again in June and July after a five-month pause, recent indicators point to fading momentum.
So far this year, monthly employment growth has averaged 22,000.
Evidence is mounting that the central bank can keep rates on hold at the next meeting in September. Manufacturing, wholesale and retail data pointed to declines in June, when the economy is also expected to shrink for the first time this year. Inflation in June slowed to 2.8 per cent, entering the central bank’s control range for the first time since March 2021.
Still, policymakers are watching for signs that rates are restrictive enough to cool the economy, and they view wage growth of this magnitude as inconsistent with bringing inflation back to the 2 per cent target.
Further easing in overall wage growth could be on the horizon as high levels of immigration boost the pool of workers while demand slows. At the same time, employees may continue to demand higher compensation as expectations for inflation remain high.
Last month, total hours worked were up 0.1 per cent on a monthly basis and rose 2.1 per cent compared to a year earlier. That points to relatively weaker economic momentum at the start of the third quarter, when economists surveyed by Bloomberg expect growth in gross domestic product to slow to 0.4 per cent. Preliminary data indicated output growth slowed to 1 per cent in the second quarter.
This is the only jobs report before the next rate decision on Sept. 6, with another key data release for policymakers — July’s inflation print — coming Aug. 15. The majority of economists in a Bloomberg survey expect the bank to hold rates steady at 5 per cent.
With the jobless rate in Canada rising steadily since May, the three-month moving average now stands at 5.37 per cent, up from the 12-month low of 5 per cent. According to a recession indicator created by U.S. economist Claudia Sahm, once that rate rises half a percentage point or more, the economy is contracting. By that measure, if the unemployment rate holds or rises further over the next few months, it could signal Canada is entering a period of downturn.
The participation rate decreased 0.1 percentage point to 65.6 per cent. The employment rate, or the employed proportion of the population aged 15 and older, was 62.0 per cent, down 0.2 percentage points from a month earlier and little changed on a year-over-year basis. From January to July, the employment rate fell 0.5 percentage points, as population growth of 1.4 per cent outpaced 0.7 per cent gain in employment over this period.
Employment growth in the past year has occurred in the context of historically high population growth due to record immigration levels. In July, the employment rate of core-aged recent immigrants, who landed in the previous five years, was 77.7 per cent, down 2.3 percentage points from July 2022. In comparison, the employment rate of those born in Canada was 86.6 per cent in July, little changed from 12 months earlier.
Job losses were led by decreases in construction, public administration, information and recreation and transportation and warehousing.
Regionally, employment rose in Alberta, New Brunswick and Prince Edward Island, while it decreased in Manitoba and Saskatchewan and was little changed in the other provinces.
Separately on Friday, one of Canada’s biggest telecommunications firms, Telus Corp., announced that it’s seeking to reduce 6,000 staff globally.
--With assistance from Erik Hertzberg.
Telus announces 6,000-person layoff after Q2 saw 61% drop in net income
, The Canadian Press
Telus Corp. announced Friday it is cutting 6,000 jobs as it seeks to adapt to a "rapidly transforming industry," saying issues such as regulation and competition have prompted the need to reduce its payroll.
The Vancouver-based telecommunications company said the reduction includes 4,000 workers at its main Telus business, half of which are being laid off. The other portion is made up of those who would be offered early retirement and voluntary departure packages, along with vacancies that will not be refilled.
The remaining 2,000 cuts are at Telus International, which provides IT services and customer service to global clients.
"It was a very difficult decision," said Telus chief financial officer Doug French in an interview.
"The industry keeps changing and from a competitive perspective, we always want to prepare ourselves for the future. We see more digitization, we see prices are coming down in our industry, which customers are looking for. And so preparing to ensure we continue to be very competitive in the market, we need to align our cost structure to what that looks like."
Earlier this year, federal Industry Minister Francois-Philippe Champagne detailed a new mandate for the CRTC, requiring the federal telecommunications regulator to implement new rules to bolster consumer rights, affordability, competition and universal access.
The directive rescinded a 2006 policy direction for the agency to rely on market forces in making decisions.
But French said the federal government should "let the market compete."
"We're one of the few countries in the world that still has four national competitors. There's been consolidation everywhere else," he said.
"We obviously would prefer to just have straight competition and regulation. I believe the competitive environment in Canada is very, very strong."
He added major telecommunications providers such as Telus pay among the highest spectrum costs globally given Canada's size and relatively small population.
"It's very, very expensive to do that," he said.
"To keep investment going, you have to have a return."
French said the cuts also reflect a shift toward increased digitization in the sector, as customers "want more self-serve" options, along with the finalization of recent mergers and acquisitions by the company.
Last month, Telus revised its annual guidance for 2023 downward, citing demand pressures affecting Telus International in particular as the technology sector looks to reduce costs. The company said it was targeting consolidated operating revenue growth of 9.5 to 11.5 per cent, down from 11 to 14 per cent.
"Part of the announcement today is also a rightsizing within Telus International to align their supply of labour, let's say, to the revenue stream that they see," said French on Friday.
Telus had 108,500 workers at the end of last year, according to financial markets data firm Refinitiv. French said cuts would affect employees across "all areas of our business" and be complete by the end of the year, with most done by the start of the fourth quarter.
The restructuring will cost the company $475 million in 2023 and lead to annual savings of more than $325 million, Telus said.
Its plans to reduce its workforce were announced at the same time as the company revealed its second-quarter net income fell almost 61 per cent from the same period last year to $196 million.
The company's net income amounted to 14 cents per share for the quarter ended June 30 compared with 34 cents per share in the same quarter a year earlier.
Other telecommunications businesses have also sought to streamline their operations this year as they grapple with regulatory action amid soaring interest rates and stubbornly high inflation.
Fellow telecommunications giant BCE Inc. said in mid-June that it would slash 1,300 positions, including six per cent of its media arm. It blamed the job cuts on a challenging public policy and regulatory environment, raising specific concerns about Bill C-11, the Online Streaming Act, and Bill C-18, the Online News Act.
The Online Streaming Act aims to regulate streaming platforms like Netflix and Disney+ and require them to contribute to the creation and promotion of Canadian content. The Online News Act, which passed this year, forced Google and Meta to pay news publishers for content they link to on their platforms.
Meanwhile, Rogers Communications Inc. told staff in a memo last month that it would offer voluntary departure packages as it worked to eliminate duplication in its businesses following the closure of its deal to buy Shaw Communications Inc.
When the memo was sent, the company did not say how many employees would be affected by the voluntary departure program, but confirmed "a small percentage" left involuntarily since the combination with Shaw.
French did not rule out further job reductions at Telus beyond those announced Friday.
"When we make a decision like this, it is not easy and we'd prefer not to continue to do more in the future," he said.
"That being said, depending on market conditions … that would be more determined on what that looks like, including regulation."
Telus' adjusted net earnings for the second quarter totalled $273 million, or 19 cents per share, compared with $422 million, or 32 cents per share, a year prior. Analysts on average had expected an adjusted profit of 22 cents per share for the period ended June 30, according to estimates compiled by Refinitiv.
Operating revenue and other income ticked up to $4.95 billion from $4.40 billion a year earlier.
The company added 110,000 net mobile phone subscribers in the quarter, up 18 per cent from 93,000 last year. Its monthly churn rate for postpaid mobile phone subscribers — a measure of subscribers who cancelled their service — was 0.73 per cent, up from 0.64 per cent during its previous second quarter, which was attributed to higher levels of retail traffic and increased market-driven promotional activity.
Telus' wireless mobile phone average revenue per user was $58.80, up 1.8 per cent from the second quarter of the prior year, which the company said was largely due to higher roaming revenues from increased international travel.
This report by The Canadian Press was first published Aug. 4, 2023.
Canaccord Genuity CEO says layoffs
necessary as economy rebounds
, BNN Bloomberg
CANACCORD GENUITY GROUP INC (CF:CT)
REAL-TIME QUOTE. Prices update every five seconds for TSX-listed stocks
The CEO of Canaccord Genuity Group said recent layoffs at his company and others are an unfortunate side-effect of tough economic conditions and higher interest rates – and a sign that the Bank of Canada has gone far enough in its monetary tightening cycle.
The financial services firm laid off about 75 people this week, or around seven per cent of its 1,200-strong Canadian workforce, mostly from its capital markets division.
Daniel Daviau told BNN Bloomberg in a Friday interview that while the job cuts at his company were “marginal,” it’s a tough necessary part of the broader market recovery he is “cautiously optimistic” is underway.
“There's some very good people who, unfortunately, we had to part ways with, but that really is just positioning the business for … a strong recovery,” Daviau said.
“You need to see job cuts, you need to see the economy pull back before interest rates can stop increasing, and therefore if interest rates stop increasing, the market can take off again.”
Daviau’s comments came as Statistics Canada’s latest jobs report showed a softening in the labour market. The country’s economy shed 6,400 jobs in July and unemployment rose to 5.5 per cent for a third straight monthly increase, according to the Friday figures.
Those numbers came after the Bank of Canada raised its key interest rate to five per cent last month, the highest level since 2001, in its continued efforts to cool the economy and bring down persistently high inflation.
Daviau pointed to other layoffs at Canadian companies like the 6,000 jobs cuts announced at Telus Friday as a sign that the Bank of Canada’s intended economic cooling is taking effect. In light of those developments, he argued further rate increases from the Bank of Canada are not necessary.
“They’re trying to create economic damage, they're trying to bring down inflation, and I understand that. But have they gone far enough now? Probably, when we're seeing job losses,” he said.
“I think they're seeing the desired effect.”
WHAT’S NEXT FOR THE COMPANY
A management-led plan to take Canaccord Genuity private was abandoned in June, with executives saying regulatory approvals were not met in time.
Daviau, who had been one of the leaders of the proposal, said the development was disappointing but the company is pressing on with no difference in management style.
“Nothing's really changed. We were disappointed that the privatization didn't go (through), but unfortunately, when you're regulated in 13 different jurisdictions and one of them puts up their hand and delays you, there was a risk of that,” he said.
“We're not going to lose sleep over it. We're going to drive on and create value for all our shareholders.”
With files from Bloomberg News.
Aug. 4, 2023.
Bell says more cost restructuring possible as
Q2 net earnings fall almost 40%
, The Canadian Press
Following a quarter in which it began cutting 1,300 positions, shuttered six radio stations and closed two foreign news bureaus, BCE Inc. says more cost restructuring could be in store in response to declining ad revenue and regulatory hurdles.
The Montreal-based telecommunications and media company reiterated the significance of those challenges on Thursday as it reported its second-quarter earnings and addressed analysts on a conference call.
Bell Media faces operating losses across its news divisions, "a prolonged advertising slump with no signs of immediate recovery," rising content production costs and "a more challenging regulatory environment that has not adapted to the new realities facing media," said chief financial officer Glen LeBlanc.
"This has required us to rightsize our operating cost structure and asset portfolio to align with the expected revenue potential of our media business," he said.
"Going forward, we will need to continue doing so in order to deliver for our shareholders in this unconstructive economic and regulatory environment."
President and CEO Mirko Bibic added that the company would continue monitoring regulatory and political developments that could impact Bell's bottom line.
"On the media front, more needs to be done by the CRTC faster. The ecosystem in Canada is under severe stress and requires urgent government assistance," Bibic said.
"The regulatory playing field does not present an environment where the same rules apply to all."
In June, Bell Media asked the federal telecommunications regulator to waive local news and Canadian programming requirements for its television stations, saying those obligations are based on outdated market realities.
The application, which was filed the same day the company announced its layoffs, noted Bell Media's average annual news operating loss totalled $28.4 million between 2016 and 2019, a figure which jumped to $40 million last year as web giants scooped up the Canadian advertising market.
The parent company of Bell Media said Thursday its net earnings tumbled more than 39 per cent in its most recent quarter to $397 million or 37 cents per common share, compared with $654 million or 66 cents per common share a year ago. Adjusted net earnings totalled $722 million, or 79 cents per share, compared with $791 million, or 87 cents per share, a year prior.
Analysts on average had expected an adjusted profit of 80 cents per share for the period ended June 30, according to estimates compiled by financial markets data firm Refinitiv.
Operating revenue ticked up to $6.06 billion from $5.86 billion a year earlier.
RBC analyst Drew McReynolds said second-quarter results for the company were slightly better than forecast.
"On balance, we view the results as neutral to a modest positive for the shares at current levels," he said in an analyst note.
Bell attributed its increased costs to severance expenses, a higher interest rate environment and an obligation it had to repurchase at fair value the minority interest in one of its joint venture equity investments.
LeBlanc, who is retiring as chief financial officer at the end of the month, said cost savings realized through Bell's "very aggressive workforce reduction program" were not reflected in the second quarter results and would instead show in the back half of the year.
"That is another area of improvement in cost trajectory," he said, adding he believed the "transformation" of Bell's media division to become more digitally focused would bring some advertising revenue back.
"When it does return, we are going to have our assets positioned to capture a larger share of the marketplace than ever before. We will have used this time wisely to right the ship."
While Bell Media's advertising revenue was down nine per cent on a year-over-year basis in the quarter, Bibic said that was partially offset by digital revenue being up 20 per cent over last year, which now comprises one-third of total media revenue.
"We want to continue to pivot very strongly towards digital," Bibic said.
"We've been talking about this for about three years and I really like the momentum we're delivering and we're driving here on that strategy."
On the telecom side, the company added 111,282 net postpaid mobile phone subscribers, up 33.8 per cent from the same period last year and representing what Bell said was its best second quarter result for the metric in 18 years.
It said the increase was driven by 30.4 per cent higher gross subscriber activations, partly due to factors such as immigration growth, continued 5G and multiproduct bundling sales and effective promotions.
Attracting the business of newcomers has been a key priority for Bell, which earlier this year teamed up with Air Canada to offer complimentary mobile SIM cards to international travellers arriving in the country on select flights.
It then partnered in June with the Institute for Canadian Citizenship to offer perks to users of its app, Canoo, which provides newcomers free access to cultural and outdoor experiences along with deals from brands.
Bibic said Bell is also serving new Canadians by expanding its retail presence in neighbourhoods with high immigrant populations and offering customer care and marketing in more languages. He said Bell does well in the "switcher market" — existing phone customers switching from one provider to another — but has room for improvement when it comes to newcomers.
"We need to do better and we will do better," he said.
Bell's monthly churn rate for postpaid mobile phone subscribers — a measure of those who cancelled their service — was 0.94 per cent, up from 0.75 per cent during its previous second quarter, reflecting more market activity and promotional offer intensity compared with last year.
Its wireless mobile phone average revenue per user was $59.16, down a cent from the second quarter of the prior year.
BCE is the parent company of BNN Bloomberg through its Bell Media division.
This report by The Canadian Press was first published Aug. 3, 2023.
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