Brad’s 56. “The death zone,” he told me Friday. “It’s like these guys are just flushing the system. You know, out with the expensive old dudes, in with the cheap kids.”
He lost his job last week, after 14 years in IT with the same big company. Gone is the salaried position worth $102,000 and a DC pension. Instead the 27-year-old sitting at his desk starting Wednesday will be an indy contractor, no benefits, no pension, no spouse, 30% less pay and happy to have work. At least it’s not a TFW.
Welcome to the new economy.
The Canadian dollar stuttered and fell when the latest jobs numbers came out before the weekend. How many productive people there are among us is the acid test of an economy, and we’re apparently failing. As I’ve chronicled here for the past year, we are in the midst of a silent slowdown that will soon have material consequences.
Last month 28,900 jobs disappeared. Most were full-time, and at private companies. The worst kind of employment losses. The jobless rate stayed at 6.9% because for every person who lost work, another person gave up looking. There are now 1,300,000 people idle. What a waste.
The employment rate – the number able to work who actually have jobs – has fallen to 61.5%, the lowest in four years, when we were just emerging from recession. As CAW economist Jim Stanford says (I like and respect him, even though he’s very pink), if the percentage of people with a job today equalled that of before the last recession, then 665,000 more of us would be working.
Here’s how it looks:
Source: Jim Stanford
Also worrisome is the fact this has been falling for the past two years. In fact, the labour force participation rate is at its lowest point since 2001. In each of the last six months a paltry 3,000 jobs have been created, compared to 23,300 in the previous six months. Furthermore, wage growth is falling – a sure sign of the deflation I keep warning you about. Employment incomes are now increasing at a rate of 1.6% annually, which is completely wiped out by current inflation. Meanwhile gas is $1.50 a litre and a SFH in 416 is almost $1 million.
In fact, if it weren’t for the current crop of greater fools – borrowing massively at cheap rates so they can buy inflated houses and fill them with crap from China – things would be a lot worse. As Stanford points out, it’s been consumer spending that has kept the economy alive, putting all those condos construction guys, mortgage brokers and realtors, into paycheques.
But with a steady erosion in jobs, flatlining incomes, steaming piles of debt and unaffordable houses, how long can this faux boom last? “Canada’s economy has no engine,” he says.
Job reductions are everywhere these days. From resource companies like Teck to the post office, the major banks, railways and food processors. Guys like Brad, despite experience and corporate memory, are deemed disposable by companies who have no trouble reading the economic tea leaves. Canada is a high-cost country from which to do business in a world which gets cheaper daily, thanks to technology and competition. If employees in Calgary or Mississauga or Burnaby think they need fat wages to afford seven-figure houses, well, that’s their problem. Workers in Baltimore, Atlanta, Manila or Mumbai are far less demanding.
What does this mean for the months and years ahead?
Nothing great, which circles back to one of this pathetic blog’s main memes: real estate is risk. More than anything else, big reductions in the US workforce were responsible for turning housing into a financial sinkhole for the middle class. Without jobs, people lack confidence and borrowing power. Without those, they don’t buy houses. It’s only a matter of time, no matter how cheap mortgages are.
Besides, remember the harbinger of the 1929 stock market crash? Shoe shine boys and elevator operators giving tips?
We have our own. It’s the Realtor Index. There’s now one for every 245 Canadians, and in the GTA one for every 140 people over the age of 19. In a single decade the number of real estate agents has doubled.
Now Brad’s contemplating it. I rest my case.
Source: Financial Post