After 2016, a year of ups and downs for the Canadian economy, there’s a growing body of evidence suggesting 2017 will be a better year.
Here are five big reasons the economy could do a lot better than you might think this year.
The job market is recovering
It may be cold comfort to anyone still looking for work, but Canada’s job market ended 2016 on a bit of a tear, adding more than 200,000 jobs from August onwards. There were more than 50,000 new jobs in December alone.
On the whole, there were more part-time jobs created in 2016 than full-time ones, but one big bank economist says it may be time to give up the notion that such jobs are somehow less desirable.
“The consensus has been far too bearish on Canadian job growth for months now,” Scotiabank economist Derek Holt says. “Yes, last year was the year of the part-time employee, but guess what — the workforce has been changing for years and not everyone wants the alarm clock buzzing at 4:30 a.m. every day.”
It’s always good to take volatile monthly figures with a grain of salt. But even ignoring the positive headline figures, the latest numbers show that wages are up, and so is the percentage of working-age adults who are choosing to be in the labour force. That’s good news no matter how you slice it.
“The job data is the first available for taking stock of 2016,” Desjardins economist Joëlle Noreau says, “and the data is good.”
Oil could be headed higher — finally
Canada’s economy is intrinsically linked to the price of oil, which is a big part of what made 2015 and 2016 such a bumpy ride. From a high of over $100 US a barrel in late 2014, oil bottomed out at under $30 US a barrel last year, wiping out billions from the stock market — not to mention tens of thousands of oilpatch jobs in the process.
But ever since last fall, crude has been on a steady, albeit slow, march higher, up $10 a barrel in the past month. The main reason is that the byzantine oil cartel known as the Organization of the Petroleum Exporting Countries (OPEC) lurched back to life with a pledge to start turning off the spigots to get prices back to a level member countries are more comfortable with.
That move might actually be working.
Saudi Arabia has been pumping out 486,000 fewer barrels a day since October, and more and more countries are following suit. While OPEC nations compete with Canadian oil companies for market share, the latter are the unwitting beneficiaries of their rivals’ action.
If OPEC’s gambit works, 2017 could be much better for oil prices — and Canada’s economy by association.
The loonie could be headed higher, too
It’s not hard to come up with arguments explaining why the Canadian dollar could be in for a rough 2017. Here are two arguments we’ve brought you in the past two months alone:
While those forecasts still hold up, at least one expert says those predictions are far too bleak — and he has a solid track record of being right.
He may not be a household name, but Konrad Bialas, chief economist at foreign-exchange broker Dom Maklerski in Warsaw, is the top-ranked forecaster when it comes to the Canadian dollar, according to Bloomberg’s accuracy gauge.
Bialas says the doom and gloom around the loonie is misguided, as Canada’s economy has been through the eye of the storm and is poised to grow. Believe it or not, the loonie was one of the best performing major currencies in the world last year, trouncing the yen, the franc, the euro and the pound.
“The beginning of the year could be difficult for the Canadian dollar, but we’re expecting the trend to start slowing down,” Bialas told Bloomberg this week, suggesting the loonie could end the year even higher than it is now, hovering around the 75-cent level.
“The Canadian economy will feel the positive effects of an acceleration of growth worldwide and the risks to trade with the U.S. — the worries over tearing down NAFTA — will drop,” he said.
Trade is picking up
There’s ample evidence that the trade winds are blowing, too. On Friday, Statistics Canada reported that Canada swung to a trade surplus for the first time in two years in November, as the economy exported $526 million more than it imported that month.
Everything from energy products, to potash, aerospace parts and canola was booming, an encouraging sign of broad and diverse strength.
“That is somewhat reassuring and suggests that, following the dip … in October, the economy enjoyed a decent rebound in November,” economist Paul Ashworth at Capital Economics said.
The TSX is near an all-time high
In the markets, the TSX came within a few points of its all-time high of 15,685 points this week, set back in September 2014 — before oil’s decline waylaid the market.
As economic indicators go, the TSX is far from perfect. But an all-time high for a country’s dominant stock index is the sort of thing that tends to draw attention. Witness the hubbub in the U.S. right now over the Dow Jones, which has been flirting with passing the 20,000 point level for the first time for about a month now.
The TSX fell just short of its all-time high mark this week, but strategist Colin Cieszynski at CMC Markets in Toronto says there’s every reason to think it could pass that mark soon.
“Canadian investors should remain cautiously optimistic,” he said in an interview with CBC News this week. “With commodities’ prices increasing and gold recovering from its big takedown, that should help resources and create a tailwind,” and blow a little more money into all Canadian investors’ pockets.
Considering the slew of positive financial news, a surging TSX seems downright reasonable.
As BMO’s Doug Porter put it this week, “this run of sturdy figures provided a nice antidote to a sour end to last year’s data.”