Construction Industry Forecasts

Politics and the economy are inextricably intertwined. However, over the last several years, in fact dating back to the onset of the sub-prime mortgage mess in the U.S., the latter has probably been more prominent in public discourse than the former. Based on a number of key world trends, it seems we may be about to enter a period when politics comes to the forefront again.

The clearest indication, of course, is in MENA (Middle Eastern and North African) nations. Higher food prices combined with rapid increases in the number of young people with weak job prospects have been the motivations for change. Add repressive and venal authorities and it’s a toxic mix. Organizational opportunities offered by new social media tools have enabled the citizenry to affect change.

No-one knows what the new regimes in Egypt and Tunisia will look like. The same goes for Libya, if Gadhafi is overthrown. It would be quite an irony if the events launched by Al-Qaeda’s terrorism on 9/11 and earlier culminated in democratization of the Arab World. Unintended consequences would reign again.

Also on the political front, there is the possibility of a spring election in Canada based on defeat of the upcoming federal budget. The Bloc Québécois and Liberals have already indicated they plan to oppose the 2011-2012 financial proposals, with the Conservatives’ corporate tax cuts being a prime sticking point.

This will leave the NDP in the awkward position of having to support measures it traditionally opposes, if it remains wary of going to the polls any time soon. In any event, a next federal election must occur by October 2012 at the latest. If that is what transpires, the timing of a Canadian campaign would be virtually the same as in the U.S.

The biggest selling point for the Conservatives will be how well they steered the economy through some very difficult times. Canada survived the recession better than any other G7 nation. Whether that was through sound policies – with the infrastructure stimulus program occupying centre stage - or good luck (i.e., the small “c” conservative nature of Canada’s financial system) will be a key debating point.

Time flies, whether you’re having fun or not. It seems hardly credible that the next U.S. Presidential election, scheduled for November 2012, is fast approaching. The actual vote may still be almost two years away, but potential candidates on the Republican side have been jockeying for position for some time. Front-runners are already making whistle-stop tours in key states and will soon be declaring themselves.

The first caucus and primary sessions are scheduled for Iowa, New Hampshire, Nevada and South Carolina in February 2012. Florida may try to skip to the front of the queue. Straw polls will begin this summer. By all accounts, former House Leader Newt Gingrich is about to formally set up a committee to explore his prospects in a run for the Republican nomination.

The tone of the political debate in both the U.S. and Canada is altering towards fiscal responsibility and deficit control and away from spending at all costs to climb out of the recession’s depths. One clear sign of voters’ change in sentiment can be found in the election of Rob Ford as Mayor in Toronto. He stuck to one simple message in his campaign, eliminate government waste, and it proved effective.

South of the border, there is currently a standoff between the Republican Governor of Wisconsin, Scott Walker, and public sector unions. Governor Walker is seeking concessions on wages, benefits and pensions. The unfunded liabilities of Madison towards its employees are beyond the state’s abilities to pay. If accommodation cannot be reached, layoffs have been promised. How the battle turns out is expected to have repercussions for similar disputes in many other jurisdictions across the land.

Employment in the U.S. public sector is coming under fire. Thankfully, the private sector appears to be picking up the pace. The most recent employment report from ADP (Automatic Data Processing, Inc.) in the U.S. estimated a gain of 217,000 jobs in February versus January. ADP has been consistently higher with respect to job creation estimates than the payroll survey of the Bureau of Labor Statistics (BLS).

The ADP numbers have also been in line with the BLS household survey used to determine the unemployment rate and with what has been happening with regard to initial jobless claims, which have been falling dramatically. ADP has reported an 853,000 increase in the number of U.S. jobs over the past five months, dating back to September 2010.

At its rate-setting meeting on March 2, the Bank of Canada left the overnight rate steady at 1.00%. There was no indication in the accompanying press release of when an increase might be expected. The Canadian dollar has been a couple of cents over parity with the U.S. dollar partly on speculation of an upward rate adjustment in this country in advance of a hike south of the border.

The BOC says economic growth in Canada is proceeding slightly faster than expected. To quote from the report, “There is early evidence of a recovery in net exports, supported by stronger U.S. activity and global demand for commodities.” But there is also acknowledgement the export sector faces “considerable challenges from the persistent strength in the Canadian dollar.”

The Bank of Canada is caught in a quandary as a result of the Libyan crisis. The risk or uncertainty premium on the price of oil is climbing above $10 USD per barrel. This helps to raise the value of the Canadian dollar in several ways. It has made the outlook for the world economy more uncertain, pushing the price of gold to a new record high. With gold and oil prices so strong, this nation’s raw materials-based economy has gained increasing favor with international currency traders, lifting the loonie. The BOC doesn’t want to make the problem worse.

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.