October 21, 2016

On Friday, the S&P 500 was unchanged and Toronto was up 0.6%.

The Canadian dollar fell to 0.7% to 75.0 U.S. cents which is the lowest in six months. This increases the value of U.S. investments if measured in Canadian dollars.

Canadian inflation was reported for September and the core annual rate that the Bank of Canada focuses on was unchanged at 1.8%.

Retail sales for August were reported and were somewhat weak.

Investments in new housing were reported. Alberta continues to be far weaker than it was two years ago.

Bombardier announced big job cuts today.

I have been giving thought to the following paradox|:

  1. Per capita wealth increases when products and services are created with fewer employees. (Improved productivity). So for the economy as a whole we might want to cheer all forms of automation and other improvements to productivity in spite of job losses. Only increased productivity can lead to increased wealth per capita.
  2. But the displaced employees are definitely hurt by the job losses and often entire regions. So, we do NOT cheer job losses.

Your “job”┬ácan very much determine your share of the total wealth created. Good jobs are hard to get but also unusually hard to lose. The higher the pay and benefits the more the job security, usually.

The ways in which our economy defines and more or less “allocates” jobs is something worth thinking about.

Those with good jobs find it easy to forget that their job would not exist without many other aspects of the economy. They tend not to realise that the pay of particular jobs is often more an accident of history than any true market-driven supply and demand equation.

I hope to think and read more about this and put some coherent thoughts together. How should we think about the benefits of improved productivity when it leads to job displacement?

(As far as Bombardier, they are a financial cripple on life support and have no choice but to cut costs as much as they can.)