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Central banker airs list

Labour-market concerns voiced

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CANADA needs to expand its labour pool, make it more efficient and improve productivity to address growing issues of labour scarcity, says Tiff Macklem, senior deputy governor of the Bank of Canada.

In a speech Thursday to the Winnipeg Chamber of Commerce, Macklem said that over the last 20 years, labour-market efficiency has improved in Canada. But in the last five years, the most significant labour-market challenge has been creating enough good jobs for workers.

He said those issues will be crucial for continued balanced growth in the Canadian economy.

The Bank of Canada has been pounding the drum for some time about the need for the Canadian economy to be more productive.

"What's new is we also need to emphasize growing the labour market," Macklem said in an interview. "It's important to stress that in order to grow, you need to grow the labour force and make the labour force more productive."

On interest rates and monetary policy, Macklem repeated the bank's stance last uttered in early September, when it announced it was maintaining its target for the overnight lending rate at one per cent.

"To the extent that the economic expansion continues and the excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary stimulus may become appropriate, consistent with achieving the two per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments," Macklem said.

"Look at where Canada is at. There are weak recoveries in other countries. Our exports are $30 billion below what they would be in a normal recovery. You combine that with the strength of the Canadian dollar and those are important reasons why interest rates are as low as they are."

Macklem said he is not in the business of forecasting the value of the Canadian dollar, but "we have said before if your business strategy is to rely on a substantially weaker Canadian dollar, that looks to us like a pretty risky business strategy."

As to labour-force expansion, Macklem noted three areas that need to be addressed, in all of which Manitoba has been particularly enterprising:

-- Helping match employers with experienced older workers. The Manitoba Chamber of Commerce-led ThirdQuarter initiative deals with this, matching employers with experienced workers over 50;

-- Addressing unemployment among aboriginals, whose jobless rate is higher than average and participation in the labour market is lower.

-- Using foreign immigration to grow the labour force, as in Manitoba's use of the provincial nominee program.

On productivity, Macklem noted some grim realities for Canada.

"Productivity growth in Canada has ranged from disappointing to dismal," he said. He said that between 2000 and 2011, productivity growth in the Canadian business sector averaged one per cent annually, compared to 2.4 per cent in the U.S. Canadian firms are only 78 per cent as productive as U.S. firms.

He said only one-third of adult workers in Canada receive job-related training compared to 50 per cent in the U.S.

On trade, Macklem said Canada needs to redouble efforts to expand its presence in emerging markets. He said Canada's share in the Asian market is shrinking and the U.S. economy, Canada's largest trading partner, is likely to continue to grow at a slower pace than in the past.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition October 5, 2012 B6

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