同志们,曙光就在前头。Unemployment likely to rise, but recovery looms (thestar.com)

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Jul. 5, 2001. 05:22 PM
Unemployment likely to rise, but recovery
Study predicts turnaround, despite poor numbers expected tomorrow
OTTAWA (CP) - An economic turnaround
is in sight, says a new study, notwithstanding
the latest jobless figures to be released
Friday that will likely show the unemployment
rate is climbing and job creation slowing.

Interest rates are expected to fall further this
summer - a quarter-point cut is anticipated in
mid-July - helping bouy consumer
confidence, says Derek Burleton, senior
economist with Toronto Dominion Bank.

And tax cuts are also still kicking in, he

That means economies across the country
should be on the rebound by the end of the
year, Burleton said in a report on the
provinces released Thursday.

''The favourable outlook for personal
disposable incomes this year goes a long way in explaining why consumers
have continued to keep their wallets open so far in 2001,'' wrote Burleton.

But aside from falling taxes and reduced borrowing costs, the economy
itself hasn't given consumers much to cheer about.

After expanding at a pace of almost five per cent last year, Canada's
economy is expected to grow by a mere 2.2 per cent this year, rising to
3.3 per cent in 2002, he predicts.

''We don't anticipate seeing any significant
rebound in growth until the fourth quarter -
we don't view ourselves out of the woods
yet,'' Burleton added in an interview.

Eight of Canada's 10 provinces are
expected to show weaker job creation
overall this year compared with last year,
says Burleton, and that's going to become
more obvious in Friday's jobless report.

The report is widely expected to show a
small increase in the June unemployment
rate to 7.1 per cent - after holding steady
at 7.0 for months - as job creation slows
to a pace of perhaps only 5,000 new
positions, several analysts say.

That view was buttressed Thursday by a
new Statistics Canada survey of 22
newspapers' help wanted ads.

It showed the demand for workers
continued to fall in June, extending a trend
which began last November.

Estimating 5,000 new jobs were added
last month may even be too optimistic, said
David Rosenberg, chief economist with
Merrill Lynch Canada.

A string of negative reports in the United
States sets the stage for a similar poor
report here, said Rosenberg.

''We dodged a bullet with 25,000 (new jobs) in April and 10,000 in
May,'' he noted, but that trend is bound to change, if only because of the
20,000 job cuts announced by troubled Nortel Networks alone.

However, all that should erase any concerns Bank of Canada governor
David Dodge may have had about overstimulating the economy with
further rate cuts, said Andrew Pyle, senior economist with Bank of Nova

''I think (the jobless) report will tell David Dodge that, look, the economy
needs further stimulus, further help in terms of lower rates.''

He expects the central bank to cut rates another quarter point at its next
scheduled rate meeting on July 17, matched by a similar cut in August.

The bank has reduced rates by only 1.25 per cent so far this year,
compared with a 2.5 percentage point reduction in the U.S.

And if Canada's rising dollar - which makes commodities more expensive
to sell abroad - plus falling exports continue to slow the economy, the
bank may move even further, added Pyle.

That slowdown in exports of manufactured goods has hit Ontario's giant
economy very hard, according to Burleton's report.

A 2.4 per cent drop in goods produced is being offset by a healthy 3.8 per
cent rise in the service sector for overall growth of only 1.8 per cent this
year in Ontario.

''Provincial manufacturing sectors that are exposed to soft U.S. demand
for big-ticket capital goods and automobiles have been on a rough ride this
year, especially in Ontario, where the bulk of Canada's automotive and
telecommunications equipment production takes place,'' said Burleton.

In contrast, Alberta's booming oil and gas sector is firing it to the top of the
provincial growth chart - likely coming in at 4.2 per cent, well above
average, said Burleton.

''Alberta's a standout this year.''

In 2002, top spot should shift to Newfoundland, when crude from the
Terra Nova offshore oilfield begins to flow, adding to the Hibernia oil
production to give the province a ''spectacular'' growth rate of 7.2 per

The Sable Island natural gas production will help offset softness in Nova
Scotia's non-energy resource and construction sectors.

And oil and gas will also keep some growth alive in Saskatchewan,
although it faces an overall loss of employment due to the sagging
agricultural sector.

But falling taxes - especially federal income tax cuts as well as some
provincial reductions - are helping consumers remain upbeat, Burleton

An individual earning $40,000 in Quebec or British Columbia, for
example, should see federal and provincial taxes drop by more than
$1,000, he estimates.

And an $80,000 wage earner in Alberta, B.C. or Saskatchewan could see
the tax burden fall by $3,000 this year, he adds.
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