Economy showing strength as Canada adds 50,700 new jobs in February Review

Ctvnews.ca: 03/08/2013

BT2.03 - Describe how the state of Canada’s economy and industries can affect international businesses operating in Canada (e.g. the effect of low production and high unemployment rates)

Summary

The Canadian economy is showing signs of strength again with the addition of 50,700 new jobs in February this year - most of them being full-time, in the private sector, and Ontario - just a month after a loss of almost 22,000 in January. This economic gain has supported the lower unemployment rate of 7% even with another 60,000 Canadians joining the labour force. However, the growth of Canada’s economy is unlikely to come as soon as some economists had predicted. Finance Minister Jim Flaherty stated that nearly one million jobs had been added since the end of 2009’s recession which is certainly remarkable. Until today, economic indicators had signaled weaker times for the economy but many of these concerns have disappeared and the growth is forecast to speed up in the second half of 2013. The Canadian dollar also recently rose 0.53 of a percent to 97.67 cents US and settled at 97.25 cents US the same day. A StatsCan employment report showed that most new workers were employees, not self-employed, and there were more full-time jobs than part-time ones. The country has added 336,000 new jobs in the past year and hours worked has also increased 1.9%. The employment data from StatsCan showed growth in the service side, mainly in the scientific and technical service sector as well as the accommodation and food services sector.

$1 CAD = $0.97 US, Source: Cbc.ca

Connection

When the state of Canada’s economy and the industries within it are stable, international businesses are able to operate more successfully. Economic indicators such as unemployment rate and exchange rate often play an important role for international businesses because the unemployment rate tells them how many members of the labour force are without jobs while the exchange rate determines the value of the Canadian dollar in relation to the currency of another country. If the unemployment rate of a country happens to be significantly high, it can impact international businesses positively by allowing more members of the labour force to search for new employment opportunities. But if the unemployment rate is low, then there is a sign that most of the labour force is already employed and tends to be less beneficial for businesses in need of new employees. Relative to other countries’ unemployment rates, Canada seems to have an average rate that is not too high nor too low of 7%. Currency exchange rate is very important for international businesses too. Companies that trade goods and services with other countries need to adapt to currency fluctuations in order to spend most efficiently. For instance, if an international business in Canada’s food industry must import foreign agriculture from a country like Mexico they would expect the costs to be fairly low since the Canadian dollar is valued quite higher than the Mexican peso. However if the value of the Mexican peso suddenly rose past the value of the Canadian dollar, the companies trading with Mexico would need to make some price adjustments to their products in order to cover the costs of importing foreign goods. Since the Canadian dollar recently increased in value, international businesses can benefit from it by spending on higher quantities of imports or making foreign investments which they can purchase at lower prices due to the change in exchange rate.