April 19,2006
The rising tension over Iran's nuclear potential is causing oil prices to spike higher. Yesterday the international benchmark price for oil reached over $70 a barrel. In Montreal this has led to the price at the pump, always one of the highest prices in the country to over $ Can.1.17 per litre in the west island part of the city.These are gasoline prices in a country which is a net exporter of oil and has all the oil supplies it needs for the next fifty years at $30 Canadian a barrel.(The current price at the pump is the equivalent of approximately $4.58 US an American gallon) At this price consumers with gas guzzling fuel inefficient cars are taking a major hit in their pocketbooks which inevitably will depress aggregate demand in other areas. Clearly it is time we beefed up public transportation, greatly increased the fuel efficiency of our automobiles and rethought our petroleum production strategy, let alone our system of sharing our national natural resources.
The Bank of Canada still has not understood the nature of the global economy , Canada's place within it and the role of the oil cartel in promoting whatever price rise is occuring in the economy.Mind you they are not alone in followng foolish policy as the experience in Europe with elevated unemployment and excessively tight money shows.If central banks don't get the message soon we are in danger of triggering a a major global slowdown beginning in North America and Europe but eventually affecting Asia as well.In any case regional economic performance gaps are going to grow in the coming years unless we do things differently than in the past.
The recent spike in stock markets may turn out to be the harbinger not of good times but tougher times if the bubble is bust by excessive interest rates, slower growth and rising unemployment. Interview anecdotal evidence from university students and those currently out of work in the Monteal area suggests that the job market is difficult to enter successfully .
Youth unemployment is still far too high and the Quebec rate of unemployment still above 8 %. A recent article, April 15,2006 p.B3 "What one low number doesn't show: More older people work, but fewer young ones do" by Floyd Norris in the New York Times based on US Labour data suggests that despite the lower rates of unemployment in the US the actual proportion of male workers in almost every demographic actually working has fallen significantly in the past 40 years.Note that the unemployment rate in 1966 and in March 2000 was roughly equal at about 4 %.
Percentage of People in US who hold jobs
Men by age 1966 2000 2006
16+ 77 % 71% 69%
16-19 42 43 34
20-24 79 75 71
25-34 94 90 87
35-44 95 90 89
45-54 93 86 84
55-64 81 66 67
65+ 26 17 19
Women by age
16+ 38 58 56
16-19 33 42 36
20-24 47 67 64
25-34 38 74 70
35-44 45 75 73
45-54 50 76 74
55-64 40 51 56
65+ 10 9 11
Source:US Dept. of Labour Statistics
This can be explained by only the following possible reasons. 1)Either there are many more discouraged workers who in the age of globalization, and decreased welfare state support have dropped out of the labour force or 2)fewer people need to work to maintain the same family standard of living, in other words people are actively preferring leisure to work at the prevailing wage because the marginal trade-off is less atractive-highly unlikely or 3) the methodology of how unemployment is measured has changed so that the figures are simply not comparable. I suspect it is most likely that once the methodology is accounted for, explanation one is most likely. I will investigate this further a report back on it in a future blog.
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