 Monday, September 11, 2023 | | | Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong | | |  | 'We are navigating by the stars under cloudy skies,' says U.S. Federal reserve chair Jerome Powell. (KatrinkaG/Shutterstock) | | | Welcome back!
I have come to think of Labour Day as the true New Year's Day. This is when the year really begins. It comes with fresh beginnings and what feels like a clean slate.
I've been away on assignment for much of the past month and half. I was in the U.K. working as a correspondent in our bureau there (check out this piece we did on the coup in Niger).
I also filled in as guest host of the CBC Radio programs As It Happens and Day 6.
Now I'm back at my desk in the business unit and I feel like I've jumped onto a speeding train.
GDP numbers at the end of August showed the economy shrank in the second quarter of this year. Jobs numbers on Friday showed the labour market has slowed considerably.
The Bank of Canada paused its series of interest rate hikes last week.
It's easy to see that pause as the end of something. But the economic turmoil isn't going anywhere.
As I tried to illustrate on The National last week, it usually takes between 12 and 18 months for interest rate hikes to get fully absorbed into the economy.
Sure, variable-rate mortgage holders get clobbered quickly, but the broader impact takes time. The interest rate changes are designed to slow down the economy.
As rates rise, people spend less money; as the economy contracts, employers hire fewer employees and eventually lay workers off.
And we've started to see that. The economy contracted in April, May and June. Big businesses like RBC and BCE laid off workers this summer.
But consider where we are in the process. We started raising interest rates in April of 2022. | | |  | | | That was just 17 months ago.
So, we are only now fully absorbing that first increase in borrowing costs. All those subsequent hikes have yet to fully work their way into the economy.
Each one of them was designed to slow down the economy.
And each one of them will hit as GDP, jobs and just about every measure shows real weakness.
We spent much of the last year worried about the Bank of Canada undershooting its target and not doing enough to get inflation under control.
Jim Thorne, the chief capital market strategist at Wellington-Altus, says we now need to discuss the risk that the central bank has overshot and gone too far.
He says the Bank of Canada should have stopped hiking rates last year.
"They're going to go too far, and that means Canada's going to have a hard landing," Thorne told me and colleague Nisha Patel. "We're looking at a life-changing event in 2024."
So, the question I keep asking myself is how will we know what that life-changing event will look like.
As ever, the answer lies in the data.
We'll get inflation numbers on Sept. 19. We'll get the latest GDP numbers on Sept. 29. This week, we'll get the latest housing numbers.
The real estate associations in the big cities have already posted their data and it sure looks like a rebound is under way. | | |  | | | The average price of a detached home in Greater Vancouver was $2,160,279 in July.
Scale out over the past five years and you'll see Vancouver's benchmark price price has gone up by 20 per cent.
Compare that to Toronto. The Greater Toronto benchmark home prices have gone up by 53 per cent over that same period. The average benchmark price in Toronto sat at $1,171,300 in June 2023.
So, keep those numbers in your pocket and compare them to the national averages that will be published here on Monday morning.
What do you think this week's housing numbers will tell us and how will they fit into the broader landscape of economic data?
This is a weird period. Figuring out what's happening is tricky at the best of times, and these are not exactly the best of times.
That said, I think there's never been a better time for this newsletter and this community to discuss the forces at play.
As always, send me a note.
My email is: peterarmstrong@cbc.ca | | |  | | We'll get the latest national housing numbers on Friday. The Canadian Real Estate Association will publish its data looking back at sales in August. | | | | | | U.S. inflation numbers come out on Wednesday. CPI has generally run along the same trend lines in both Canada and the U.S. Canadian numbers will be released next week. | | | | | | Statistics Canada will release the National Balance Sheet Accounts on Wednesday. It's a quarterly look at the assets and debts of Canada’s governments, corporations and households. | | | | | Three things to read, watch and listen to this week | | |  | Shirts and hats emblazoned with Donald Trump's mug shot at a shop in Los Angeles. (Mario Anzuoni/Reuters) | | | 1. Who owns your mug shot? | | | It didn't take long for a cottage industry of sorts to pop up after Donald Trump's mug shot was released.
The former president's image was captured after he turned himself in for processing on racketeering and fraud charges in Atlanta, Ga., in August.
First out of the gates was Trump himself.
The Trump campaign released T-shirts, mugs, hats emblazoned with the mug shot. The words "NEVER SURRENDER" (all caps, of course) or "Free Trump" hover over the image.
Politico reported that the campaign had raised more than $7 million US “powered” by the sales of merchandise “bearing Trump’s scowling mugshot.”
Knockoffs were inevitable, of course. Shops and street venders had their own shirts made. Etsy has a whole category of merchandise built on the image of Trump's mug shot.
Never one to shy away from a lawsuit, Trump's team quickly issued a warning to the would-be profiteers of the image. One of Trump’s top advisers took to X (formerly known as Twitter) warning against using Trump's image without permission.
"If you are a campaign, PAC, scammer and you try raising money off the mugshot of @realDonaldTrump and you have not received prior permission ...WE ARE COMING AFTER YOU you will NOT SCAM DONORS," wrote Chris LaCivita.
The fact is, Trump doesn't actually own that mug shot. A piece on MSNBC digs into what the law says about who owns what.
"As a general principle, the owner of a photo’s copyright is the person (or entity) who takes that photo, not its subject," wrote MSNBC columnist Dean Obeidallah.
That would mean the owner of the mug shot is likely the Fulton County Sheriff’s Office.
MSNBC reached out to the sheriff's office for comment, but never heard back.
Read the MSNBC piece here.
Check out the Politico piece on the money raised here. | | | 2. Some housing solutions | | | The housing crisis has quickly become one of the biggest policy issues on the economic landscape (if not the biggest).
There are a ton of inter-related problems and it's easy to throw your hands up in the air and say there are too many factors involved.
But the fact is there are some things that could be done quickly and without much effort.
Toronto's former city planner, Jennifer Keesmaat, is now a developer working the front lines of this issue.
She spoke to David Herle on his always excellent Herle Burly podcast about what can be done to get things moving.
She has a ton of suggestions and the whole episode is really a must-listen.
Her company is trying to build 10,000 homes in the next 10 years, but she says the obstacles are everywhere.
"Some of our biggest roadblocks in doing that have been all levels of government," she told Herle.
Right now, she says there are "tens of thousands" of units that developers want to build that are stuck in the appeals process at the Ontario Municipal Board.
Her company spent more than a year trying to get a hearing date to process an appeal on one development.
"The day of the hearing, they dropped it. We waited an entire year for nothing. Do you know what happened in that year? Interest rates went nuts. We could have locked in our construction financing at a significantly lower cost," said Keesmaat.
It's just one small example in one part of the country, but it speaks to a larger issue of capacity.
Keesmaat isn't saying any jurisdiction should get rid of the appeals process. But if municipal boards hired more people, they could move things more quickly and get more units built.
As I say, that's just one small portion of a fascinating and important conversation about what it will take to build enough housing in this country.
Check out the Herle Burly episode here. | | | 3. The writers strike vs. the fall TV launch | | | I love fall. Ever since I was a kid, I'd come home from summer camp and feel like September was a new world, a fresh start.
I love sweater weather, the colours of autumn.
I've also always loved digging through the papers to see what movies and TV shows were launching in the fall season.
This year is going to be... not so good.
The writer's strike in Hollywood is dragging on, and it's starting to show.
A piece in Morningstar describes the entertainment landscape this way: "A hugely underwhelming lineup from streaming services, which burned through their best shows in the spring and have little to offer for the start of the traditional fall TV season," wrote Mike Murphy.
The industry has been all but shut down by a duo of strikes from two key unions.
The Writers Guild of America strike began May 2, after it failed to ink a new deal with the studios. The Screen Actors Guild and American Federation of Television and Radio Artists joined them on the picket lines July 14.
The unions say the TV and film landscape has changed dramatically in the last 10 years, and they say the way they get paid has changed as well.
Streaming has upended a decades-old business model that shared film and TV revenues between the writers, the actors and the studios.
The strike has been costly, but the studios have not yet been willing to budge.
"Warner Bros. Discovery expects the ongoing Hollywood strikes to have a $300-$500 million negative impact on the company’s 2023 earnings," wrote Jennifer Maas in Variety.
Hopefully, the parties can reach a deal and get back to making new series, and I can get back to binging my favourite shows. Meantime, I guess we can all read a book for a change?
Read the piece on the fall lineup here.
Read the Variety piece on the studio's losses here. | | | How the economy looks beyond Bay Street | | | China's (many) problems | | | This summer, I read a lot of smart pieces on what's going on in China.
The always wonderful Adam Tooze has a series of pieces in his excellent newsletter Chartbook entitled "Whither China" that explores why the Chinese economic slowdown matters to the rest of the world.
"We are witnessing a gearshift in what has been the most dramatic trajectory in economic history," he writes in the first of the series.
The long and short of it is that China's economy is slowing... dramatically. And that slowing will have a sweeping impact on the rest of the world.
Chinese President Xi Jinping has almost unprecedented power and thus a lot of levers he can pull to soften the blow.
But will they be enough?
The good folks at Visual Capitalist put together this graphic highlighting six of China's economic red flags. | | |  | GDP is down, CPI is up, exports are down and youth unemployment is rising.
What the Chinese economy has done over the past 20 years is simply extraordinary. But in a lot of ways, it is facing its biggest and most important struggle right now.
How China, its businesses, its workers and its political leaders manage this period will be just as important to the global economy as China's rise in the 1990s was then.
What do you think?
I'd love to hear from you. Drop me a line at peterarmstrong@cbc.ca. | | | Share this newsletter | | or subscribe if this was
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