Newspaper article The Canadian Press

Editorial Exchange: Outlook Half-Full, Half-Empty

Newspaper article The Canadian Press

Editorial Exchange: Outlook Half-Full, Half-Empty

Article excerpt

Editorial Exchange: Outlook half-full, half-empty


An editorial from the Winnipeg Free Press, published April 4:

The market loved Janet Yellen's ruminations about unemployment on Monday. The U.S. Federal Reserve chairwoman told a Chicago community agency conference the U.S. still has plenty of opportunity to reduce unemployment through low interest rates and credit expansion. Investors who had been nervous about withdrawal of stimulus breathed a sign of relief. The Dow Jones Industrial Average immediately shot up 135 points.

Ms. Yellen explained that in her view a great many unemployed people in the U.S. could find work if only companies would hire them -- and if the central bank keeps expanding credit by buying assets from the chartered banks, that is going to happen. Some unemployed people, admittedly, have no skills that employers want, but that is not enough to explain the U.S. February unemployment rate of 6.7 per cent. She believes employment can be increased until a rock-bottom unemployment rate is reached somewhere between 5.2 per cent and 5.6 per cent.

Stephen Poloz, governor of the Bank of Canada, took a very different approach when he explained the state of the Canadian economy to the Halifax Chamber of Commerce last month. Canada is suffering from slow economic growth partly because of continuing effects from the 2008 financial crisis and partly because baby boomers have been investing in their houses, not in the kinds of financial assets that allow companies to grow and improve productivity, Mr. Poloz explained. Canada's growth is unlikely to return to historically familiar rates for want of young job-seekers entering the labour market and for want of capital to finance business investment.

Both central bank chiefs are appointees of the present governments. Prime Minister Stephen Harper elevated Mr. Poloz in May 2013 to replace Mark Carney. Ms. Yellen, the nominee of President Barack Obama, took over from Ben Bernanke on Feb. 3. Independent though they are from political interference, their different approaches in part reflect the thinking of the two governments.

Both central bankers felt they had to explain disappointing results -- disappointing employment growth in the U. …

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