Evidence of meeting #71 for Finance in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was manufacturing.
A video is available from Parliament.
Research Fellow, C.D. Howe Institute, As an Individual
One of the problems in our society is the growth of pseudo-knowledge and sham data. I think that's what I called it.
NDP
Research Fellow, C.D. Howe Institute, As an Individual
I don't keep track of the House.
NDP
Research Fellow, C.D. Howe Institute, As an Individual
When you think about it, adult unemployment in this country is below 6%.
Research Fellow, C.D. Howe Institute, As an Individual
The adult unemployment number.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Is that the actual number of unemployed adults or is it...? Does it include people who have given up looking for work, people who are long-term unemployed?
Research Fellow, C.D. Howe Institute, As an Individual
But it's at an historically low level. You could argue about that level.
I think the number I cited was that almost all of the growth in the last four years has been in jobs over $20 and especially over $30 an hour. I look at data like that and I just think, how can you tell me job quality is the worst ever? Not just low, but the worst ever, worse than 1982, worse than in 2008. At Statistics Canada if somebody had put something like that in front of me I would say, you have to be kidding.
I would encourage you to find better measures than that particular index.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
CIBC's feelings are eternally hurt now. They're never going to produce another estimate again.
I want to go to Mr. Locke. You talked earlier in your testimony about a 1% to 2% oversupply across a 60% price drop. Is that accurate? I'm trying to think of another commodity that's that sensitive.
Prof. Wade Locke
That's what happened here. We're talking about one to two million barrels a day, based upon a 93 to 94 billion barrels a day production, and the price dropped by 60%.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
But to drop another 1% or 2% wouldn't cause a further 60% drop because it's not in combination with...or would it? I'm trying to think of other commodity prices, other natural resource products that would drop.
Prof. Wade Locke
These were all coming through demand effects. Demand elasticity is in a range of 0.1, so we would expect to clear a 2% oversupply. A 20% drop in price will clear that because it's all coming through demand. So if there are any supply effects, you would need that big of an increase. So it is peculiar—
NDP
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
I want to get back to this. The chair mentioned this as well. This is to you and Mr. Wright. I don't pretend any expertise in the oil market whatsoever.
The Saudis seem to pretend at action yet didn't necessarily take a great deal of action, according to one of our witnesses yesterday who is in the energy business. I forget the quote exactly, but it was something to the effect of this having been effectively the biggest non-action maybe in the history of the oil market, where the Saudis at OPEC say one thing, and the market then responds.
I want to get back to whether it's a glut or a demand-side problem, because if the future bets right now are still consistently looking at $50, there can't simply be this 1% to 2% production oversupply alone. Can there? That seems a remarkable loss in value of a globally traded product simply because there's an extra 1% or 2% kicking around the market. This seems to be people hedging as well, suggesting that this might be in part at least a mix of the demand-side concerns from the market as well. Am I wrong? Am I reading what I'm hearing...?
Senior Vice-President and Chief Economist, RBC Financial Group
I think, as Steve said earlier, it's both demand and supply. I would argue it's early. If you look at oil prices through 2014, we had some downside demands, surprises. The U.S. printed a negative growth in the first quarter. It was weather-related and it has since snapped back, but it was a negative surprise. China was shifting growth down to more sustainable growth. The eurozone was continuing to struggle. So that opened up this gap between supply and demand. Energy prices started the year north of $100 and drifted down to about $75 a barrel back in November. Then everything changed post-November 27, and that's when, I think, the politics of oil kicked in. Then there's speculation and a lot of other non-economic issues that pushed it lower, and it'll take some clear line of sight before we get a bounce-back.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Cullen.
I'm going to chime in here as well. First of all, does anyone want to make a brief comment on the impact on Canada's housing market, impacts we can see?
Senior Vice-President and Chief Economist, RBC Financial Group
Everybody's obviously watching. I think we've seen the early round of impact, if you look at the December, January, and February numbers out of Alberta. There, I think, it was a confidence story. The shock has been quite dramatic and confidence has been rattled by it, given all the other shocks we've been putting up with. Now the next thing to watch is the employment side, and I think that's the key for the housing market. When you look at the housing market, invariably it's tied to the employment market, and if we're right, and jobs continue to grow, the unemployment continues to drift below its 20-year average. That suggests to us the adjustment in the housing market won't be dramatic and we think the bigger risk going forward, albeit more next year and the year after, is a rate increase rather than this shock.