Latest news with #CanadianEconomy
CTV News
6 hours ago
- Business
- CTV News
‘Zombie firms': Hudson's Bay among Canadian business that are ‘severe drag' to economy
Tom Goldsmith, founder and principal of Orbit Policy, joins BNN Bloomberg to discuss the economical impact of 'zombie firms'. Hudson's Bay was a 'zombie firm' that was struggling to keep the lights on for years before its inevitable shuttering, one expert says – and Canada is home to many more. Tom Goldsmith, founder and principal of Orbit Policy told BNN Bloomberg that retail outlets like The Bay and many other retail outlets did not respond innovatively in the face of competition, which led to its ultimate, rapid downfall. 'In the base case, you have a story of venture capital coming in and asset stripping, essentially, and really kind of taking away the productive capacity of the organization,' Goldsmith said. What is a 'zombie firm'? The term 'zombie firm' was first coined in the 1990s in Japan. According to Statistics Canada, it was used to describe economically underperforming businesses when they were being kept alive by government and bank loans. Goldsmith describes them as 'mature firms that persist and are a severe drag to our economy.' A StatCan report from 2023 says zombie firms have been increasing over the past few decades in advanced economies like Canada's, claiming that they influence the national productivity, subdue wages and restrain the growth of healthy firms. The same report claims that between five and seven per cent of all Canadian businesses are zombies, which could potentially be the highest in the world. 'While the share of zombies among all firms has been declining since 2011, the share of zombies among publicly traded firms has steadily increased,' the report said, adding that between 18 to 36 per cent are publicly traded firms that fit the description of the zombies – most prevalent in the mining, oil and gas extraction sector. How can businesses be kept from going under as the market shifts? A combination of factors keeps older businesses like Simons afloat, amid the influx of newer business models, Goldsmith says. '(It's) just business leadership, the quality of actual leadership and strategy and decision making,' he says. Meanwhile, Goldsmith says only 25 per cent of firms get a return on their investment for AI adoption. 'A lot of that depends on the quality of the strategy you have,' he said. According to Goldsmith, deploying new technologies and taking advantage of new opportunities is paramount when dealing with AI. Like Simons, the companies need to have a virtual presence and an e-commerce position that attracts consumers. Meanwhile, a company like the Bay starts out as a viable business, then comes the privatization and the debt imposition, according to Goldsmith. 'Part of this picture is the fact that some of these firms have been bought by leverage buyouts,' he said. 'They might have had revenues that were able to pay their debt payments before being thought about. After that, they then get turned into these companies that act as this drag on the economy.' Could AI adoption become an impending issue? It depends on the type of firm it is. However, the evidence suggests that zombie firms are a good thing, he explains. 'They freeze resources,' Goldsmith said. 'It frees talent, it frees capital that could be better spent elsewhere. Other firms that are good are going to struggle.' Goldsmith says it will all come down to the workforce and the talent hired by the companies when it comes to AI adoption. 'AI is a tool, especially in technology sectors. Where, how it fits in your workflows is so varied that there needs to be a collaborative engagement between management and workers to actually make the best of it,' Goldsmith said. 'Are firms actually doing that? Are they having top-down mandates? Forecast strategies? That's a big question. How do we make the most out of this technology?'
Bloomberg
a day ago
- Business
- Bloomberg
Canada Economy Set for Contraction in Second Quarter
The Canadian economy is on track for a modest decline this quarter, yet isn't deteriorating as fast as some economists feared. Advance data showed industry-based gross domestic product shrank 0.1% in May, matching April's 0.1% decline, Statistics Canada said Friday.
Globe and Mail
2 days ago
- Business
- Globe and Mail
Canada's labour market softens, with drop in job vacancies
The Canadian economy shed jobs in the early weeks of the U.S.-Canada trade war and vacancies continued to drop this spring, showing that employers are scaling back their hiring plans at a fraught time for the economy. The number of employees receiving pay and benefits fell by 6,200 in April, after a drop of 20,900 in March, Statistics Canada said Thursday in a report. The number of job vacancies, meanwhile, has ebbed to just over 500,000 – down from a peak of nearly one million in 2022. The U.S.-driven trade war has sent a chill through the Canadian labour market, which struggled in 2023 and 2024 as companies grappled with higher interest rates. Now, with the Canadian economy slammed by U.S. tariffs, businesses are reticent to add to their payrolls or have resorted to layoffs. Podcast: Why the job market is hitting new grads especially hard Job opportunities have been drying up for much of the past three years. The job vacancy rate, which measures the number of vacant positions as a proportion of total labour demand, has slipped to 2.8 per cent as of April, down from a peak of 5.7 per cent in March, 2022. Statscan's payroll employment report uses data from the Canada Revenue Agency, various levels of government and a survey of about 15,000 businesses to produce its estimates. Some economists consider it a more reliable gauge of employment trends than Statscan's monthly and more timely Labour Force Survey, which showed the unemployment rate rose to 7 per cent in May. Nationwide, the number of job vacancies fell by nearly 17,000 month over month. The finance and insurance industry experienced the largest drop, down 4,000 postings from March. Wholesale trade was not far behind, down about 2,700 vacancies. Payroll employment fell by 7,300 in April in the manufacturing industry, which has been targeted by the Trump administration's tariffs on autos, steel and aluminum. Most major sectors have seen employment decline in the past four months, National Bank of Canada said in a client note on Thursday. 'This development contrasts with the Bank of Canada's message last week, which highlighted resilient job creation outside of U.S. export-sensitive sectors so far in 2025,' deputy chief economist Matthieu Arseneau wrote. Last week, the Bank of Canada noted how tariffs are affecting trade-intensive industries, but other industries have, so far, held up in employment – with the caveat that if tariffs and economic uncertainty persist, and domestic demand in Canada remains soft, businesses will cut jobs. In a note to clients, CIBC Capital Markets senior economist Andrew Grantham said that it wasn't just trade-sensitive sectors that lost jobs in April, pointing to a decline in the accommodation and food services industry. AI adoption is upending the job market for entry-level workers 'Overall, the weaker trend within this survey suggests that the labour market is softer than the [Labour Force Survey] report does, and supports our forecast for two more 25 [basis point] cuts from the Bank of Canada before the end of the year,' Mr. Grantham wrote. Canada's westernmost and easternmost provinces felt the worst of the job vacancy squeeze. There were 7,300 fewer job postings in British Columbia in April, a decline of 8.5 per cent from the previous month. In Atlantic Canada, the decline in the number of job vacancies was smaller in raw terms, but in percentage terms, Newfoundland and Labrador saw postings tumble by 26.3 per cent, and New Brunswick by 16.8 per cent. Alongside the lack of job opportunities, unemployment has also been rising, according to the report. There were 3.1 unemployed workers for every job vacancy nationwide in April, up from 2.9 in March.
Bloomberg
2 days ago
- Business
- Bloomberg
Canada's Budget Watchdog Urges Carney to Show Numbers as Spending Rises
Canada's budget watchdog urged Prime Minister Mark Carney to release an update on the federal government's finances soon or risk eroding the government's credibility with investors. Carney is promising to spend billions on infrastructure, military equipment, housing and transportation — part of his ambitious agenda to boost the potential of the Canadian economy. Those plans, combined with slow economic growth, are causing economists to forecast a larger federal deficit this fiscal year.
Globe and Mail
3 days ago
- Business
- Globe and Mail
Carney ready to dismiss top bureaucrats unable to meet his expectations, Liberal insiders say
Prime Minister Mark Carney expects high-ranking public servants to speedily carry out his ambitious nation-building agenda and is prepared to discipline anyone unable to meet his expectations, government and Liberal insiders say. To meet his stated goal of achieving 'the largest transformation' in the Canadian economy since the Second World War, the sources say, Mr. Carney is also ready to recruit more outsiders like former Hydro-Québec chief executive Michael Sabia. Mr. Sabia, who served as deputy minister of finance from 2020-23 and once headed BCE and Quebec's pension fund, will become clerk of the Privy Council Office in early July. The PCO clerk is the country's top bureaucrat and the Prime Minister's deputy minister. The Globe and Mail spoke to five government and Liberal insiders about the Prime Minister's plans to rapidly fulfill his promises to diversify trade away from the United States and turn Canada into an energy superpower. The Globe is not identifying the sources because they were not authorized to speak publicly. The Prime Minister and his top advisers have made it clear at every meeting that senior federal bureaucrats must meet the challenge of reforming the Canadian economy with the same 'pace and urgency' as the government, one official said. Two Liberal insiders told The Globe that discussions have been held with Mr. Sabia and incoming PMO chief of staff Marc-André Blanchard about demoting or dismissing senior civil servants who can't meet the performance goals. Carney hires Hydro‑Québec CEO Michael Sabia to head federal bureaucracy Carney selects former UN ambassador Marc-André Blanchard as chief of staff Mr. Blanchard, a former United Nations ambassador, also has extensive credentials. He was until recently executive vice-president of Quebec's pension fund and before that was chairman and CEO of McCarthy Tétrault, one of Canada's largest law firms. The insiders said the Prime Minister and those two top advisers have been told that they should not tolerate any deputy minister who is slow to implement the government's agenda. Deputy ministers serve at the pleasure of the Prime Minister, unlike most civil servants who cannot be easily fired or demoted. One of the insiders said there is frustration in the Carney PMO about the 'muscle memory' of senior bureaucrats who seem more focused on process than outcomes. The source stressed, however, that there is no sense that they are opposed to the government's agenda, but that they are caught up in 'analysis paralysis.' While there has been high-level talk of recruiting other business achievers to the government, the insider said the Prime Minister is not looking for an Elon Musk type of personality, or the chaos that ensued in Washington when the entrepreneur tried to massively cut spending. The insider said Mr. Carney would be looking at individuals with deep business and government experience, who could help, for example, new Natural Resources Minister Tim Hodgson get major energy projects approved quickly. Mr. Hodgson is a former investment banker with Goldman Sachs who was personally recruited by Mr. Carney to run for the Liberals. More infrastructure needed to boost energy security in Eastern Canada, Hodgson says A second official said the Prime Minister is serious about ensuring that top echelons of the public service meet his high expectations. He's made it clear, for example, that he expects cabinet ministers and deputy ministers to show up on time for meetings, to be well prepared and to have answers to his probing questions. Government expert Donald Savoie, a professor of public administration at the University of Moncton, said Mr. Carney and Mr. Sabia bring extensive government and business experience to the table and will not tolerate lackadaisical deputy ministers. 'Both of them will know who is performing or not. They have been in government. They know,' he said. 'Both Carney and Sabia know the system. When they turf somebody out, they will be turfed out for the right reasons, because they are not up to the task at hand.' Mr. Carney made a small shuffle of deputy ministers on Friday but a much larger one is expected once Mr. Sabia and Mr. Blanchard have had time to assess the work of top civil servants, according to two of the sources. Allen Sutherland, a former senior PCO official who recently became president of the Institute on Governance, said the urgency of the Carney agenda presents a challenge for the public service that it hasn't faced in years. He acknowledged that some senior bureaucrats are apprehensive about the demands placed on them by Mr. Carney. Konrad Yakabuski: The federal public service is broken. Is it too late to fix it? Opinion: Canada can learn from Trump and cut its bloated bureaucracy 'The Carney government has a high expectation and their ambitions are high,' he said. 'For some people in the public service there is an appetite for this because they see the moment that the country finds itself in and, just like any other Canadian, they want their institutions to deliver." Pierre Martel, a former senior public servant and now professor of public administration at the University of Ottawa, said the federal bureaucracy is going to be tested, not only on its ability to deliver on Mr. Carney's agenda, but also on whether it can become more efficient with fewer people. 'It is certainly a very profound change from the way prime minister Justin Trudeau operated. Mr. Carney has a more businesslike approach with cabinet setting the direction, and he is expecting results,' Prof. Martel said. 'The public service has to demonstrate that they can be more efficient and more agile to produce results very quickly.' The public service has grown more than 35 per cent over the Trudeau decade, which is not sustainable in a world where there is increased pressure on Canada and its allies to divert money to defence and security, he said. 'It is going to be an exciting time to be in the public service. Obviously there are tough challenges and we will hear more and more about doing more with less,' he said. 'There is no way around it but the public service has to reinvent itself.'
