Asymmetric recovery

Now is the time to prime our business engine

Symmetry, in art and nature, is a desirable and soothing observation. Our eye seeks uniformity, but in economics symmetry is uncommon. As our province steps through the last “current” hurdles of the 2020 economic pandemic (the health phase), we need to turn focus on the larger element of economic recovery and financial ramification acceptance. We need to prime our business engine.

Combustion engines propel through the symmetry of firing pistons. Four, six, eight cylinders moving in synchronized unison for common purpose. If the symphony of explosions is disrupted, the result is lurching, stalling or even engine failure. In contrast, a DC-wound electric motor moves without requiring symmetry and is a more reliable method of locomotion; this torque of leadership is what business now requires.

Our Island economy is asymmetric in its current form.

Year-over-year the unemployment claims are up over 30 per cent, with labour incomes up over four per cent, and the labour force has also grown by four per cent — driven largely by new Islanders. Employers cannot find workers, yet workers are dislocated from the market.

The disparity of industry is also observable with leisure activities, recreational items, furnishings and microchips virtually out of stock until 2022. Construction is experiencing unprecedented demand while enjoying low interest rates, CEWS inducements and demand from small home projects to massive infrastructure. In contrast, our tourism, aerospace and small store retailers are suffering the effects of the economic pandemic and shortrun shifts that have adjusted consumers patterns.

Lumber futures have increased over four times their

levels of a year ago. Oil has increased from a low of $36 a barrel to $69 a barrel in under a year. Even coffee is up 50 per cent this past year. Many things we consume have increased in price, considerably. Yet the cooling instrument of interest rates to slow inflation is left on ice; rates have not budged in over a year.

With low rates and rising wages, young people are eager to buy their first home, the asymmetry of supply strips this opportunity as available inventory is priced out of reach of many purchasers. The equilibrium of balance that we have largely relied upon is distorted causing frustration and exasperation.

But asymmetry is always a short-run phenomena.

The Bank of Canada is expecting strong growth this summer, but, like the U.S. Federal Reserve, has no plans to raise rates. Economists expect May’s inflation numbers in the United States to hit a 28-year high. But can any country allow rates to rise when there is so much sovereign debt accumulated and programs to pay for?

The new political philosophy is modern monetary policy, with grave consequences for future generations.

Retirees and baby-boomers are affected as their nest eggs are not providing expected returns in a suppressed rate environment. Asymmetrically, low rates have created wealth for risk-tolerant equity investors, who have tended to be younger and less informed.

The competitive monetary policy of a weak Canadian dollar may be coming to an end. Providing an artificial advantage for exporters and tourism operators. Last week, the Canadian dollar topped 83 cents (US), the first time in more than six years, popping more than 20 per cent in over a year. Maybe benchmarking to crypto currencies will become a consideration as countries such as El Salvador move to adopt Bitcoin as a legal form of tender.

On P.E.I., the Consumer Price Index (measure of inflation) is rising faster than the national average. Farm receipts are up over last year, as are vehicle sales, retail sales and our net population.

A balanced economy raises the benefits of all, but we are still not finding our footing and the asymmetry of a ceasing pandemic. This summer will be a time of euphoria, relaxation and consumer-spending loosening. However, if we don’t use this precious time to return to economic symmetry, we will create inequity and compounded disparity. Our economic leadership, locally, needs to apply policies that are asynchronous, planned and meaningful to establish a balanced and productive symmetric economy.