Good morning. A slew of artificial-intelligence-centric earnings showed investors are growing nervous as the tech giants of Silicon Valley ramp up spending on AI but show little in return, Canada’s affordability crisis might be running into Canada’s productivity crisis and did you know the U.S. election is next week?
In the news
Speaking of: A Donald Trump election win could give a boost to Canada’s largest financial institutions, analysts say.
On blast: U.S. Senator Elizabeth Warren says Toronto-Dominion Bank executives should have been punished more severely. Meanwhile, TD’s retiring chief executive is set to reap millions of dollars in possible stock option gains, David Milstead writes.
Open to overtures: Kinaxis Inc. executive chair Robert Courteau has signalled that the Ottawa supply chain software company’s board is open to receiving takeover bids as part of a continuing strategy review.
Happening today
- A big day of earnings include Enbridge Inc., Air Canada, Magna International Inc., Imperial Oil Ltd., Exxon Mobil Corp. and Chevron Corp.
- The U.S. reports non-farm payrolls and unemployment for October.
A job threat writes Chinese characters at the World Robot Conference in Beijing this August.AFP/Getty Images
In focus
Let’s catch up: Four stories from a pivotal week
1. Canada’s slow burn
Canada, like me, could use more caffeine. A disappointing economic report for August shows that as even as the pace of inflation is finally hitting the Bank of Canada’s 2-per-cent goal, the broader economy might need another jolt.
Statistics Canada said the manufacturing sector was the largest drag on the economy in August due to lower orders. And though the rate of price growth has fallen back to the central bank’s target, consumers are still feeling the pain. Inflation might have been tamed enough for the recent spate of interest rate cuts, but that doesn’t mean prices are anywhere near prepandemic levels.
That gives the Bank of Canada Governor Tiff Macklem more room to keep cutting. As the economic report suggests another 50-basis-point cut might be in order, he’ll have more data to consider before his next rate decision on Dec. 11.
- Up next: October employment numbers will be released on Nov. 9 and that month’s inflation numbers are out on Nov. 19.
2. Artificial intelligence isn’t coming for me – yet
Okay, so perhaps that’s not the most universal takeaway from this week’s flood of AI-centric earnings. But early reviews of Apple Inc.’s AI-powered writing assistant indicate underwhelming results. Phewf! Grate thing me right words good.
The bigger takeaway, amid a lot of takeaways from Apple, Meta Platforms Inc., Alphabet Inc. and Microsoft Corp., is that investors are still concerned about how gobsmacking the amounts companies are investing with so little to show for it. Siri’s improved writing capabilities are neat, I have to admit, but they represent an incremental development. And incremental developments are more than incrementally testing the market’s patience.
Microsoft and Alphabet are finding success in the cloud, for example, but no clear large-scale payoffs in sight for AI are worrying investors. They’re a nervous bunch. (Not me, of course. Cool as a cucumber.) Meta beat earnings estimates, yet it still saw its stock shrink as the number of people who use its apps daily fell short. Chairman Mark Zuckerberg said he’s “pretty amped” about the AI projects he has under way, as the company’s guidance indicated capital expenditure could grow from around US$40-billion this year to US$50-billion in 2025. They’re going to need to sell a lot of those Ray-Ban smart glasses.
- Up next: Nvidia Corp. rounds out reports from the Magnificent Seven tech companies with an earnings report expected on Nov. 20. The billions those companies are spending are piling up at Santa Clara, Ca.-based Nvidia, whose market-leading computer chips play a central role in each of the companies’ expensive AI dreams. Nvidia’s fortunes, like those of investors in Apple, Meta, Microsoft and Alphabet, rest largely upon the ability of it biggest clients to realize them.
3. Immigration intake numbers tell only half the story
Immigration Minister Marc Miller.Jennifer Roberts/The Globe and Mail
🎧 Marc Miller, Minister of Immigration, Refugees and Citizenship, joined The Decibel this week to discuss why the government is cutting Canada’s immigration targets, and why he says Canadians should trust the Liberals to fix the problem. You can listen to the interview here.
—
Canada faces a wave of challenges in making shelter more affordable: Home ownership is seen as out of reach, rent is still soaring, and the gap between supply and demand is growing. Even as the federal government announced dramatic reductions to immigration targets, Canada still has an urgent need to increase housing supply for homeowners and renters.
But there’s one piece in this week’s Globe Opinion section that I think represents one of the most compelling and damning effects of this squeeze: Immigrants were leaving Canada anyway. These include federally selected economic immigrants – those with the very highest scores under the points system. Over 30 per cent of those people say they’re likely to move to another country within two years, mainly owing to housing affordability. And this was a sentiment shared before Ottawa’s reductions were announced.
It’s easy to blame an influx of immigrants on driving up the price of housing. Or we could look at it another way:
- WE NEED MORE HOUSING FOR THESE IMMIGRANTS.
I acknowledge that it’s easier for me to shout this argument than it is to put into practice. And there’s a world in which we hit pause and build more housing in the meantime.
But it’s particularly frustrating as Canadian policy leaders sound the alarm over another crisis: productivity. As Bank of Canada Governor Tiff Macklem said in a Senate hearing this week, the country is being held back by “own goals” – policies that include poor credential recognition for immigrants.
It’s not the first time the central bank has weighed into the skills mismatch – often while underlining the limits of monetary policy. In a speech this year calling the country’s productivity problem a “time to break the glass” moment, senior deputy governor Carolyn Rogers said Canadians are working in jobs that don’t take advantage of the skills they already possess.
“And too often these people wind up stuck in low-wage, low-productivity jobs. Doing better at matching jobs and workers is crucial to the future of Canada’s economy.”
That mismatch represents a significant cost to our economy. A report from Statistics Canada in 2022 said skilled immigrants are “chronically underemployed,” and pointed to a 2012 study that found raising the employment rate of immigrant workers to the level of non-immigrants would result in about 370,000 more people working.
How many times have you read that Canada faces a productivity crisis, an affordability crisis and an innovation crisis? By failing to house the very talent the country might need to produce more effectively and efficiently, to innovate by making better use of their skills, are we missing a chance to solve all three at once? That’s no easy task, but the flight of underemployed, unhoused immigrants underscores the effects of trying to solve a puzzle with a hammer.
“When you add these leavers to the number of immigrants who will never arrive because of reduced quotas,” the authors write, “the prospect of acute talent shortages seems just as likely as the housing shortages that slower population growth is intended to address.”
4. The U.S. election doesn’t matter to Canada
Haha, jkjk. On Tuesday, the American people will vote between Democratic presidential candidate Kamala Harris and Donald Trump, technically the Republican candidate but in practice a man who occupies various positions across the political spectrum.
Trump’s economic policy is Tariff. It’s like Ken’s job is Beach, but with far wider implications.
For a country whose economy relies on the free exchange of goods and services with the United States, the implications for Canada are borderline existential. Trump has vowed import taxes on energy production and foreign imports of, well, everything. And sixteen Nobel economists agree his proposed tariffs will be damaging to the U.S. economy. An unhealthy U.S. is an unhealthy Canada:
That’s not to say Harris represents a free ride for Canadian exporters. Her campaign has spent little time on trade (why bother when her stance is already being made clear by Trump?) and economists see her as a “bit of a blank slate.”
But in 2020, she was one of only 10 senators to vote against the United States-Mexico-Canada Agreement (USMCA) – the deal that replaced the North American Free Trade Agreement. She is on record saying she wouldn’t have supported that deal either, if she had the chance, which would have pit her against Joe Biden, who backed it as a senator in 1992. Hm.
- Up next: USMCA is up for renegotiation in 2026. Regardless of who wins, Canada will likely face demands to make concessions on energy, manufacturing and the dairy industry, John Ibbitson wrote earlier this spring. “It’s all-hands-on-deck time again.”
The outlook
On our radar and reading list
Bricks and mortar: In Toronto, a retail surge is capturing how shopping spaces still build a sense of community, surprising streetscapes and an inspired wardrobe.
Hotels, motels: Even Holiday Inns. Out-of-towners heading into Toronto or Vancouver for emerging indie musician Taylor Swift are facing a massive spike in the cost of overnight stays.
Carrick on Money: On the housing market sidelines? Watch for this mortgage rate milestone.
Morning markets
Global markets edged higher after a sharp drop yesterday driven by Big Tech and as investors wait for U.S. jobs data, although a rate cut next week is largely a given. Wall Street futures and TSX futures were in positive territory.
Overseas, the pan-European STOXX 600 was up 0.63 per cent in morning trading. Britain’s FTSE 100 rose 0.65 per cent, Germany’s DAX gained 0.48 per cent and France’s CAC 40 advanced 0.51 per cent.
In Asia, Japan’s Nikkei closed 2.63 per cent lower, while Hong Kong’s Hang Seng rose 0.93 per cent.
The Canadian dollar traded at 71.80 U.S. cents.
Editor’s note: A previous version of this newsletter incorrectly stated the U.S. election is set for next Wednesday. It will take place Tuesday, Nov. 5. This version has been updated.
