We all got a brief remedial lesson in how foundational the railway system is to day-to-day life in Canada. We may think of our economy as evolved and digital, but we’re really still hopelessly captive to a network of parallel steel bars.
Rail is key to the functioning of the country’s biggest industries – agriculture, manufacturing, oil and gas, and mining among them. It plays a big role in how consumer goods are delivered. Thousands of commuters found out the hard way that the passenger and freight systems are interwoven. Even our drinking water is vulnerable.
Why on Earth have we been obsessing over artificial intelligence? It’s all about trains, people! More on that below.
In the news
- Toronto-Dominion Bank reported its first quarterly loss in 21 years on Thursday after it set aside a US$2.6-billion provision to pay anticipated regulatory fines over anti-money laundering failures.
- TD brass have lots more questions to answer, including who is to succeed current CEO Bharat Masrani.
- Two of Canada’s largest property and casualty insurers are facing a spike in catastrophic losses that could cost them billions after a series of severe weather events this summer.
- The association representing Canada’s power utilities is stepping up its criticism of the federal government’s proposed Clean Electricity Regulations.
IN FOCUS
Peace train
CN workers picket in Toronto, as the rest of the country grappled with an unprecedented total shutdown of Canada's two national railways.Carlos Osorio/Reuters
When the federal government moved to end the railway shutdown on Thursday, it heeded the warnings of dire economic consequences resulting from an extended disruption. It’s difficult to fully contemplate what the potential cost could be of letting the dispute drag on, since nothing of this magnitude has ever happened before in Canada. When Canadian Pacific Kansas City Ltd. and Canadian National Railway Co. locked out nearly 10,000 of their unionized workers on Thursday morning, it sparked the first simultaneous stoppage of both national railways.
A series of fun facts can help illustrate the economic importance of the railways. (Much of this info comes from the Railway Association of Canada):
- $380-billion worth of goods are moved by rail in Canada every year, which works out to more than $1-billion a day.
- Roughly 6,500 containers cross the border to the United States by rail from Canada every day.
- Half of Canada’s exports are moved by rail.
- Two-thirds of the cargo at the country’s largest port in Vancouver arrives by rail, according to Everstream Analytics.
- Freight trains in Canada are colossal – up to four kilometres long – making them more like “land barges” than trains, according to a widely followed transit commentator.
- The vast and immensely profitable rail network has made the railway industry the single-best Canadian stock market performer of the last 30 years.
- Chlorine, which is used to treat drinking water, is restricted from being trucked, making boil-water advisories a possibility from an extended stoppage
If we think of the industrial economy as a human body, the railways function as the circulatory system. (You can decide which parts of the anatomy other industries deserve.)
Let’s look more closely at some of the reasons policymakers are in such a hurry to get the trains moving again.
Supply chain chaos, revisited
Think back to when the global supply chain broke. You remember, there was a once-in-a-century pandemic, lots of hoarding, the economy was shut down, then there were all kinds of shortages, such as baby formula and new cars, the world’s ports stopped functioning, which all ultimately led to the worst inflation in four decades, requiring a campaign of emergency rate hikes that is with us still. Ring a bell?
Right, so the supply chain is sort of existentially important. As John Corey, president of the Freight Management Association of Canada, told The Globe, while the stoppage continues, nothing will come in or go out of the country through the ports. That’s a bit of a headwind to the whole international trade file. A prolonged stoppage could even reignite inflation is some categories.
Against the grain
Grain farmers were suddenly put in a very tight spot. This is getting into their busy time of year, with more than $50-million in wheat, canola and other grain typically being shipped by rail daily in late summer and the fall. And 85 per cent of it travels by rail from grain elevators to the country’s ports. Farmers who can’t move their harvested grain don’t get paid. And in politics, as in life, it’s a bad idea to anger the farmers.
The silver lining
It is precisely because the railways are integral to the Canadian economy that they have not historically been allowed to sit idle for very long. A 2019 strike by CN workers was settled after eight days, while a 2012 CP stoppage lasted nine days before the government got involved. And since both railways are disrupted this time around, there is no tolerance to let it go on even that long.
CHARTED
The sudden shortage of admin workers
There has been a 30-fold increase in the number of administrative assistants hired through the Temporary Foreign Worker Program over the last seven years. The program is already under intense scrutiny for its heavy use in hiring since the start of the pandemic, even as Canadian unemployment has risen. Most of the hiring has been in low-wage jobs in hospitality and construction. But admin assistants?
Either there was a rapture specific to Canadian entry-level office workers, or this is another example of the program not being used as intended.
THE OUTLOOK
On our radar and reading list
Today: Canadian retail sales are set to be released, giving a glimpse into how consumers are feeling. Last month’s data showed declining sales in nearly every sector Statistics Canada tracks. But in the topsy-turvy world of financial markets, bad news is sometimes seen as good news, since its makes the central bank more likely to cut interest rates.
Next week: Bank earnings season really gets going, with five of the Big Six slated to release third-quarter earnings, after Toronto-Dominion Bank kicked things off in dramatic fashion.
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Morning markets
World shares held steady in muted trading ahead of a speech Federal Reserve chairman Jerome Powell this morning, which investors will be eyeing for guidance on the size and timing of the next U.S. interest rate cuts. Wall Street and TSX futures pointed higher.
Overseas, the pan-European STOXX 600 was up 0.33 per cent in morning trading. Britain’s FTSE 100 gained 0.37 per cent, Germany’s DAX rose 0.66 per cent and France’s CAC 40 advanced 0.6 per cent.
In Asia, Japan’s Nikkei closed 0.4 per cent higher, while Hong Kong’s Hang Seng slipped 0.16 per cent.
The Canadian dollar traded at 73.59 U.S. cents.