Good morning. Ontarians are now on day seven of a strike that has shut down more than 650 liquor stores across the province. While union leaders and Premier Doug Ford trade barbs over his plans to expand booze sales, the strike adds to a flurry of other labour disputes. And there are more to come. We’ll unpack what’s driving the strike surge, and what could tamp things down.
In the news
- Taxpayers’ ombudsperson launches investigation into CRA’s handling of bare trusts rules
- 3D-printed live tissue implants – there’s government funding for that
- Quebec’s electric snowmobile maker Taiga looks for rebirth after filing for creditor protection
Up top
Towering sale
What is a Toronto office tower worth? That would normally be a fairly straightforward question in the city’s multibillion-dollar commercial real estate market. But these are not normal times and a dearth of transactions has made it hard to value office space in an era of high interest rates, rising office vacancies and the shift to remote work.
The question could soon be answered. The Globe’s Rachelle Younglai reports that two major Canadian pension funds and Brookfield Asset Management have put one of their downtown Toronto buildings on the block after previously listing it in 2022 and failing to get the price they wanted.
The 20-storey property at 2 Queen St. E. is fully leased, which isn’t something all downtown Toronto office building owners can boast.
A striking LCBO employee dressed as a Tusken Raider from Star WarsCole Burston/The Canadian Press
In focus
Strikes are back. And in greater numbers
From the start, 2024 was billed as a year of labour unrest, and it has lived up to the promise. A quick recap:
- A strike by 9,000 Liquor Control Board of Ontario store has left booze, beer and wine shelves empty and wreaked havoc on the alcohol supply chains for restaurants and importers
- WestJet aircraft maintenance engineers walked off the job, forcing the cancellation of 1,700 flights and disrupting the travel plans of hundreds of thousands of furious passengers over the Canada Day long weekend
- Dozens of smaller strikes have broken out as of late across a number of industries, including at Bombardier, the Children’s Aid Society of Ottawa, Nestlé Canada, etc, etc, etc.
That doesn’t include several narrowly averted strikes that had the potential to be massively disruptive, such as a threatened walkout by Canada Border Services Agency workers that resulted in a last-minute deal, or the ruling by Canada’s industrial relations board that forestalled a strike by Western Canadian port workers.
And we still are waiting to see how a labour dispute involving thousands of CN and CPKC railway workers plays out.
▶️ More like this: Fed-up workers are rejecting deals even their unions thought were good
So let’s delve in to this mid-year state of the unions.
What the stats show
Over the past year the number of person days lost to work stoppages has soared to the highest level since the 1980s, a period marked by punishing inflation.
While striking LCBO workers have been motivated by demands for job security and opposition to Ontario’s privatization of alcohol sales, money is by far the biggest driver of labour disputes and workers are struggling to make up for wage erosion that occurred as the cost of living spiked.
As such, wage settlements continue to climb, with private sector unions extracting the biggest wage adjustments.
Where will it end?
To put it simply, this is far from over. A quick scan through the list of expiring collective agreements shows there are dozens more union deals set to wrap up during the remainder of the year, covering more than 170,000 employees, from city staff and tradespeople to plant workers and security guards.
That said, Canada’s job market has slowed a lot in recent months, with job vacancies falling and unemployment creeping up. That, coupled with a slowing economy, could make employers less able – or less willing – to agree to big wage demands.
Why it matters
Wages are now rising faster than overall inflation. In June the average hourly wage for employees increased by 5.4 per cent compared to the year before, a slight uptick from the 5.1 per cent year-over-year rise the month before. Meanwhile Canada’s inflation rate sat at 2.9 per cent in May. That’s not what the Bank of Canada wants to see as it looks for reasons to bring interest rates down further.
In a recent report taking the pulse of wage growth in Canada, Bank of Montreal economists Douglas Porter and Sal Guatieri highlighted the wave of strikes as one of the big stumbling blocks for wage growth to return to levels the Bank of Canada can get comfortable with. “One reason that expected wage increases remain relatively high is that labour unrest is elevated, reflecting the drive to make up for past inflation,” the pair wrote.
Why it really matters
If a picture is worth a thousand words, here’s a heartbreaking one from Chris Wilson-Smith, your Business Brief’s regular author, who is away on vacation this week ...
Wine shelves at an Ontario grocery store sit empty as a result of the LCBO strike.Meghan Wilson-Smith/Supplied
Charted
Hey AI, are you a bubble?
In a recent report Goldman Sachs kicked up a storm among tech investors by asking if AI can ever live up to the hype. The stunning rise of chip giant Nvidia to become one of the most valuable companies in the world (No. 3 currently) has been at the forefront of that debate. For good reason. Its trajectory shares a lot in common with another change-the-world tech play a quarter century ago, the dot-com era Cisco. But even with its skepticism, Goldman Sachs warns against trying to time any correction in AI stocks. As the firm’s head of global equity research, Jim Covello, noted: “Bubbles take a long time to burst.”
So what does ChatGPT itself think about whether there’s an AI bubble? Here’s the answer I got when I asked it: “While there may be pockets of speculative fervor and inflated valuations within the AI sector, it’s essential to evaluate individual companies based on their fundamentals.” Geesh, thanks for the insight.
The outlook
On our radar and reading list
Zoom in: Earnings are due out today from Aritzia, Cogeco, MTY Food and Richelieu Hardware in Canada, and Delta Air Lines, Pepsico and ConAgra Brands south of the border.
Zoom out: The U.S. consumer price index for June is due out at 8:30 a.m. ET. Markets – and the Federal Reserve – will be watching for further progress on the fight against inflation.
Outreach: The Canadian Chamber of Commerce just got a new boss in former Nutrien exec Candace Laing. It will be interesting to see how she navigates the shifting political tides in Ottawa, given Conservative Leader Pierre Poilievre has dissed the chamber and other business groups for holding “pointless luncheons” and he refuses to meet with them.
More or less: As some brands and retailers cut back the choices available to shoppers, Canada Goose is branching out from luxury down coats to shorts and T-shirts.
Hands off the dog: Costco is putting up its prices. No, the $1.50 hot dog is safe (did you know that’s the price in both Canada and the U.S. despite the currency gap, meaning we really are getting a deal) but the retailer is raising its annual membership fees in both countries for the first time in seven years.
Markets this morning
World stocks extended gains ahead of the release of U.S. inflation numbers later this morning that could signal the timing of a Federal Reserve interest rate cut. Wall Street futures pointed lower after the Nasdaq and S&P 500 rallied to record high closes, and TSX futures were also down.
Overseas, the pan-European STOXX 600 was up 0.29 per cent in morning trading. Britain’s FTSE 100 rose 0.31 per cent, Germany’s DAX added 0.17 per cent and France’s CAC 40 rose 0.33 per cent.
In Asia, Japan’s Nikkei closed almost 1 per cent higher, while Hong Kong’s Hang Seng jumped a little more than 2 per cent.
The Canadian dollar traded at 73.35 U.S. cents.