Labour Day weekend – The end of the beginning.

• Mike Moffatt put out two pieces this week that were really interesting.
  • The recent one is on the debt services costs for the Federal Government and where they will likely go. This led to a bet with John Ivison in response to his piece here, about where bond yields will be in 2 years and the consequences of the debt that Canada is taking on.
  • Earlier this week part 4 of what has become a 5+ part series on UBI came out. For those calling for UBI please read these 4 posts – Part 1, Part 2, Part 3, Part 4 and tell me how you make it work?
• This thread on why Labour Force Data in Canada is getting sketchy is really important and interesting.

Great article by @mattlundy33 on declining LFS response rates.

Thought I'd give a sense from under the hood of how StatCan adjusts for some of this, and what might be missed. It all revolves around an obscure variable in the micro-data: "FINALWT" (1/9)https://t.co/Vo8LxjXk80

— Brendon Bernard (@BrendonBernard_) September 3, 2020

• Locally, our Windsor rebounded with unemployment dropping by almost 2.4%. There are some caveats to that.
  • First the standard error for Windsor is one of the largest in Canada at 1.1% (only Peterborough and Barrie have higher errors). This means that you can put a +/- 1.1% to the unemployment rate locally 68% of the time. Or 95% of the time, the error is within +/- 2.2%
  • In other words 2/3 of the time, the actual unemployment rate is statistically estimated to between 9.0% and 11.2%.
• Most people don’t realize that Labour Force data comes from a Survey, that is conducted every month of tens of thousands of households in Canada. So if you are asked to participate, do it!

We have recovery in the LFS response rate!!! 📣 While gain is tiny, it puts us on the right path. The final response rate was 70.4% in August (same as July to one decimal place). # of households interviewed increased from 39,535 to 39,752. BIG thanks to all 🇨🇦s who responded!

— Mikal Skuterud (@mikalskuterud) September 4, 2020

• On Thursday there was some interesting news from the auto industry with the partnership of GM and Honda. I think this is important for a couple of reasons:
  • From a timing standpoint it is days before Unifor announces its strike target for the Canadian negotiations with the Big 3. Although the timing of this announcement may not play a significant role in this negotiation, the potential long term consequences of this partnership are important to consider.
  • For this negotiation related to GM, Unifor is looking for a solution for the Oshawa plant. Although Oshawa is planned to be utilized for some R&D, sub-assembly and parts stamping (with a far smaller workforce) there is significant space on the plant footprint to ramp up new facilities.
  • Although it might be a year or two before the rubber hits the road on the GM/Honda deal. A promise of investment into the Oshawa footprint could be viable for this partnership as Honda’s only Canadian production facility is about 1.5 hours away is Alliston Ontario.
  • The GM CAMI plant in Ingersoll has a history of building vehicles for other manufactures as the former home of Suzuki production in Canada. From my understanding the CAMI plant has room for another production line.
    • If future partnership production is on the horizon, a potential supply/support triangle between these three sites could be an interesting chip to play even if it was a couple of years away.
• The biggest takeaway is the trend towards consolidation in the auto sector. Although this is just sharing of technology and development agreement, this is a first step. Batteries for example will have certain sizes and shapes, which will then dictate elements of car design (weight distribution, panel sizes etc). Those design elements trickle down to the point of talk of joint platform production. If you are just swapping out cosmetic body panels, upholstery and a badge you don’t need a separate plant to build cars. This is the long term risk for the Canadian auto sector, with fewer types of cars being built, partnership like this will put pressure on production footprints over the long run.
  • The secondary impact trickles down to part suppliers, as to streamline platforms means fewer types and models of parts are necessarily needed across companies. So where there may be two bids to sell sunroof frames now, there might only be one bid in the future. Given that the only jurisdictions that both GM and Honda have facilities are Ontario and Ohio, there might be opportunity for local part suppliers.
  • With talk of a shorter contract term from Unifor, to align with the UAW term. This partnership may be something to impact the next negotiation rather than this one.

• As back to school looms, the data is about as good as it could be with 5 straight days with under 5 cases and a two week rolling average of 5.8 cases per day.
  • In Quebec where school is back in, 47 of 3,100 schools had cases last week. They have not declared any outbreaks!
• Supposedly 1/3 of athletes in the Big 10 who test positive for COVID show this symptom. Although that number is some what debated, as is everything coming out of the US these days. Myocarditis seems to appear in 20-30% of COVID patients (symptomatic or not) due to the receptors in the heart being particularly susceptible to COVID virus attack.
  • Long term impacts of myocarditis are generally negligible but in severe cases it can lead to heart failure or other potentially chronic or fatal heart issues.
    • If these numbers hold up it is where it gets really scary.
    • Canada has had about 132,000 cases, if 20% develop this issue, that is 26,000 potential emerging cardiac issues. If 10% (this number is a guess there is limited data on the percentage of severe cases) result in heart failure or severe cardiac cases it still adds to 2,600 additional cases acroos the country. If it is 1% than it is an extra 260 cases/potential deaths post COVID.
      • Evidence of Kawasaki disease in children, which leads to heart issues are being linked to myocarditis.
      • Myocarditis may also have links to higher rates of COVID death in Black and other equity seeking populations. Whether this is due to the underlying health issues in these communities or another factor is not clear.
  • The question has to be asked with nearly 3,000 cases locally, are we equipped to handle long term cardiac challenges in tens, dozens or at worst case hundred plus case range?
• A shout out to Sarah Mushtaq starting a monthly column with the Windsor Star, watch out for this column every month!