Bank of Canada sends wrong signal, labour says

May 29, 2007

OTTAWA – The leaders of Canada’s most important unions and of all the provincial and territorial federations of labour, meeting in Ottawa today as the Executive Council of the Canadian Labour Congress, adopted and issued the following statement:

“The soaring Canadian dollar is one of the major factors behind the loss of 250,000 reasonably well-paid manufacturing jobs since 2002. At the current level of about 92 cents US, the job carnage will only increase.

“The high dollar is leading to a major loss of the Canadian domestic market to Asian imports (since China, Japan and other Asian currencies are closely tied to the US dollar), and to decreased non-resource exports to the US and other countries. The emergence of a huge manufacturing trade deficit is the key cause of the manufacturing jobs crisis.

“The high dollar reflects some factors beyond our control, such as high energy and mineral prices, and a weak US dollar. However, the Bank of Canada can and does influence the exchange rate by setting our interest rates.

“Today’s clear signal that interest rates will be increased in the “near term” sends exactly the wrong signal to financial markets, and will stabilize or even increase the current exchange rate at an intolerably high level.

“Instead, the Bank of Canada should have said that the Canadian dollar is trading at too high a level and that interest rates will be cut if it does not fall.

“The Bank of Canada points to inflation slightly above the 2% target as a cause of concern, but this is mainly driven by booming housing prices in Alberta.

“Over the past year, real wages for hourly-paid workers have been flat, union wage settlements are barely matching inflation, and new job creation has been tilted to temporary and low-paid jobs in the lowest-paid parts of the private services sector.

“The Bank of Canada sees an economy at risk of over-heating. But the reality is a major ongoing loss of good jobs, poor quality new jobs, and stagnant wages. This is the reality which should have been addressed in today’s announcement.”

One comment

  • Re: “… China, Japan and other Asian currencies are closely tied to the US dollar … a weak US dollar.”

    A “Federal Reserve Note” is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.

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