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The main economic concern of the past year was the slowdown that occurred not just here in Canada, but in most major economies. Compounding the economic concerns were the 11 September terrorist attacks in the United States.

The Canadian economy is expected to expand by 2.1 per cent this year and in 2018.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

The number of job gains and losses across firms in Canada each year is roughly one-fifth the total number of jobs and generally occurs within sectors (industries) rather than across sectors. Since labour reallocation within sectors has been strongly related to productivity growth in Canada, defining the key drivers of this type of reallocation is important, given the higher rates of reallocation and productivity growth in the Untied States than in Canada. This article finds that the appreciation of the Canadian dollar and rising commodity prices led to above-average reallocation of labour across sectors over the 2005-08 period, but that the impact on productivity has been minor. Labour reallocation across firms, however, generates substantial labour productivity gains in manufacturing and the business sector as a whole.

Defined-benefit (DB) pension plans account for the majority of employer pension fund assets. In recent years, a number of DB plans have become underfunded, in sharp contrast to the 1990s, when many plans had large actuarial surpluses. The deterioration in the financial health of DB plans has underscored various longer-term structural issues that could make it increasingly difficult for plan sponsors to manage the financial risks of these plans. Tuer and Woodman examine how funding deficits, a greater focus on plan liabilities, a low yield environment, and changing investment beliefs are influencing investment decisions in the Canadian DB pension sector. They review the funding of DB plans, changing views on the equity-risk premium, and the shift towards liability-centred approaches to investment and how these developments are affecting pension sector investment. They also consider additional influences on the pension sector, including the limited supply of long-term bonds, the elimination of the foreign-property rule, and the movement towards fair-value accounting and a financial-economics approach to actuarial valuation, as well as their implications for financial markets.

Information received since the last Monetary Policy Report, released on 17 November, points to a stronger pace of economic expansion in the United States and Europe than was expected at that time, and confirms the hesitant nature of the recovery in Japan.

Offshoring has become an increasingly prominent aspect of the globalization process. Evidence over the past two decades suggests that offshoring has not exerted a noticeable impact on overall employment and earnings growth in advanced economies, but it has likely contributed to shifting the demand for labour towards higher-skilled jobs. There appear to be some positive effects of offshoring on productivity, but such effects differ by country.

The Boc–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default. The 2020 edition includes a new section examining the scale of domestic arrears in 2018.