Empty downtowns, booming suburbs, pension trouble and why after-work drinks are a bad idea: Must-read business and investing stories

For women and marginalized groups, going for after-work drinks with other employees isn’t always comfortable.istock

Getting caught up on a week that got away? Here’s your weekly digest of The Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

Not everyone wants to go for after-work drinks

Since the days of Mad Men, going for after-work drinks with your co-workers and boss has long been seen as a way for company employees to network and bond. But as Sarah Micho writes, for women and other marginalized groups, this common social practice isn’t always inclusive. Employees may not drink for a variety of reasons, including religious or cultural beliefs, health and substance and abuse issues. Whatever the reason, the consequences of opting out may go beyond missing a social occasion. It can create barriers to professional growth and advancement, which is why it’s time for company leaders to rethink the role alcohol plays in unlocking professional success.

Ottawa is moving to reduce credit-card fees

Credit cards are the most common form of payment in Canada, and their use skyrocketed during the pandemic – when no one took cash and everyone mastered the “tap.” But how the credit-card system actually works is something most of us rarely think about. Now, the end of a long-running legal battle, and new government efforts to cut credit-card fees, are highlighting the web of players in the system: merchants who pay each time a card is used, payment processors and card networks that take a cut, and financial institutions that issue cards and collect a high margin off the fees, Chris Hannay and Susan Krashinsky Robertson write. Over the next three months, Ottawa will convene many of these players for a series of negotiations, with a goal of reducing fees, especially for small businesses. If a deal is not reached, the government says it will table legislation to set the fees itself.

Corporate profits have dropped

For all the talk of “greedflation,” new data from Statistics Canada shows corporate profits in the third quarter fell for the first time on a seasonally adjusted basis since the start of 2020. Net income before taxes declined 8.1 per cent to $137-billion compared with the previous quarter, Jason Kirby reports. While analysts have been warning for months about a slowdown in corporate profits, now that margins are being squeezed because of high inflation and rising interest rates, it’s heightening recession fears.

Some mortgage lenders are letting borrowers shift unpaid interest onto the principal

With interest rates up 3.5 percentage points so far this year, Canadians with variable-rate mortgages are at risk of falling behind on their interest payments and increasing the amount of their original loan. According to Erica Alini and Rachelle Younglai, at least two of Canada’s largest mortgage lenders, TD and CIBC, allow borrowers to shift a portion of their interest costs onto the principal owed on their mortgages, helping them cope with the impact of soaring interest rates. Variable-rate mortgages have constant monthly payments and the interest rate on the mortgage is connected to the Bank of Canada’s overnight lending rate. With interest rates rising as sharply as they have this year, some borrowers are reaching a trigger rate, which often requires them to make higher monthly payments to reduce the size of their loan. But with TD and CIBC variable-rate mortgages, borrowers may be allowed to go past the trigger rate and stick with payments that don’t even cover the full amount of the interest owed, up to a certain threshold. The unpaid portion of the interest is deferred and added to the mortgage principal and the borrower’s loan balance grows, or negatively amortizes.

Urban centres continue to hollow out, while the suburbs are booming

During the height of the pandemic, downtown cores in major cities were like ghost towns. Now, even after many employers have asked workers to return to the office at least a few times a week, the downtowns of most major Canadian cities are still facing a substantial dip in foot traffic compared with prepandemic norms, Vanmala Subramaniam writes. However, the opposite is true of smaller towns and suburbs within commutable distance of those cities, a new study shows. Worker foot traffic in downtown Toronto was 46 per cent lower in September, 2022, while Brampton, Barrie and Brantford – all within a two-hour commute from Toronto – saw a surge in foot traffic of roughly 30 per cent between January, 2020 and September, 2022.

Attention retirees: All our pensions are in trouble

The days of peak pension are over. As John Rapley writes, the past few years were an extraordinary time, but the long bull run in asset markets of the past 40 years combined with macroeconomic stability and cheap money that made it all possible have ended. As a result, some of the income streams that pensions use to pay out their monthly dividends are losing value, and going forward, markets aren’t likely to generate the sorts of returns to which we’d grown accustomed. The future will be one of rising wages, tighter profit margins and permanently elevated interest rates. That’ll be good for the economy, but less good for asset-holders.

Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.

Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.


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