Jimmy Jean stepped into his new role as chief economist at Desjardins Group at a time of upheaval in the global economy and significant change at Desjardins. As world markets responded to the shock of the pandemic, Desjardins was shifting its vision from a regional, Quebec-based focus to one that covers all of Canada.
Jean, 44, has been with Desjardins since 2011, most recently as a senior economist and macroeconomic strategist. In May, he took over as chief economist, replacing François Dupuis, who retired after 33 years with the banking co-operative. Prior to joining Desjardins, Jean held roles at Moody’s Analytics Global Education (Canada) Inc., Royal Bank of Canada’s capital markets division and Statistics Canada.
As the economic voice of Desjardins, Jean produces the firm’s economic outlook, updating that outlook as new information arrives and managing the research agenda of the department to support the firm’s activities, members and clients. Jean also is responsible for expressing his firm’s perspective to a broad, national audience.
According to Jean’s recent outlook, 2021 is a year of rebound after the disruptions of 2020. In mid-August, Canada’s economy was expected to grow by 6.2% this year; however, that figure changed to 4.9% less than two weeks later after the second-quarter GDP report landed.
“It took all the forecasters by surprise in revealing a contraction in GDP as opposed to the expansion we were expecting,” Jean said. The contraction is related to supply-chain issues, he said — particularly in the auto sector — and a slowdown in the housing market. The U.S.is seeing more growth in 2021, at 6.1%.
In 2022, growth rates are expected to drop to 4% in the U.S. and 3.8% in Canada, numbers that are still high by any measure, Jean said. A normal year of GDP growth would be around 2%.
“It’s a crisis that’s been pretty unique in that we never see household balance sheets in particular improve in a recession. Consumers have quite a bit of cash that we’ve seen them spend as locked-down services have started to reopen this year.”
Jean noted that despite the momentum, he still is monitoring risks, most notably regarding Covid-19.
“We still hold the assumption that we’re past the use of deeply penalizing lockdowns as the primary tool to address the pandemic,” Jean said. “If we manage to go through more waves without having to go through lockdowns, it means that we’re fairly comfortable that the economy will be able to handle those waves.”
Jean is watching the progress of the Delta variant as well as preliminary data released in July by the Israeli government indicating that vaccine efficacy declines over time. “There are some uncertainties and question marks that have been arising in the past few weeks,” he said.
On the positive side, Jean credited government intervention in the form of income support with preventing mass insolvencies or a full-blown financial crisis. “Without the activism we’ve seen on the part of governments, we could easily be talking about a great depression because of the sheer violence of this shock,” he said. “We wouldn’t see inflation right now; we would see deflation.” Jean acknowledged that supports have a hefty cost in the form of public debt, but said the cost of not providing them would arguably have been much worse.
Jean noted that while inflation is high right now, he doesn’t see it as a long-term concern. “Inf lation is something that central banks know how to deal with, generally speaking. The Bank of Canada could lift rates in a heartbeat and that would take care of it.”
One of Jean’s key responsibilities in his latest role is to help execute Desjardins’ vision of developing research that’s relevant across Canada.
“Desjardins started from a rural community co-op. We’re still very much attached to those origins,” Jean said. “We want to be able to create research on what’s happening in local markets and smaller markets and generate value for a broad range of stakeholders, be they small and medium businesses or just the general public. It’s something we’ve done well for Quebec, and we’re keen to be able to do that in Ontario, Alberta and other provinces.”
Desjardins’ research will focus on regional and urban dynamics, demographics, local unemployment rates, local industrial composition — such as which industries are dominant in one region versus another — and how these factors affect various economic prospects. The firm also plans to follow regional business developments (for example, if a multinational corporation were to expand activities) so it can brief clients on economic prospects for that region.
Tied to this mandate is a desire to express the firm’s views regularly. “Much of our team right now is francophone,” Jean said. “We’re trying to bring a bit of diversity in [by] bringing new members who are anglophone and can carry on [speaking to media and publishing research] for the rest of Canada.”
Jean added that Desjardins, as the biggest financial co-operative in Canada, has a unique view regarding economics.
“We have a different culture. It brings a bit of diversity in how we approach certain themes or topics,” Jean said, citing cooperation, community involvement and community service as some of Desjardins’ core values.
As Jean builds the firm’s research agenda, he plans to go beyond typical economic topics and examine themes such as inequality, climate change and sustainability.
“We’re interested in topics like the circular economy — which is not a topic that I think banks have approached — and reutilizing products as [well] as possible to lessen the footprint on extraction and lessen waste and emissions,” Jean said. “Those are important topics we have a bias toward exploring.”
Biggest pandemic lesson?
One of the biggest investing lessons from the pandemic for both advisors and clients is not to “exaggerate your pessimism,” according to Jimmy Jean, chief economist with Desjardins Group.
“In late March 2020, a lot of people were completely discouraged by the uncertainty of what was going on,” Jean said. “[They] thought it was pretty much an apocalypse and started selling their assets. That was exactly the wrong thing to do.
The right thing to do was to get into the market at that point because of how central banks and governments reacted.”
Once the markets began rebounding in the summer, they never looked back, he added.
The forceful fiscal and monetary response to the pandemic indicates that there probably is a new blueprint for the way these institutions react to shocks, Jean said. He advised investors to think twice before quickly selling assets or reducing risk exposure whenever a new shock occurs. “Central banks and governments don’t want that to happen,” he said. “It’s a new environment we’re in.”