Canada: What economic recovery?

Jim Stanford, (Photo: CAW/TCA)

Political leaders boast that the Canadian economy has fully recovered from the recession, and that it was not as severe there as it was in other countries. It turns out that both of those claims are false because they don't take population growth into consideration, according to a study released by the Canadian Centre for Policy Alternatives (CCPA, one of the focal points of Social Watch)

The report launched under the title “Canada's incomplete, mediocre recovery,” by economist and CCPA Research Associate Jim Stanford, finds that, after adjusting for population growth, neither GDP nor employment growth has yet to recoup the ground lost during the 2008-09 downturn.

Real per capita GDP remains 1.4% lower as of the third quarter of 2011 than it was at the beginning of 2008. And the labour market is still much weaker than it was before the recession—measured by the employment rate, less than one-fifth of the damage has been repaired.

As for international comparisons, once population growth is factored in, Canada's GDP performance ranks 17th out of 34 OECD countries. Canada also ranks 17th (out of 33 reporting countries) in terms of employment growth.

So, the twin claims by political leaders that the damage done by the recession to the Canadian economy and labor market has been repaired and that Canada survived the recession much better than other countries are both false.

“In the labor market, in particular, the pace of employment-creation has lagged far behind the pace of population growth. After adjusting for population growth, less than one-fifth of the damage from the recession has been repaired, and things have gotten worse in the last 18 months, not better,” says Stanford.

“No wonder most Canadians think we’re still in a recession. From the perspective of the labour market, we still are.”

According to the study, real per capita GDP remains 1.4% lower as of the third quarter of 2011 than it was at the beginning of 2008—and several thousands of dollars per person below where it could be today on the basis of pre-recession growth trends.

“Real per capita GDP is still lower in Canada than it was at the beginning of 2006, when the Harper Conservative government first took power,” Stanford says. “By this measure, during almost six years of Conservative ‘economic stewardship,’ Canadians have experienced no economic progress whatsoever.”

Failing to take account of population growth also distorts international comparisons of economic and employment performance. Adjusting for differential population growth shows Canada’s GDP performance is only mediocre when compared to other OECD countries. Of the 34 countries in the OECD, Canada ranks only 17th—right in the middle—for growth in real per capita GDP since 2007. And after adjusting for growth in the working age population, Canada also ranks 17th (out of 33 reporting countries) in terms of employment growth.

“The claim that we’ve done better than other industrialized countries in surviving the recession is false. In fact, we’ve barely kept up with the pack,” Stanford says.

“The incomplete and relatively weak state of Canada’s economic recovery should make policy-makers think twice before embarking on a campaign of fiscal austerity,” Stanford concludes. “To do so would clearly further undermine output and employment, which are still weak. Instead, the top priority should be placed on expansionary measures to strengthen the economy.”

More information
“Canada's Incomplete, Mediocre Recovery” (in PDF format):