A monthly scorecard on the state of the economy in North America and beyond
Whatever faith there was left in the Canadian economic miracle, it is fast eroding. Everyone from bank economists to the parliamentary budget officer to the International Monetary Fund is cutting growth estimates. Last week’s report that GDP shrank in August by 0.1 per cent puts the annual growth rate somewhere below two per cent. The results are much the same in the U.S., where growth was two per cent last quarter, up from 1.3 per cent.
Diehard optimists will say any growth is good growth. But today’s climate is starting to feel suspiciously like a recession again.
In the U.S., recent growth has been attributed to a blip in government defence spending. Business investment hasn’t been as weak since 2009. In Canada, growth hangs on the prospect that manufacturing and mining will pick up steam again. How realistic is that? With 10 of 18 industries showing declining output in August, the GDP drop “was no fluke,” said Bank of Montreal chief economist Douglas Porter in a note. “The main message here is that the economy is struggling to churn out any growth whatsoever.”
So what does two per cent growth offer? It does nothing to break the jobless cycle or lift middle-class fortunes. Canada’s unemployment rate is stuck at 7.4 per cent, not far off from the U.S.’s 7.9 per cent. Food bank use is up 31 per cent since 2008, and still rising. Two per cent growth also means more or less stagnant tax revenues, and less chance governments will be able to pay off deficits anytime soon. It could throw a wrench in Ottawa’s plan to balance the budget in three years.
Predictions in 2009 that North America was headed for a “lost decade” now appear depressingly accurate. Two per cent is the new norm, and unfortunately, it’s just not good enough.
The good news
The bad news
By the numbers
Signs of the time: The hard sell