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Don’t look now, Canada’s economy is getting ugly

There’s been a lot of terrible economic news in recent weeks. At what point does this become a problem for Justin Trudeau?


 
Box turtle hiding in his shell on a white background. (Princessdlaf/Getty Images)

(Princessdlaf/Getty Images)

Oooph. That’s about the best way to sum up the state of Canada’s economy after a barrage of awful economic reports in recent weeks.

First up was fresh evidence that Canada’s manufacturing sector is struggling, despite all the support it’s received from cheap oil, the low loonie and a strengthening U.S. economy. Factory sales fell in May by 1 per cent, the third monthly drop this year.

After that, we learned Canada suffered the steepest monthly decline in GDP since 2009, as the full impact of the Fort McMurray wildfires caused the economy to shrink by 0.6 per cent in May. As Statistics Canada noted at the time, the majority of the downturn was due to the fires, but not all of it. In fact, in three of the first five months of 2016 that we have data for, Canadian real GDP declined on a monthly basis, even when the beleaguered oil sands are taken out of the picture.

Aug5-1Then on Friday we got a double whammy of awful news on the jobs and exports fronts. First, the wallop from Statistics Canada’s labour force survey—the country lost 31,000 in July, a far, far cry from the 10,000 new jobs that were expected to be created. Ontario in particular was hit hard, losing more than 36,000 positions.

Perhaps one of the most troubling aspects of the jobs report, though, was that hourly wage growth has hit a wall, climbing just 1.8 per cent over last year, compared to an annual gain of 3.25 per cent in February. When combined together the drop in employment, slumping wage gains and stagnant growth in hours worked paint a picture of a labour market in distress.

Aug5-3

Friday also brought yet more dismal news about trade. Canada’s trade deficit—the gap between the value of the goods it buys from the rest of the world and what it sells—widened to its largest in history. The trade shortfall hit a record $3.6 billion in June—in fact, of Canada’s 10 largest monthly trade deficits of all time, five have occurred this year alone. Worst of all, non-energy exports suffered a fifth straight monthly decline, and fell 3.5 per cent from the year before, the biggest year-over-year decline since 2012.

Aug5-5

That’s a lot of scary news for the economy to digest in a short period of time. The worry is this will create a feedback loop, where bad news begets more bad news. As it is, this has already been the weakest recovery for business investment in decades, with the private sector on track for its lowest share of capital construction expenditures in a quarter century. So it’s hard to see businesses opening up their wallets to invest, which is what’s sorely needed in order to reduce the economy’s over-reliance on consumer spending and real estate.

This is also likely to make the job of Bank of Canada Governor Stephen Poloz a lot more difficult. The recovery in non-energy exports, driven by the weaker loonie and a strengthening U.S. economy, was an important part of his explanation for how Canada would finally move beyond the effects of low oil prices. At the very least, that recovery seems to be on hold, though perhaps continued improvements south of the border—a report on Friday showed the U.S. economy created 255,000 jobs, exceeding expectations of 180,000 new jobs—will boost Canada’s non-resource economy in the coming months. If that doesn’t happen, Poloz may feel he has to cut interest rates again, at the risk of further inflating housing bubbles in Toronto and Vancouver.

Before Poloz does that, though, he will want to see if the fiscal stimulus measures revealed in the Trudeau government’s first budget work as promised. Ottawa plans to run a $29-billion deficit in fiscal 2016-17 as it rolls out its stimulus measures, including spending on infrastructure and enhanced child benefits. Last month the first payments under the new Canada Child Benefit went out to households, with some economists predicting it will add 0.1 to 0.2 percentage points to GDP this year due to higher consumer spending. All told, the government forecasted that its budget measures would add 0.5 percentage points to GDP.

Which raises the question: At what point do the dismal jobs numbers, weak exports and slumping GDP become a political problem for Prime Minister Justin Trudeau?

The Conservatives are certainly trying to pin the blame for the stumbling economy on Liberal policies. “Canadians have no reason to trust the Liberal Government when it comes to Canada’s economy,” Lisa Raitt, the party’s finance critic, said in a statement on Friday. “The Liberal Government claimed that if it borrowed tens of billions of dollars, it could grow the economy and create jobs. In reality, the Liberals have failed to deliver results for middle-class families and the Canadian taxpayer will be left to pay the bill.”

In reality, the Trudeau government is only nine months into its first mandate, and less than five months have passed since the Liberals brought down their 2016 budget. For now, at least, the polls suggest Canadians are willing to accept the government’s position that it inherited a slow economy made worse by shocks like the Fort McMurray fires.

Yet a key plank in the Liberals’ election campaign was that Trudeau would bring a more activist government to Ottawa capable of engineering stronger growth through deficit spending—all in contrast to his predecessors low-tax, laissez-faire approach. (Never mind that there’s really little that any government can do in the short term to influence the economy.)

Whatever the polls say now, there’s a limit to how long Canadians will support the Trudeau government if its big deficits and bold promises don’t at least appear to deliver good news soon.


 

Don’t look now, Canada’s economy is getting ugly

  1. Lots of employment in the study and inquiry industries. JT throws millions at that but I suspect you have to be liberal to catch that cash.

  2. Oh look….it’s Debbie Downer again

    • In other news, JT was spotted coming out of a cave shirtless and everyone is all a flutter.

  3. Justin took us straight over the cliff into the abyss. No bottom Justin. Canada freefalling into the oblivion.

    Justin has spent his entire first year networking amongst the global 0.1% for his next job, not concerning himself with the problems of ordinary Canadians.

    • You were probably a professional mourner in a former life, right?

      • I can’t figure out what you were in a former life. Get real and read some accurate news and not Liberal propaganda.Our Country is a mess. Thank heavens I live in BC where our Premier is in the real world and not a fantasy world like the East.

        • Our country is an advanced wealthy western nation.

          I have no idea why you think it’s Somalia.

        • Surely you are joking. Under Christy Clark the BC economy has become almost entirely dependent on selling off Vancouver to wealthy Chinese – hardly the basis for a healthy or sustainable future.

          • Do you live in BC? Take a look at the construction taking place ALL over BC.. You must be living in Ontario and love their economy which is in the DUMPS.Or maybe you are pushing for another failing NDP Gov’t for this Province.Your name is right on.

          • get real demers10, stop smokin’ the BC bud so much…i’m from TO (30 yrs there) and have been out here 21…old grouche is right: the BC RE market is largely a false one, propped up by corrupt money fleeing havens from China, with many of the politicians and Rennie like developers in collusion.
            have a read: ‘the highest bidders: how foreign investors are pushing out vancouver’s middle class.’…written by Globe and Mail RE columnist Kerry Gold in May.
            https://thewalrus.ca/the-highest-bidder/
            there is SO much anger out here in the city now, with communities being demolished and renovictions occuring.

  4. Well good for the USA. Funny how being a top oil producing nation certainly hasn’t hurt them. Why was it so hard on our reputation? Hmmm…..

  5. It has not even been a year and he has already tanked Canada’s economy just wait for the next 3 years the numbers will be just like his fathers with around 12% unemployment.The first thing maybe he should show up to work instead of partying like a rock star on taxpayers dime and doing photo ops.It’s time main stream media start telling canadians what really is going on and not sugar coating his every blunder that he and the liberals make. Billions being sent out of the country to never come back and immigrants who will never be off welfare and zero job creation for any Canadians.

    • The unemployment numbers mean nothing – what is the important number is employment rate – the number of people actually working. The unemployment numbers are manipulated to mean nothing, but the employment rate is the stark figures of full time, part time work; male/female and age distribution.

  6. It maybe a little too soon to lay all of the blame on Sunny. If there is blame to pass around, some of it – actually a lot of it – should be laid at Wynne’s feet. What she’s been doing in Ontario must have investors very nervous.

    • You’re absolutely right about that, but don’t overlook the fact the much of the Ontario Liberal fiscal policy is mirrored by the Federal Liberals, so things are only going to get more ugly. Ontario needs to get its shit together in 2018 and vote Wynne out. We can’t afford to listen to the union fear mongering anymore. They need to go.

    • Except that Trudeau is Wynne-on-steroids, taking the Ontario Liberals disasterous policies national.

      The Ontario Liberals ran out of things to loot in Ontario, so they went to Ottawa with Trudeau to take the looting national.

  7. Reorganizing the economy is underway.

    • You mean the economy under the Conservatives was a positive one and now we are going down hill to a very negative position.Not a good move.

  8. Things will have to get worse before idiot voters will turn back to a safe conservative government, which will fix things and restore prosperity, so the same idiots can indulge their stupidity and vote in liberal garbage again.

  9. I regret that it will never become a “problem” for “sunny ways, sunny days” Trudeau. He and his government will keep increasing the deficit beyond the $30 billion, sending money out of the country, and spending money they don’t have on policies that don’t produce jobs for Canadians.

    Blaming the current economic situation on previous governments is a great “cop-out” and will deflect attention from what this government is failing to do. Blaming the economic woes on the wildfires in Alberta is also a deflection. Alberta’s resource industry was already under attack from the poor fiscal policies of the NDP government.

    When Canadians have the perception that our fearless leader is too busy gallivanting around the globe, taking numerous holidays with his family, and posing for “selfies”, this results in a lack of confidence in our government! Notice that I stated “perception”! Also, I do not think there is anything wrong with having a holiday with your family, but how many holidays does the normal Canadian family get to take?

    In the normal Canadian family, mom and dad work five days a week, usually at least eight hours per day. They have weekends off (typically). Then they usually have anywhere from 2 to 4 weeks of “holiday” time which they take. A typical family can not afford to take a holiday on a whim! They need to have the money for that holiday. And, with these increasingly serious economic times, that money is becoming more and more limited. Not everyone was provided with a million dollar plus trust fund. And not everyone can have the taxpayer pay for his/her holiday!

    As well, adding more people to the Canadian population through the refugee program only serves to exacerbate the problem of employment as these migrants need jobs, food, housing, health care. I support immigration to our country provided it is done in a gradual, thoughtful and considerate manner at an optimum time when the economy can support them. This is not that moment.

    I would advise all Canadians to prepare themselves for harsher economic times and sub-prime interest rates. Protect your savings as much as you can.

    • It has worked for Obama – he still blames everything on Bush even after 8 years. For man-childs, nothing is ever their fault

  10. High fees, high rates, high taxes and taxes on the high taxes. Eventually something’s got to give.

  11. OMG the slave-raiders are coming in from the south, the enemy from the north, the frogs and locusts are eating the crops….and WE’RE ALL GONNA DIE!

    How do you people sleep at night imagining all this stuff?

    • Some of us who don’t have the unbridled faith in Wynne and JT that you do are not sleeping as well as you apparently are especially given these economic realities. I have heard that delusional people often do take medication which has a side effect of knocking them out at night. My guess would be that is why you are snoozing with no effort and are calling anyone who is reporting the truth of Canada’s ugly economic reality, a “Debbie downer” or a “mourner.” At least the rest of the lib partisans have to decency to just shut it. Given your history when the Cons were in power of loudly lamenting Harper’s lack of economic acumen at all opportunities as well as your practice of denying that Ontario’s high debt has ever been an issue, your behaviour of pretending that Canadians shouldn’t be concerned that our entire country is struggling despite our low dollar isn’t exactly reassuring. The fact that you regularly called Mark Carney an idiot when he was the head of the bank of Canada is reason enough to dismiss anything you might have to say on any matters pertaining to our national economic wellbeing.

      • Stop worrying about political parties and focus on the economy and what’s good for the country.

        You guys just waste time with all this partisan crap.

        Alberta and Saskatchewan are in far worse shape than Ontario…..so it might be wise to focus on your western mess, and stop worrying about Ont.

        PS….for the umpteenth time I am not a Liberal….and Carney was a Harp minion….which may be why he departed.

        • Carney was the number 2 man to David Dodge (the head of the Bank of Canada under Chrétien). He was recommended by Dodge for the job. How does that make him a conservative minion?
          To clarify your position on politics, you are not a con, you aren’t an NDP and you just stated in another blog that Canada is by a nature a “Liberal country.” You love JT and Wynne. You voted for both. You defend everything they do? In what way, aren’t you a Liberal?
          Further, this “mess” isn’t just western. It is nation wide. That is the beauty of it. He has tanked the whole country’s economy. Actually Alberta’s unemployment numbers are bad for Alberta but are still better than most provinces. Same with our debt. Ontario’s debt is atrocious. It’s rating is horrible.

  12. Please, Please Zoolanders Carbon Tax (On Every Thing) will fix it all, after all Budgets Balance Themselves….

    • You guys lie about everything.

      The full quote is : “the commitment needs to be a commitment to grow the economy and the budget will balance itself”

      • Pray tell how this commitment to grow the economy is going to play out in specifics because thus far, the money is being spent but no growth is being seen except in the economy of our neighbour to the south. Perhaps that is what Trudeau meant. He has a commitment to grow Obama’s economy and balance Obama’s budget and provide Obama with soldiers. Well then, JT is doing a great job for Obama. Is he also planning to balance Hiliary’s budget?

        • Look, enough with the fantasizing.

          If you can’t make it in Canada ….you can’t make it anywhere

          Stop worrying about debt and screaming CUT CUT CUT

          You cannot CUT your way into prosperity.

          You grow the GDP

          • Oh, like Greece did? Spend, spend, spend…

        • GDP stands for Gross Domestic Product

          Why are you talking about Greeks??

          • Our gross domestic product is growing. Our exports aren’t growing despite our low dollar. Our debt is growing. That is the point of the article. The country’s economy is shrinking, not growing. People are losing their jobs, despite the government spending money to jump start the economy. You are not stupid. When governments become too highly encumbered in debt, they pay every increasing amounts in interest on their loans. The citizens pay every increasing amounts in taxes both personal and business. Soon, the countries don’t attract citizens that are interested in opening businesses because the cost of doing business is prohibitive. When the “Cons” we’re in power, all Libs did was complain that Chrétien left a surplus and Harper ran a debt. Suddenly, debt is great? Funny change of attitude, especially on your part.

          • That first statement should have been a question. Our gross domestic product is growing?

        • Gage

          Gross domestic product: Canada
          1.827 trillion USD ‎

          I didn’t say debt was great…..I said it wasn’t a problem

          THIS is a problem

          The Japanese public debt exceeded US$10.46 trillion in 2013, more than twice the annual gross domestic product of Japan.

          However Japan isn’t going to disappear anytime soon

          I am not ON any other blog

          • Forgot to add:

            Justin has only been in power 10 months….so he hasn’t done anything to the economy, much less ‘tanked’ it

            Harper, however, had 10 years.

            And Alberta and Sask have a financial mess because they are primary resource economies……not industrial, service or knowledge much less diverse

          • Please tell us what Ontario’s problem is with their large debt. You have other answers for soooooooooooooo many things but as the saying goes “you cannot cure stupity” but please work on yours Emily

          • demers10

            Ont doesn’t have a problem with their debt….Japan does.

            It would seem that none of you have any knowledge of economics….you just want to spew hate

            Well sorry…..not interested in this partisan nonsense…..go back to your caves. to be stupid

          • Emilyone, I assume you are under 30 as you have no recollection of Canada’s brush with insolvency in the late 1980’s and early 1990’s. We had massive cuts under Martin/Chretien on transfers to individuals and provinces due to high debt. It was painful times after years of large deficits under Mulroney and Trudeau. It is why we ended up with a GST. Let us not get back to that again as we have the baby boomers retiring and expenses will skyrocket with them (we need the debt space).
            Also read up on Japan’s 20 year stagflation of their economy and please don’t use them as an example to emulate.

          • LOL I’m 70…..and Canada has never been close to insolvency.

            Why can’t you read? I said Japan had a problem. We don’t.

          • Matt, the GST was not implemented to reduce the deficit, it replaced a handful of very inefficient manufacturing taxes that were buried in the price of goods and made us uncompetitive in exports. I believe it was very close to revenue neutral.
            .
            I agree with the rest of your post though.

  13. The only people surprised at this seem to be the media, the economists, and the government – any one actually running a business saw this coming leading up to the election, but we were not allowed by the media to actually say anything because Justin was the bright sunny ray that was going to solve all problems (from the heart outward – remember that!).

    When does it become a problem for Sunny Boy – probably never because the media is on his side and Harper can be blamed right into the next election.

    • Sorry. There is no possibly way that Trudeau is responsible for this in just a few short months. Which you obviously acknowledge since you foresaw this when Harper was in charge.

      Kind of like how Harper was not responsible for Canada escaping the more serious consequences of the 2008 recession, since it was Chretien’s and Martin’s policies that got us through that.

      I suppose now you are going to blame Trudeau for the fact that Harper’s tough on crime policies failed so miserably allowing the crime rate to go up in 2015.

  14. My print edition of Macleans arrived in the mail today – it has an eight-page photo spread of Trudeau and his family with four “experts” gushing over him.

    • Glad you mentioned that as I use to subscribe but utter waste of money now. They should get a big payout from TRudeau but too bad it will be on the backs of the taxpayers.

  15. “There’s little any government can do in the short term to influence the economy”?

    As we now see, adopting Luddite energy policies is an exception to that rule.

  16. “There’s been a lot of terrible economic news in recent weeks. At what point does this become a problem for Justin Trudeau?”

    If and when our Prime Minister Zoolander finds his shirt.

    • Turns you on does it?

      Remember Harps two recessions?

      • Do you mean the world wide recessions that Harper was praised for bringing us out of quicker and more stable than any other G20 nation? Yeah, I remember those, thank God we had a decent PM to guide us out, not dig us deeper in which is clearly happening under Trudeau.

  17. Canada is not alone in its malaise, the world is in a slump. Name any other country that is doing well and we can take a look at its political economy. The real concern should be that the real economic driver of the h past decade and a half – war spending, no longer seems to be ‘doing the trick’ despite more and more nations on the earth doing it.

    World War Two may not have been foreseen as the event that would reverse the on-going effects of the Great Depression, but that notion hasn’t been lost on those who still rely on the arsenals to produce guns after the cow has died. What is really scary are the steady, and seemingly unopposed, drumbeats of war – even in a Trudeau Canada.

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