Justin Trudeau is getting cocky about the economy. Watch out. - Macleans.ca

Justin Trudeau is getting cocky about the economy. Watch out.

Strong Jobs growth and markets may breed complacency, which creates the conditions for the dumb risks that eventually cause a crisis

Prime Minister Justin Trudeau speaks to the media after visiting the YMCA Employment Services in Burlington, Ont., on Thursday, October 26, 2017. THE CANADIAN PRESS/Nathan Denette

Prime Minister Justin Trudeau speaks to the media after visiting the YMCA Employment Services in Burlington, Ont., on Thursday, October 26, 2017. THE CANADIAN PRESS/Nathan Denette

Justin Trudeau still knows how to land a jab. “With Mr. Harper, we had the lowest growth rate since R.B. Bennett,” the current prime minister said last month of the man he dispatched in 2015.

Low blow. For all you kids out there, Bennett was the Conservative prime minister who did the Liberals a favour by winning the 1930 election, relieving William Lyon Mackenzie King of the responsibility of dealing with the Great Depression. It was an impossible situation, but Bennett generally is thought to have handled the calamity poorly. If you are Stephen Harper, who considered economic oversight his forte, it’s not a comparison you would like.

Trudeau is starting to get a little cocky about the economy. “Record numbers” of jobs are being created, he said that same day in October, which also happened to be the one when he capitulated…sorry, kept his campaign promise…to the Canadian Federation of Independent Business, lowering the income tax paid by smaller companies. “We are seeing that our focus on the middle class, by putting more money in the pockets of hard working families, and giving less advantages to the wealthiest, is growing the economy,” Trudeau said, as he also attempted to distract the media horde from his finance minister’s loose interpretation of what constitutes a conflict of interest. Plenty of economists were skeptical of the Liberal program, which involved consciously plunging the country into deficit. The prime minister had a special message for the skeptics: “Guess what? That plan is working.”

READ: Trudeau’s pandering small business tax cut will do nothing for the economy

How well is that plan working? Pretty well, actually. Statistics Canada reported Nov. 3 that the number of Canadians employed in October was 308,000 greater than the same month a year earlier. Results of that kind have Trudeau on track to oversee the most impressive run of economic growth of any prime minister since, um: Mr. Harper.


It was only this past summer that Trudeau’s PMO was reluctant to brag about a boast-worthy run of economic indicators. The good news culminated this summer with a StatsCan report that showed gross domestic product expanded at an annual rate of 4.5 per cent in the second quarter. Developed, aging, and unproductive economies such as Canada aren’t supposed to expand that fast. Someone in Ottawa appears to have decided the government should get some credit for that heroic feat, lest the public see it as some kind of fluke.

But here’s the thing: It’s all downhill from here, raising questions about the timing of Trudeau’s boasts about his ability to direct the course of a $2.1 trillion economy. If there were reasons to be wary of the future a year ago, there are at least as many reasons to be so now.

Let’s consider a couple of them.

Asset prices have defied gravity for a long time. Too long, probably. That doesn’t guarantee a stock-market crash, or the collapse of the Toronto housing market, but it does raise the odds that a significant amount of paper wealth could disappear at some point if (when) those markets correct. Pretty much every metric that analysts use to measure the value of asset prices is off the charts, in part because relatively few real-economy opportunities pushed investors into the markets for stocks, corporate debt, farm land and whatever else offered a return of more than a couple of percentage points. That means those markets are prone for a shock when the big money decides to collect profits and run.

WATCH: How real estate mania swept Canada

For example: you may have read this week that Canada’s main stock index touched 16,000 for the first time. Scott Barlow, the market strategist at the Globe and Mail, wrote (subscribers only) about how the S&P/TSX composite index’s rally was mostly the result of a jump in the value of bank stocks. Most every other stock was muddling along, a reminder that the index, like Canada’s economy, depends greatly on the oil industry, which is scaling back its ambition to fit an international crude price of around $50 per barrel. The TSX quickly retreated after touching its new record, suggesting a lack of conviction on the part of investors in the Canadian economy’s staying power.

READ: If the economy is so great, why do we feel so bad?

Those investors have every reason to be skeptical, since the Trudeau boom quite likely has peaked. That’s partly because the Bank of Canada is obligated to keep the good times from getting out of hand. Growth through the first half of the year was roughly twice as fast as what the central bank estimates the economy can manage without stoking inflation, prompting it to raise interest rates in July and September. It opted against a third increase last month, but signalled it will do so again in the not-too-distant future. (Most economists on Bay Street think that will be early next year, perhaps as early as January.)

But Canada’s mini-boom also has peaked because the economy no longer has enough foot soldiers to carry on at this pace. About 68 per cent of the Canadian population aged 15 and over was working in the autumn of 2007, compared with about 66 per cent now, according to StatsCan. The Bank of Canada predicts growth of 3.1 per cent this year will be followed by expansions of 2.1 per cent in 2018 and 1.5 per cent in 2019. That’s Harper territory. Nor is it unreasonable to contemplate the possibility of Trudeau facing re-election as the economy tanks, which was the fate that befell his former adversary in 2015. The annual meeting of the International Monetary Fund and World Bank last month was upbeat because for the first time in years, the world’s major economies all were doing pretty well at the same time. But recently an economist friend reminded me of that last time that was the case: 2007, the eve of the financial crisis that triggered the Great Recession. Past isn’t prologue, but economic history does suggest that periods of calm do breed complacency, which creates the conditions for the dumb risks that eventually cause a crisis.

That might actually be a better way to measure Trudeau’s stewardship of the economy in 2019 when we go back to the polls: did he and Finance Minister Bill Morneau simply maintain steady growth, while averting disaster? If they do, then we might conclude that their plan is working.



Justin Trudeau is getting cocky about the economy. Watch out.

  1. Yeah, we may get hit by an asteroid too.

    Any more gloom and doom you want to wheel out?

  2. Trump will take the wind out of Jr’s sails.
    A rip up of NAFTA will be all it takes.

    • That would be Canada’s sails if that were to happen. Seems you are hoping Canada will be harmed just so you can express your hatred of Trudeau. Unpatriotic lout that you are.

  3. I read an opinion piece a few weeks ago, perhaps it was in Maclean’s, saying that Trudeau wasn’t bragging about the economy because it was likely to turn bad soon. So when he does brag about the economy it only seems fitting that a member of Pundit Nation should write this opinion piece using the opposite reasoning to come to their preferred conclusion.

    No matter what, Pundit Nation will criticize Trudeau. Canada’s right wing media is as predictable in it’s use of pretzel logic as it is morally and ethically flexible.

    • It’s not pretzel logic.

      Bill Morneau, our Minister of Finance, himself has predicted the downturn. Just look on the ministry of finance website. Economic outlook <2.8% in 2018 and < 1.9% in 2019.
      It appears Canada's big banks agree with Morneau.

      Does that mean the author of the pretzel logic are the Liberal's themselves???

      • Didn’t bother to read the article I see.

        The premise of the author is that because Trudeau is expressing confidence in the economy then things are sure to go bad probably due to Trudeau himself.

        Your bit of pretzel logic is that decent growth next year after very good growth this year is a “downturn” twisting a term that usually refers to negative growth into one that means decent growth after very good growth.

  4. Oh but I wish and pray that it were all true. When Harper brought us out of the worst FINANCIAL crisis in our history we were shocked and pleased. Damn happy. But we must look at the type of jobs and the security factor. We are bringing in a lot of unskilled labour, and in many cases, unwilling to work. This is a new factor. We are diving in to debt with reckless spending and giving away money , that we are borrowing. On balance a scary concept. We will get NAFTA renewed, but watch which country will benefit. Hint, not USA or Canada.

    • “worst FINANCIAL crisis in our history” – not even! Not only that but Harper boasted that Canada, thanks to good management on his part, would be immune to the US financial meltdown (the great economist?). Overall, he presided over tepid economic growth which averaged less than any other PM on the chart even those that presided over other mini recessions while quickly turning a moderate surplus into a perennial deficit. For the entirety of Harper’s reign, all increases in tax revenue came from increases in personal income tax (no wonder that giving the middle class a break is an attractive pitch).

  5. You really have to work hard to turn such good news into bad.

    Over at CBC they pushed the nothing Payette story and buried, almost ignored the jobs news.

    CTV National led with jobs and gave it the prominence it deserved.
    It’s not a sell out to deliver some good news, a little morale boost, when it’s deserved.

  6. This guy knows nothing about economics, nor finance.
    Trudeau is defined only by the billion$ of other people’s money he gets to play with like a game, for no good reason but to promote gender, immigration, party hardy, and sexual choices.

    100 year old Muslim men from 3rd world countries, are truer feminists that this man-child. They recognize the benefits of a woman working!
    PET was a confirmed, controlling and abusive misogynist, who came from a generation and a community of misogynists….and his eldest son is saying he is different?!
    He is smothering his upbringing, to win female votes!

    To a player like Trudeau, he does not see anyone as “equal”! Women need billion$ for abortions, that is Trudeau$ view of women, on International Women’s Day…and pretty much every day.
    He did not even lift his fat pinky finger to help all the single mothers from Sears, who have no way of providing for their family this holiday.
    Where is Turdo and family and entourage, Shame-us and Morneau, Liberal leaders and Payette spending the holidays, and are we paying for it?
    Turdo is very quick to announce that he will announce something on a private trip to a personal funeral, and that is so we keep paying and paying for him and his family and his entourage, because after all, a god like him should be paid to speak!
    Since he took office, all of his 5* world travels, we have paid dearly. And what has he done after these hundreds of billions he has wasted? Squat. No European agreement, despite inviting and paying for most of the world to come to Ottawa, or for he and his family and entourage to fly around the world. None of the promises he made during his campaign, have come to fruition. No NAFTA agreement after paying millions in expenses for every man and woman Trudeau wants to impress with OUR taxes he has power to waste.
    We pay for monuments to the victims of concentration camps, and he casually forgets to mention the Jews! Like Canada’s 150th, Turdo casually forgets to mention Alberta?
    He lives on our corporate jets and is always in the air going somewhere, but never does anything…unless Ivanka is involved! Trudeau$ legacy, despite all his photo-journalism of every breath he takes, will be as fake as his cut out dolls, as his and hers magazine covers, and his planned intrusions on proms and weddings. He is a total f*ck up! A clown for the rest of the world to use and ridicule.

    The only recognition Turdo affords, is for other people”s money and votes. Black, white, red, yellow, man, woman, gay, lesbian, transgender; they are all just dollars and votes to him.

    Trudeau is all glitz and glimmer, either rising in childish excitement to celebrate anything, or coming down from the party, and can’t remember anything! “The lights are on, but no body is home.”

    Trudeau only knows how to talk, and he will say anything any one tells him to say, for money and votes.
    Trudeau$ cocky behavior is not new, he has always had a cocky god-complex, since his father forced his mother to birth him on Jesus’ birthday.

  7. The author refers to ‘the Great Recession’ meaning the last one: that’s ridiculous hyperbole: obviously he has no direct experience of the modern Great Recession where people actually starved: my parents actually lived it and I’m pretty sure that no one born since 1935 even has a clue (I never heard of any 10 year olds hanging around the local bakery hoping for reject and week old bread in 2008!).
    Some positive growth is good news, particularly growth in employment, especially following on the heels of the Harper government whose average economic growth was the lowest for any government since WWII. That’s just data, hardly a low blow. It is the nature of politicians to claim responsibility when things go well and blame external forces when they don’t – that’s hardly newsworthy. However, Harper’s poor performance predates the financial meltdown so using that as an excuse implies time travel. The fact that employment is still lower than it has been in recent times must be balanced against the aging out of the ‘boomers’ but also the structural reasons for youth unemployment. Also, massive deployment of capital and government spending in fossil fuel industries which have low employment intensity and a parallel collapse in manufacturing jobs is also responsible.
    Of course, Albertans have reason to be dissatisified but their problems are mainly a huge plunge in oil prices and oil industry companies that dumped jobs and development projects like hot bricks. A structural problem with fossil fuel industries is that employment intensity (jobs per unit of capex and unit of revenue) is much lower than most other industries so employment is very sensitive to market conditions. Increased access to an already over-supplied market is hardly a solution.
    ” That means those markets are prone for a shock when the big money decides to collect profits and run.” – what nonsense: ‘big money’ is in the business of turning money into more money. This vision of ‘Scrooge McDuck’ investors is comic. A current issue is lack of investment opportunity with a lot of pent up capital. It’s certainly the case that ‘big money’ is moving towards new industries, consequently away from legacy industries. Perhaps the fact that Canada has moved away from a time when nearly half of new capital went into the fossil fuel industry presents a chance for other industries to advance. Somehow, we need to find a way to move with the times.

  8. His government is running the economy on borrowed money. This is deficit spending, combined with higher gas prices, higher inflation because the Canadian dollar is higher, higher cost of living, deficit spending which has artificially created jobs that taxpayers will be paying for in the future.

    Plus the BoC raised interest rates. Picture this the Canadian dollar went up and so did gas prices? If the Canadian dollar goes up shouldn’t gas prices GO DOWN? The Canadian dollar went up yet so did the price of food, portions of most boxed foods have actually gotten smaller. Canadians have actually gotten poorer under Trudeau in his short stint however the numbers don’t reflect this because his government is using deficit spending something Harper’s government thankfully was reluctant to do.

    The disaster is coming, unfortunately when conservatives take over this government they’re going to get the blame. It’s one of the reasons it’s important that conservative keep speaking out, speak out now. Give details of what’s happening, give details about Trudeau is doing. Good and bad tell it like it is. Don’t allow Trudeau’s government to paint a rosey picture. Because what they’re going to make it seem like is they took money from the rich and gave it to the poor. which in reality is they took money from the middle class in higher taxes to pay their big corporate buddies to give us minimum wage jobs.

    As a conservative our focus should not be minimum wages it should be HIGHER WAGES! Liberals like to put limits on things. Increase minimum wages so new small business can’t start businesses, forcing small businesses in Canada to move abroad, that’s how liberals operate it’s time more conservatives call these corporatist liberals out. They’re destroying the infrastructure of our country!

    • Inflation is low not high. The Canadian $ is up but so is the price of oil in US dollars plus the price of gas does not move in absolute lock step with the price of oil.

      But you’re last paragraph really shows how desperate you are to rant against the Liberals. You want higher wages but don’t want higher wages at the lowest end of the wage scale. You claim higher minimum wages will “force” companies to move abroad while saying the “focus” should be “HIGHER WAGES”. And you wrote that and thought it should actually be posted. Amazing.

  9. One in five Canadians is mentally ill.

    Apparently they all post on here!

    • did you catch a glimpse of yourself in the mirror again Em?

  10. Macleans flatters itself by labeling this “Economic Analysis”.

    This is “Political Carping”.

    If Macleans wanted to try honesty they should create a very large section labeled Political Carping and file the vast majority of their articles under it.

  11. The economic expertise of both Trudeau and Morneau combined is small enough to fit comfortably into the belly-button of a flea and still have enough room left over to accommodate their business ethics and morals as well.

  12. getting cocky? GETTING COCKY???
    did you forget … “the budget will balance itself”
    yeah … he’s just now getting cocky