OTTAWA — The Great Recession wasn’t for Canada — it wasn’t even as painful as the previous two slumps in the 1980s and 1990s.
That’s the final assessment of Statistics Canada, which issued Thursday the most comprehensive comparison of recessions since the Second World War and determined Canadians got off easy.
The conclusion may surprise many who have come to regard the financial and economic meltdown that began in 2008 as the most scary free-fall the world has faced — and continues to face — since the Great Depression.
The numbers show that was true for much of the world — particularly the U.S. and Europe — but not even close for Canada.
And they also show Canada’s economy bounced back faster than during the previous two recessions.
Canada is the only member of the G7 that has recovered all its lost output — measured as gross domestic product — and all its lost jobs.
“Canada came out remarkably well given that at the beginning of the downturn it did look like it was going to be as severe or more severe than previous recessions,” says Philip Cross, the agency’s chief economic analyst.
“It’s quite remarkable how quickly it ended and how complete was the recovery.”
Although pinpointing recessions and recoveries to the month are difficult, Statistics Canada’s best estimate is that the slump lasted eight months and it took 10 months to reverse.
The slump did set a modern-day record in recording eight straight months of uninterrupted decline, and the plunge was steeper, but that was the end of it. It began recovering in the summer of 2009 and mostly never looked back, gaining back all lost GDP in 18 months.
The plunge during the 1981-82 recession was almost as fast, and it kept going longer. It took over two years to regain lost GDP.The 1990-92 slump was not as steep, but it lasted the longest, requiring a full three years to return to pre-recession levels.
In the most recent downturn, employment fell a total of 2.4 per cent, or 417,000 jobs. That compared with an employment contraction of 3.4 per cent in 1990-92, and a massive 5.4 per cent in 1981-82.
But again, jobs recovered much faster this time, less than two years after the beginning of the losses. It took about three years for jobs to return to pre-slump levels in the early 1980s, and over four years in the 1990s.
“Most striking is that jobs contracted at only half the rate at which output fell during this recession,” noted Cross. “This is because employers in Canada relied almost equally on reductions in employment and shorter work weeks in order to lower total hours worked in line with output.”
Full-time employment in Canada dropped by the same amount as output, 3.3 per cent, and is still a smidgen below pre-slump levels.
Still, during the 1980s and 1990s recessions full-time jobs fell 7.4 per cent and six per cent, and took four years and seven years to recover, respectively.
Cross is not suggesting the just-passed recession did not cause pain, or that there wasn’t plenty of reason to worry.
The plunge in Canadian exports — one third of the economy — was unprecedented and have yet to recover.
And when the world appeared on the brink of calamity, there was no way of knowing how far down the hole lay the bottom.
Policy actions helped, he said. Unlike in the previous two recessions when central bankers were battling runaway inflation, this time the Bank of Canada was able to react aggressively, taking the policy interest rate to virtual zero and keeping it there for over a year. That boosted borrowing and spending.
As well, Canadian and world governments borrowed massively to stimulate economies.
As critical, at least in Canada, households entered the slump in good shape and banks kept issuing credit, so consumers were able to continue to buy cars and houses throughout.
“Household spending held up so well in this country. (Most) people didn’t lose their jobs and they didn’t lose their ability to borrow money,” Cross explained.
“Look at what happened in the U.S. and Britain and Ireland and all these countries where there’s been disruptions of the financial systems ... they’re really hard to overcome, and that was a big plus for Canada.”