OTTAWA — Canada’s economy likely grew in August, but at such a snail’s pace that economists fear hopes of a substantial recovery capable of triggering job growth are fading.
After a flat gross domestic product reading in July, most analysts believe August won’t prove much better when Statistics Canada announces fresh data Friday
The consensus is for a tiny 0.1-per-cent gain. Some, including Carl Weinberg of High Frequency Economics, predict the first contraction since May.
And, to rub salt into the national wound, the United States is likely to report its battered economy grew by a relatively robust three per cent or more during the July-September period in figures being released Thursday.
“Don’t expect to see booming economic growth (in Canada) any time soon,” said Craig Alexander, deputy chief economist with the TD Bank.
Speaking to a Senate committee hearing Wednesday, Bank of Canada governor Mark Carney also characterized the recovery in muted terms.
“Overall, there will be a subdued recovery, but there will be a recovery,“ he said.
Sluggish growth hasn’t exactly come as a shock. Many have long warned that repairing the damage from the financial meltdown would take years rather than months.
Now, new data shows house sales in the U.S. unexpectedly collapsed in September, suggesting that like the cash-for-clunkers program, much of the turnaround in the U.S. has been the result of temporary government inducements.
In a report from the Canadian Centre for Policy Alternatives being released today, labour economist Jim Stanford argues that much the same situation exists in Canada.
Gross domestic product may have stopped falling, and even may be inching forward, but that is only because of federal and provincial stimulus spending.
The reason the U.S. is bouncing back faster is that it is outspending Ottawa by seven-to-one in stimulus that directly creates jobs, he says. Take away stimulus, Canada would still be in a recession.
Private sector economists would argue about whether Canada is still in recession. After all, gross domestic product has stopped falling, and August and September saw job growth, not contraction.
But Stanford’s theme is not disputed by Alexander or Derek Holt of Scotiabank. They agree that the expectations of a strong bounce this quarter are likely no longer tenable and Canada’s unemployment rate will likely rise in the coming months.
“People probably got too far ahead about how strong the recovery was going to be. Now I think a dose of reality is setting in,” said Alexander.