OTTAWA — Canada’s economic recovery is suddenly looking vulnerable after Statistics Canada shocked observers Friday with new data showing the country lost 71,000 jobs last month.
The October figure was the third major economic indicator that has surprised well to the downside since the Bank of Canada declared the recession over in July.
But the grim jobs data — glossed up by a 27,500-gain in self-employment that brought the net loss to 43,200 — puts into question the previous two months of reported gains.
In conjunction with gross domestic product readings of zero growth in July and a 0.1 per cent shrinkage in August, the growth predicted for the third quarter appears to have vanished into thin air.
No economist now believes Canada will come close to matching the U.S. third quarter growth of 3.5 per cent when Statistics Canada reports later this month. And, some say, the quarterly GDP data may show that Canada did not emerge from the recession at all.
“Technically, we could still be in recession,” agreed Michael Gregory of BMO Capital Markets. “You are in recession until there is evidence you are not.”
Even Human Resources Minister Diane Finley hedged on whether Canada has emerged from the recession that began a year ago.
“In the last two months when we saw declines in unemployment, we cautioned people about getting overly optimistic too soon,” she said. “Unfortunately, we are not out of the woods yet. But then we are nowhere near the position originally forecast a year ago when they were saying there could be as high as 10 per cent unemployment.“
Most economists still believe September growth will rescue Bank of Canada governor Mark Carney from a forecasting embarrassment.
Some, like TD Bank’s Grant Bishop, even argues that September could be robust.
He points out that there was a 1.6 per cent pick-up in hours worked during the month, which augers well for increased production.
But the doubts are now more than theoretical.
The evidence for recovery include rebounding home and retail sales, a return to production in the auto sector, fewer plant closures, and to some extent jobs — at least the three-month average shows no overall losses.
As well, a series of unfortunate occurrences — from poor weather to the Toronto municipal workers strike in the summer and labour stoppages in the mining sector — have conspired to keep GDP numbers lower than they might have been, argues Merrill Lynch chief economist Sheryl King.
The thinking is that with the strikes ending, September will do for the recovery what economists thought July would accomplish.
The corollary is that important sectors are unquestionably still sliding, including manufacturing, exports and business investment.
Despite a strong third quarter, artificially pumped up by U.S. government incentives, the United States reported that another 190,000 jobs vanished in October, and that the jobless rate had hit a 26-year high of 10.2 per cent.
For Jim Stanford, the chief economist with the Canadian Auto Workers, whether third quarter GDP in Canada will be slightly above zero or below is beside the point.
He said by every real measure of economic performance, Canada is still in recession, and deeply so.
“It is clear that the qualitative conditions are not present for a genuine recovery,” Stanford explained.
“We need to see the private sector kicking into gear, with a broad and self-sustaining expansion, before we can say the recession is over. That isn’t remotely true in Canada.”