OTTAWA — Canadians will be fighting to recoup what they lost during the recession for several years even after growth returns to the economy, says a new report.
The analysis on the recession’s impact and the painful aftermath from Dale Orr Economic Insight shows the downturn’s scars will still be noticeable five years after growth resumes later this year, in terms of productive capacity, unemployment and living standards.
Economist Orr says it’s unlikely the unemployment rate, which is projected to hit 10 per cent next year, will get back to the six per cent that existed before the slump even by 2014.
As well, he projects Canada’s productive capacity in 2014, as well as per-capita output, will only measure about 95 per cent of what it would have been had the recession not occurred and growth proceeded at a modest 2.7 per cent pace.
“The average Canadian is going to be hearing of recovery, and they will look around and say, ‘Gee, my per capita income has hardly recovered, employment levels have yet to recover, what do you mean by recovery?’ ” Orr said.
Many economists have also been warning of the long convalescence ahead for the Canadian, and other western economies.
Bank of Canada governor Mark Carney cited reduced business investment and the shuttering of plants and mills in the auto and forestry sectors as reasons for keeping the central bank’s interest rates at a historical record low.
The new paper shines a dark light on just how much has been lost that cannot be recovered, and how painful the recovery process will be.
“Over the recession, people lose their jobs and they lose work experience which cannot be fully recovered,” Orr explained.
“Business investment and innovation is lost, which is unlikely to be fully recovered. As well, the recession will cause significant changes in the structure of the economy, especially in the financial and auto sectors.”
Orr’s sobering look of the next five years assumes a relatively rosy recovery from the deep recession, with average annual advances in gross domestic product of 3.4 per cent from 2011 to 2014, and more significantly, no slip-up.