The great what?

Two years removed from what many feared would be the total collapse of the world economic and financial systems, Canadians may be forgiven for asking — “What was the big deal?”

Finance Minister Jim Flaherty speaks in Toronto. Two years removed from what many feared would be the total collapse of the world economic and financial systems

Finance Minister Jim Flaherty speaks in Toronto. Two years removed from what many feared would be the total collapse of the world economic and financial systems

OTTAWA — Two years removed from what many feared would be the total collapse of the world economic and financial systems, Canadians may be forgiven for asking — “What was the big deal?”

The most severe global recession in six decades fizzled into a run-of-the mill slump in Canada lasting three quarters and costing just over 400,000 jobs, a mere 2.4 per cent of the labour force.

And as the second anniversary of “the Great Recession” approaches, superficially at least, Canada’s economy appears to be just about where it started.

The economy has recouped all of the jobs that vanished in late 2008 and 2009, and then some. Meanwhile, the country’s gross domestic product, the broadest measure of the economy’s strength, is a rounding error from reaching pre-slump levels.

Other important indicators, from household wealth to home prices have also recovered and average wages, while not robust, never dipped below the inflation rate.

In recent speeches and statements, the Conservative government has sounded mostly satisfied with how the economy fared in bad times and is bouncing back now.

With Parliament resuming Monday, there is no hint that Finance Minister Jim Flaherty is thinking about another round of stimulus, or even extending current programs beyond their use-it-or-lose-it date of March 31.

The Bank of Canada began withdrawing monetary stimulus by raising interest rates in June.

But if the recession is over, it certainly doesn’t feel like it.

“All we’ve done is stop the clock from where the economy was two years ago, but the capacity of the economy and labour markets has grown in that two-year interval,” economist Derek Holt of Scotia Capital points out.

In those two years, Canada’s population has grown from 33.5 million to over 34 million, according to Statistics Canada.

That means the country’s output per person remains about $1,500 below what it was in October 2008.

And all those jobs recouped don’t take into account the growth in working-age people needing jobs. In fact, employment may have returned to pre-slump levels, but there are 373,000 more Canadians unemployed today than two years ago.

Bank of Montreal chief economist Sherry Cooper says no one should be surprised that economy is up to speed.

“This (global slump) was an extraordinary event and so I don’t think it’s surprising it has taken an extended period to recover,” she said.

For politicians, the numbers present a “glass half full or glass half empty” quandary — providing a rationale for more public spending to help the economy and also for removing stimulus.

Liberal finance critic Scott Brison said it should be clear to the government that at the very least they cannot afford to add impediments to growth, such as plans to increase employment insurance premiums in January.

That measure has been blasted by both labour and business interests as a job killing tax.

“The economy certainly doesn’t need a counter-stimulus package when so many Canadians are still unemployed,” he said.

David Rosenberg, chief economist with wealth management firm Gluskin Sheff and well-known economic bear, was surprisingly laudatory about how the Canada has coped with the global meltdown, and bounced back so far.

But, Rosenberg says the future doesn’t look so bright. Weakness in the U.S. will continue to hammer Canadian exporters, he said, and tapped-out consumers will drag down the domestic side of the economy.

“I’ve counted up all the beans and directly or indirectly, every basis point of Canadian economic growth from the deepest of the recession a year ago came courtesy of the resurgence in housing activity,” he said.

Rosenberg says the housing boom fed residential construction and the wealth effect from higher prices supported spending on such things as home renovations, building materials, appliances, furniture and electronics purchases, among other goods.

“But now the bloom is off the rose and we’re going to be going through a significant cooling off of growth through the next several quarters,” he adds.

Holt also worries that household debt, now at 145 per cent of disposable income, has made the Canadian economy more vulnerable.

Unlike in 2008 and 2009, Canadian consumers will no longer have the capacity to prop up the economy, he explained.

The good news, says Cooper, is that governments and the Bank of Canada are in better shape than in most advanced countries to intervene if necessary.

Ottawa’s debt-to-GDP ratio is about half where it stood in the mid-1990s and significantly lower than even the most solvent nations in the G7.

As well, after hiking the overnight rate from 0.25 to one per cent since June, Bank of Canada governor Mark Carney now has room to cut rates if needed.

Cooper said if the economy continues to crawl along at sub-two per cent growth, as some are forecasting, the Harper government may have to reconsider its stimulus exit strategy.