The Prime Minister says it’s true. So does the Finance Minister. So do most — maybe even all — Canadian economists. So why does it feel wrong to so many of us when our political and economic leaders insist Canada is not in, or on the cusp of, a recession?
A recent poll says 70 per cent of us feel we’re battling a recession, and will be for at least another year. Policy-makers and economists are quick to point out the recession ended more than two years ago and with one exception, the economy has been growing since then. Obviously then, there’s no recession since the technical definition of recession is when real, inflation-adjusted gross domestic product is in negative territory for two consecutive fiscal quarters.
Why is there such a disconnect between what economists report and what so many Canadians believe? Part of the reason is growing distrust of government and other institutions, including the media. A good example is that many of us feel we’re more at risk from crime although nearly all forms of crime have been decreasing steadily. We don’t believe the crime stats, just as a majority of us, apparently, don’t believe our leaders and economists about the R-word.
But in the case of the economy, there is more at play. The problem may be simply that the definition of recession is flawed. Yes, it measures GDP growth — the broad measure of economic output — but it doesn’t factor in population growth, which is running about one per cent growth per year. So if we have GDP growth of two per cent and population growth of one per cent, the economic picture changes, a lot. Perhaps what we need are better metrics.
Consider the employment rate. In February of 2008, it was 63.8 per cent. It fell to 61.3 per cent in July of 2009, and continues to hover around 61.7 per cent, which puts it well below the prerecession rate. The Prime Minister likes to talk about how the economy has created 600,000 jobs since the recession, during which 400,000 jobs were lost. But that fails to factor in population growth, and also that more Canadians came into the workforce over that period.
We hear daily about factories shutting down, layoffs and job loss. Robert Hutton, CEO of polling firm Polara, puts it this way: “Canadians are looking at things like grocery costs, fuel costs, housing costs, user fees and less net incomes. People are just reporting overwhelmingly, ‘You know I’m not getting ahead, at best I’m staying even.”’ Household net worth is below 2008 levels when inflation is factored in. And income growth has fallen behind inflation.
We may not be in recession technically. But recessionary conditions continue to exist. It is fair to expect our political and economic leaders to understand that and make public policy decisions that reflect the reality that most of us are experiencing day-to-day.
From the Hamilton Spectator.