Categories: Need to know

Bank of Canada: Recession is over

Quarterly report predicts return to growth. But unemployment will continue to rise.

by macleans.ca on Thursday, July 23, 2009 1:24pm - 19 Comments

The recession is over, according to the Bank of Canada. In its quarterly report, the Bank of Canada predicted that the economy would bounce back from the shrinkage it has seen since the last quarter of 2008, growing by annualized rates of 1.3 per cent in the July to September period, and three per cent in the fourth quarter. The news however wasn’t all rosy: the report says the up-tick in unemployment will continue.

CBC.ca

Tags: Canada

http://intensedebate.com/people/Ed_Sweeney Ed_Sweeney

Could we start closing that valve labeled 'reckless spending' now? I am not overly keen on having my children pay it back later.
http://www.intensedebate.com/people/Ed_Sweeney Ed_Sweeney

Could we start closing that valve labeled 'reckless spending' now? I am not overly keen on having our children pay it back later.

http://intensedebate.com/people/Gaunilon Gaunilon

Amen brother.

http://intensedebate.com/people/SophiaGeffros SophiaGeffros

I'm not sure I understand- the recession is over, but unemployment will continue to rise? How exactly does that work?

Anil

Well unemployment will keep growing because of poor administration take Example of Drive Test in Ontario they are on stick past 3 months can you imagine how much people are put to loss all the Driving school people are unemployed, they cannot offered to pay their insurance, mortgage , Rents for there office, the new immigrants they don’t get the test and the government looses their revenue, and so on All this credit goes to Garbage people in Ontario who taught others how to pull demands by opting sticks , I was wondering when would the Government go for Stick and then what would happen ? so is Exports nobody is serious about Exports in our country…there are plenty of jobs we can create for our self if the Government wakes

Anil

http://intensedebate.com/people/Stewart_Smith Stewart_Smith

Listening to an economist on the radio yesterday, predicting this report. He indicated that it is typical for employment to lag behind economic growth during a recovery. I think this is understandable, a business that has lost a lot of money and perhaps let go staff likely wants to be very sure it is profitable before it starts hiring again.
Anon

Recessions over, sheeple! Go back to shopping and maxing out those credit cards again!
RJM

Whoo, dodged the bullet that time, eh?! Glad we got the official 'ALL CLEAR'! According to 'the bank of canada', "the recession is over> for bankers"! (I'd hate to see reports of suited men wandering aimlessly around Bay St!) According to others, not so over…
RJM

Oh, and I DID see a real estate agent frothing at the mouth. A SURE sign that things are looking up…?!
Anon

Does this Bank of Canada Governor have any credibility left?
Wayne

ROFL – I can see it all now – across Canada in web forums everywhere poor frustrated ledft wing nut harper haters dropping their timbits and coffees in a mad panic to somehow counter the positive news for the CPC and Harper because as so few really appreciate that if you give the PM the hits when things are bad you gotta give em the cudos when they go good (this never sits right with the lib's) – sometimes it is so sweet to be a conservative!
http://intensedebate.com/people/Tidewaters Chrystal Ocean

So can we stop the 'stimulus' spending now?
http://www.intensedebate.com/people/jolyon jolyon

Sophia I believe recessions are declared when there are two quarters of economic decline and recessions end when there is growth. I would be interested to know how often unemployment and GDP increase at same time, I wouldn't have thought the two go together.

Craig O

Unemployment fluctuations tend to lag behind GDP changes, as companies and businesses often making payroll decisions in response to economic conditions rather than in advance of them. If a job is cut, it's usually because there wasn't enough work for them the previous quarter. Likewise, new jobs don't get created until there's a period where there's too much work for a company to handle.

wayne moores

Just as I have been saying. The spin doctors have been preparing us for months for a jobless "recovery". As for cutting the stimulous package, go ahead, we have yet to see a dime of it in this region of the country anyway. In fact, Harper pulled 10 million off the fricken table that had been previously commited. What a joke. If anyone thinks Canada is just gonna skate by this mess with our biggest customer(USA) bankrupt you must be smoking those green shoots I have been hearing so much about. I hear they really grow when the Bay Street bull***t artists pump up the retoric. Cheers
wml

One thing I have learned over the years……never trust what an official of the Central Bank tells you. By the way Mr. Carney…is it Art or Mark??? Anyway, where is the missing gold from the mint gone to? That should be an easy question for you eh?
wayne moores

Funny, the Irving billionaire oil family in New Brunswick don't seem so optimistic. Suddenly today they canned an 8 billion dollar oil refinery they were going to build in Saint John. It was going to take 8 years to build by the way. They didn't see anything in the future to even just delay it. It was going to produce 300 thousand bbl. of gas a day mostly for the USA market. I tend to take those hard ass sob's more seriously than some boob in a suit in Ottawa, devoriced from reality. Thousands of jobs just evaporated of the table. Prime example of USA problems hurting us.
Craig O

It's still far too early to celebrate – until unemployment starts to drop and the US economy picks up, Canada is still going to have a rough time. However, now is good time to start planning for the recovery, even if it's premature to implement such policies.

Two things that need to change once we're on solid footing – interest rates need to rise and the budget needs to be balanced, fast. The Bank of Canada is rightfully watching inflation to make decisions on interest rates, but I'll be interested to see if they hold to their promise of keeping rates at 0.25% through 2010. It was a smart promise to make, but we'll see if it's a smart promise to keep.

As for the deficit, things become trickier. A weak recovery means Harper can't rely on growth to make up the gap. So, he's got to cut spending or raise taxes. Spending cuts are tricky – the easiest things to cut (infrastructure spending and EI) are the ones that would blunt the recovery even further. However, tax increases go against the Harper mantra. Worse, the most obvious place to raise taxes would be the GST, which would be political suicide for Harper. There is the third option of simply letting the deficits persist until a stronger economy slowly outgrows them, but that will likely take years, and I'm not confident we can let the debt grow for that long. Ball's in the PM's court now, I suppose.
http://intensedebate.com/people/Thwim Thwim

It's nice that the CBC is so rosey, but perhaps they should have considered giving more of the story:

'But Carney also issued a caution that recovery "is not a foregone conclusion," and that the economy remains dependent on massive government stimulus and his own conditional pledge to keep the policy interest rate at the historic low of 0.25 per cent until mid-2010.

Without such interventions in Canada and around the world, economies would still be spiralling downwards, he said.

The Toronto stock market surged almost 200 points late morning, while the Canadian dollar gained a full cent against the greenback and peaked above 92 cents US.

The latter result won't please the central banker, who again voiced his concern that a stubbornly high-priced loonie will cut into the recovery because it will price some Canadian exports out of world markets.

Carney also said there remains a risk that the fragile financial systems in the United States and Europe may contain more unpleasant surprises, such as last September's collapse of Lehman Brothers, and deliver another body-blow to the economy.'

From: http://www.google.com/hostednews/canadianpress/ar…

Me.. I'm thinking we haven't even seen the worst hit yet. Remembering that it takes 3 months or so for the banks to start foreclosing, and much of the last bubble was built on the housing market, we still have another month or so before the rapid rise in unemployment starts hitting Canada with our own real-estate collapse.