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KONRAD YAKABUSKI
Globe and Mail Update
January 9, 2009 at 8:13 PM EST
MONTREAL — The worst economic crisis of a lifetime? Maybe if you were born in 1992.
Job numbers out Friday – showing a jump in the national unemployment rate to 6.6 per cent – confirm that Canada has followed the United States into a recession. But the odds are that workers here will come through the downturn of 2009 with far fewer scrapes and bruises than they did during the two previous recessions. They`ll also – for a change – fare markedly better than their American counterparts.
The Canadian unemployment rate rocketed to 13 per cent in the 1981-82 recession and almost as high in the 1990-91 contraction. In both of those periods, Canada was an economic basket case compared with the United States, where unemployment rates peaked at 10.8 per cent in 1982 and 7.8 per cent in 1992.
So far, almost no economist expects Canada`s jobless rate will surpass 8 per cent during this downturn. Most, by far, predict it will peak below that figure. The U.S. unemployment rate, however, could enter double digits.
Even an 8-per-cent jobless rate would have been embraced as practically full employment in the Canada of the `70s or `80s. Yet, Friday`s news of 34,000 job losses in December, and a 0.3-percentage-point increase in the unemployment rate, had politicians in conniptions. It`s easy to feel pessimistic when president-elect Barack Obama speaks of “a crisis unlike any we have seen in our lifetime,” and the U.S. economist Nouriel (Dr. Doom) Roubini warns that the bubbles “have only begun to burst.” But they`re not talking about Canada. This country remains an island of relative tranquillity in a raging global economic sea. Our job market, in particular, faces this tempest with storm shutters firmly affixed.
One of the reasons has to do with demographics. The millions of Canadian baby boomers who reached adulthood in the `70s and `80s overwhelmed the labour market`s ability to absorb them. Employers didn`t have much of an incentive to hold on to workers during tough times, since they could draw on an overabundant supply of labour to replenish their work force when the economic tide turned.
Not now. The prospect of a looming post-recession labour shortage promises to factor into employers` staffing calculations this time around.
“The whole phenomenon of an aging population will act as a brake on layoffs,” predicts Desjardins Group senior economist Benoit Durocher. “Businesses will think twice before laying people off because it could be more difficult to find employees when the recovery comes.”
Claude Morin, an economic development officer in Quebec`s export-dependent Beauce region, agrees, adding that more than a decade of solid growth has left firms with strong balance sheets. Though many of the region`s clothing and furniture makers have closed in recent years, most of their workers have found jobs elsewhere in the Beauce.
“Our businesses are well capitalized, which allows them to play for time,” says Mr. Morin of the Conseil économique de Beauce. “Morale is good and no one tells me on my visits that things are bad or catastrophic.”
The relative strength of Canada`s job market also stems from having an older work force than the Americans. While youth has certain advantages, they`re not apparent during a recession. Layoffs will figure more prominently south of the border.
At the same time, Canada has largely succeeded in eliminating much of the structural unemployment that plagued the economy in the past. Though pockets of chronic joblessness still exist, they`re modest compared with the unemployment rates in excess of 20 per cent that used to be common in some regions.
This shows up in Canada`s employment rate – the percentage of those over 15 with jobs. It remains historically high, at 63.1 per cent in December, down 0.2 percentage points from November. In 1982, it was 57 per cent.
“There has been two decades of continued out-migration from places that were pools of structural unemployment,” observes Dalhousie University economics professor Lars Osberg. “And Internet job searches didn`t exist in [past recessions], so there`s a whole new way of matching vacancies with unemployed workers.”
Another measure of Canada`s relative economic health lies in the so-called misery index, the combined total of the unemployment and inflation rates. It hovered around an excruciating 25 per cent during the `80s recession and about 20 per cent a decade later. Today, it is well below 10 per cent and likely won`t surpass that threshold in this recession.
Monetary and fiscal stimulus are two reasons Royal Bank of Canada is predicting this recession will be shorter than the two previous ones. The bank expects Canada`s economy to start growing again in the second quarter of this year, following only two quarters of contraction. As a result, the bank predicts the unemployment rate will peak at 7.4 per cent.
Some economists have been warning of deflation, a phenomenon where expectations of falling prices cause consumers to put off purchases. But with unprecedented liquidity being pumped into the financial system by the Bank of Canada, and the federal government promising a spending package that will make it look like Christmas in January, the longer-term threat is that of upward pressure on prices.
“There are risks in terms of the timing of the [stimulus] initiatives,” warns Paul Ferley, assistant chief economist at Royal Bank of Canada. “If they leave them in place too long, it could very well sow the seeds for an inflation problem.”
U.S. economist James Grant, author of the influential Grant`s Interest Rate Observer, has also expressed this concern. Though with doomageddon in vogue, not many people are listening.
As Mr. Grant observed recently: “Frostbite victims tend not to dwell on the summertime perils of heatstroke.”
http://www.theglobeandmail.com/servlet/sto...ndrecovery/home
Globe and Mail Update
January 9, 2009 at 8:13 PM EST
MONTREAL — The worst economic crisis of a lifetime? Maybe if you were born in 1992.
Job numbers out Friday – showing a jump in the national unemployment rate to 6.6 per cent – confirm that Canada has followed the United States into a recession. But the odds are that workers here will come through the downturn of 2009 with far fewer scrapes and bruises than they did during the two previous recessions. They`ll also – for a change – fare markedly better than their American counterparts.
The Canadian unemployment rate rocketed to 13 per cent in the 1981-82 recession and almost as high in the 1990-91 contraction. In both of those periods, Canada was an economic basket case compared with the United States, where unemployment rates peaked at 10.8 per cent in 1982 and 7.8 per cent in 1992.
So far, almost no economist expects Canada`s jobless rate will surpass 8 per cent during this downturn. Most, by far, predict it will peak below that figure. The U.S. unemployment rate, however, could enter double digits.
Even an 8-per-cent jobless rate would have been embraced as practically full employment in the Canada of the `70s or `80s. Yet, Friday`s news of 34,000 job losses in December, and a 0.3-percentage-point increase in the unemployment rate, had politicians in conniptions. It`s easy to feel pessimistic when president-elect Barack Obama speaks of “a crisis unlike any we have seen in our lifetime,” and the U.S. economist Nouriel (Dr. Doom) Roubini warns that the bubbles “have only begun to burst.” But they`re not talking about Canada. This country remains an island of relative tranquillity in a raging global economic sea. Our job market, in particular, faces this tempest with storm shutters firmly affixed.
One of the reasons has to do with demographics. The millions of Canadian baby boomers who reached adulthood in the `70s and `80s overwhelmed the labour market`s ability to absorb them. Employers didn`t have much of an incentive to hold on to workers during tough times, since they could draw on an overabundant supply of labour to replenish their work force when the economic tide turned.
Not now. The prospect of a looming post-recession labour shortage promises to factor into employers` staffing calculations this time around.
“The whole phenomenon of an aging population will act as a brake on layoffs,” predicts Desjardins Group senior economist Benoit Durocher. “Businesses will think twice before laying people off because it could be more difficult to find employees when the recovery comes.”
Claude Morin, an economic development officer in Quebec`s export-dependent Beauce region, agrees, adding that more than a decade of solid growth has left firms with strong balance sheets. Though many of the region`s clothing and furniture makers have closed in recent years, most of their workers have found jobs elsewhere in the Beauce.
“Our businesses are well capitalized, which allows them to play for time,” says Mr. Morin of the Conseil économique de Beauce. “Morale is good and no one tells me on my visits that things are bad or catastrophic.”
The relative strength of Canada`s job market also stems from having an older work force than the Americans. While youth has certain advantages, they`re not apparent during a recession. Layoffs will figure more prominently south of the border.
At the same time, Canada has largely succeeded in eliminating much of the structural unemployment that plagued the economy in the past. Though pockets of chronic joblessness still exist, they`re modest compared with the unemployment rates in excess of 20 per cent that used to be common in some regions.
This shows up in Canada`s employment rate – the percentage of those over 15 with jobs. It remains historically high, at 63.1 per cent in December, down 0.2 percentage points from November. In 1982, it was 57 per cent.
“There has been two decades of continued out-migration from places that were pools of structural unemployment,” observes Dalhousie University economics professor Lars Osberg. “And Internet job searches didn`t exist in [past recessions], so there`s a whole new way of matching vacancies with unemployed workers.”
Another measure of Canada`s relative economic health lies in the so-called misery index, the combined total of the unemployment and inflation rates. It hovered around an excruciating 25 per cent during the `80s recession and about 20 per cent a decade later. Today, it is well below 10 per cent and likely won`t surpass that threshold in this recession.
Monetary and fiscal stimulus are two reasons Royal Bank of Canada is predicting this recession will be shorter than the two previous ones. The bank expects Canada`s economy to start growing again in the second quarter of this year, following only two quarters of contraction. As a result, the bank predicts the unemployment rate will peak at 7.4 per cent.
Some economists have been warning of deflation, a phenomenon where expectations of falling prices cause consumers to put off purchases. But with unprecedented liquidity being pumped into the financial system by the Bank of Canada, and the federal government promising a spending package that will make it look like Christmas in January, the longer-term threat is that of upward pressure on prices.
“There are risks in terms of the timing of the [stimulus] initiatives,” warns Paul Ferley, assistant chief economist at Royal Bank of Canada. “If they leave them in place too long, it could very well sow the seeds for an inflation problem.”
U.S. economist James Grant, author of the influential Grant`s Interest Rate Observer, has also expressed this concern. Though with doomageddon in vogue, not many people are listening.
As Mr. Grant observed recently: “Frostbite victims tend not to dwell on the summertime perils of heatstroke.”
http://www.theglobeandmail.com/servlet/sto...ndrecovery/home
