By: Rolf Li
There is so much talk surrounding our great country these days, and many are related to the fact that our economy is slowing down, and that we are in a recession. As a Canadian, this really hurts my pride, and it really forces me to think about the real state of our economy. It turns out that things aren’t as bad as they seem.
Most of the argument against the Canadian economy is that it has been shrinking at a rate of around 0.1-0.2% per month for the first five months of the year. By definition, a recession is when an economy is in decline (negative territory) for six months in a row. However, when we look at the numbers that Canada has been posting, can we really call the “recession red alert”? To begin with, the Canadian unemployment rate for the month of May remained steady at 6.80%, and 57 000 new jobs were created. In fact, the unemployment rate has remained at around 6.80% since January. Yes, January. So just based on job numbers, how can experienced economists start spreading the word that the Canadian economy is in massive decline? Strong job numbers are the basis of a strong economy, and our job numbers are above-decent with no doubt. Moving on to the trade deficit. Statistics Canada’s new trade deficit numbers were released on August 5th, 2015, and they tell a different story than the ones’ of “doom and gloom” that “economists” have released. The trade deficit plummeted from an estimated $3.4 billion loss to $476 million, most of which was the result of a 7% increase in trade to the USA, and a reduction of 0.6% in imports. Finally we are seeing some benefits of a lower Loonie. So with these strong numbers, are we likely in a recession? No. Are we likely to see another month or two of GDP decline due to the last of the impacts of the low price of oil? Probably.
So in the end, there is no reason to worry that much about the Canadian economy. Even in the dollar stays at it’s current value, the economy will grow due to the increase in exports that will be generated. Although in many cases, a six-month decline in GDP would mean a recession, but in our case most of the damage is centralized in Western Canada, and our numbers are still strong.