Winnipeg Free Press - PRINT EDITION

Prepare for next recession

  • Print

Stephen Poloz exuded a new confidence last week in his debut appearance as governor of the Bank of Canada before the Commons finance committee in Ottawa. Mr. Poloz became Canada's central bank chief on June 3, replacing Mark Carney who left to take over the running of the Bank of England.

Enlarge Image

(DALE CUMMINGS / WINNIPEG FREE PRESS)

Mr. Carney's discussions of economic conditions used to reflect the difficult times through which he had led the bank. Mr. Poloz recognized the damage suffered by Canadian industry and employment following the 2008 near-collapse of the U.S. banking system but he also described the stages by which Canada is already recovering.

"Just as the financial crisis triggered an atypical recession, the recovery cycle is unusual," Mr. Poloz said. "The rotation of demand will require more than just the ramping up of production. The sequence we can anticipate is the following: foreign demand will recover; our exports will strengthen further; confidence will improve; companies will invest to increase capacity; existing companies will expand and new ones will be created. In short, we need to see the reconstruction of Canada's economic potential, and a return to self-sustaining, self-generating growth. This sequence may already be underway."

Indeed it may. The following day, Canadian and U.S. statistical agencies produced their monthly employment reports for May. The U.S. report showed that total employment increased by 175,000 from April to May and the unemployment rate remained essentially unchanged at 7.6 per cent. From a high of 10 per cent in October 2009, the U.S. unemployment rate has declined by fits and starts to its present level. In Canada, employment rose by 95,000 in May and the unemployment rate dropped slightly to 7.1 per cent. Canada's unemployment rate has been declining little by little from its October 2009 peak of 8.7 per cent.

Economists have been struck by the slow pace of economic recovery and employment growth in Canada and the U.S. But as Mr. Poloz pointed out, this recession was different from earlier ones and the recovery is also different. For one thing Brazil, Russia, India and China -- along with a great many lesser emerging economies -- now produce many of the goods once produced in North America.

Europe, meanwhile, has not yet started into the upward phase of its economic cycle. In the 17 countries that use the euro common currency, the unemployment rate rose to 12.2 per cent in April from 12.1 per cent the month before -- the 24th successive month of increase. For the 27 countries that make up the European Union, the unemployment rate remained steady at 11 per cent.

Enlarge Image

(DALE CUMMINGS / WINNIPEG FREE PRESS)

In this context, Canada and the U.S. are doing pretty well. Business cycles being what they are, the expansion that began about October 2009 is now 3 1/2 years old. It may continue for many more years, but there is no assurance that it will. It is not written anywhere that Canadian and U.S. employment will return to the levels that were once thought normal before China made our microchips and India programmed our computers.

For Europe, the policy of austerity and debt-reduction has left the poorest countries in an extremely weak position so unemployed people see no hope of recovery. Hope has fled. For Canada and the U.S., by contrast, there is every reason to hope conditions will continue to improve. Mr. Poloz has given a simple account of how that may happen and may already be happening. Beyond the expansion he describes, the next recession is already in preparation. Economic expansions do not go on forever. Finance Minister Jim Flaherty, Premier Greg Selinger and the other managers of public spending and debt in Canada should use these years of expansion to pare down spending and prepare for the next phase of the cycle.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition June 13, 2013 A14

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Jets This Week: Quarter Season Analysis

View more like this

Photo Store Gallery

  • Marc Gallant / Winnipeg Free Press. Local- Weather standup. Sundog. Refraction of light through ice crystals which caused both the sun dog and and fog along McPhillips Road early Wednesday morning. 071205.
  • Someone or thing is taking advantage of the inactivity at Kapyong Barracks,hundreds of Canada Geese-See Joe Bryksa’s goose a day for 30 days challenge- Day 15- May 22, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Would you visit Dalnavert Museum if it reopened?

View Results

Ads by Google