Projects & Initiatives: Alternative Federal Budget
January 26, 2012

OTTAWA—The twin claims by Conservative political leaders that the damage done by the recession to the Canadian economy and labour market have been repaired and that Canada survived the recession much better than other countries are both false, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).

The study, by economist and CCPA Research Associate Jim Stanford, finds that, after adjusting for population growth, neither GDP nor employment growth have yet to recoup the ground lost during the 2008-09 downturn.

“In the labour market, in particular, the pace of employment-creation has lagged far behind the pace of population growth. After adjusting for population growth, less than one-fifth of the damage from the recession has been repaired, and things have gotten worse in the last 18 months, not better,” says Stanford.

“No wonder most Canadians think we’re still in a recession. From the perspective of the labour market, we still are.”

According to the study, real per capita GDP remains 1.4% lower as of the third quarter of 2011 than it was at the beginning of 2008—and several thousands of dollars per person below where it could be today on the basis of pre-recession growth trends.

“Real per capita GDP is still lower in Canada than it was at the beginning of 2006, when the Harper Conservative government first took power,” Stanford says. “By this measure, during almost six years of Conservative ‘economic stewardship,’ Canadians have experienced no economic progress whatsoever.”

Failing to take account of population growth also distorts international comparisons of economic and employment performance. Adjusting for differential population growth shows Canada’s GDP performance is only mediocre when compared to other OECD countries. Of the 34 countries in the OECD, Canada ranks only 17th—right in the middle—for growth in real per capita GDP since 2007. And after adjusting for growth in the working age population, Canada also ranks 17th (out of 33 reporting countries) in terms of employment growth.

“The claim that we’ve done better than other industrialized countries in surviving the recession is false. In fact, we’ve barely kept up with the pack,” Stanford says.

“The incomplete and relatively weak state of Canada’s economic recovery should make policy-makers think twice before embarking on a campaign of fiscal austerity,” Stanford concludes. “To do so would clearly further undermine output and employment, which are still weak. Instead, the top priority should be placed on expansionary measures to strengthen the economy.”