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Former Bank of Canada governor Stephen Poloz sees recession conditions in many parts of the Canadian economy, as growth fails to keep pace with an increasing population.<\/p>\n
Canada\u2019s unemployment rate rose to 6.4 per cent in June and ticked up again to 6.6 per cent in August.<\/p>\n
\u201cThese are close to around two percentage points above the low point,\u201d Poloz said. \u201cThat\u2019s a very decisive recession signal in most situations, many of our normal signals about recession are clouded because of what I mentioned earlier, which is the immigration numbers.\u201d<\/p>\n<\/div>\n
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Poloz, now a special adviser at Osler, Hoskin & Harcourt LLP, detailed his views of the economy during a webinar Thursday.<\/p>\n
He noted that the population is growing at 3.5 per cent, but the economy is growing at around one per cent. This is also an indication that spending per household is shrinking significantly, something that only happens during a recession, he said.<\/p>\n
\u201cSo that just means, if we didn\u2019t have the population growth, it\u2019d be growing as a minus two per cent,\u201d he said. \u201cWell, that is a recession.\u201d<\/p>\n
While the labour market\u2019s downturn so far has been mostly a result of too many people chasing too few jobs, Poloz thinks layoffs could increase in the new year as mortgage renewals strain more households and further sap consumer spending.<\/p>\n
\u201cIt\u2019s probably just the beginning, because we are getting into the most stressful phase of mortgage renewal,\u201d he said. \u201cSo, it doesn\u2019t matter the rates are coming down, you still have to renew higher from where you were, and that just means more people join that group of constrained spending until we get through this thing.\u201d<\/p>\n
Preliminary estimates of July gross domestic product by Statistics Canada were flat and economists are predicting annualized growth of just 0.5 per cent for the third quarter, well below the Bank of Canada\u2019s forecast of 2.8 per cent.<\/p>\n<\/div>\n
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\u201cThis year is kind of a turning point, and so there\u2019s always a lot of uncertainty around forecast,\u201d Poloz said. \u201cWe\u2019ve looked at the Bank of Canada\u2019s report in July; they\u2019re looking for actually a pretty strong second half of this year; it\u2019s not turning out that way.\u201d<\/p>\n
Canada\u2019s low productivity relative to our U.S. counterparts remains an economic sore point. Labour productivity declined for the first two quarters of this year and GDP per capita, which considers population, declined for five consecutive quarters.<\/p>\n Recommended from Editorial<\/p>\n