The Globe and Mail's Konrad Yakabuski argues that this recession should be nowhere near as nasty as its 1982 and 1991 predecessors.
However, the Bank of Canada issued two surveys Monday that suggest business is still feeling gloomy.
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.
The article posits the theory that employers will be less likely to pull the trigger on layoffs because they fear post-recession labour shortages.
I suspect that will be an asymmetric phenomenon.
But this is another interesting idea:
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.
Yakabuski said RBC thinks the economy should start growing again in the second quarter, with unemployment peaking at 7.4 per cent.
Now, to balance that out, see this CTV.ca story from Monday:
Two new Bank of Canada surveys suggest Canada's business community believes 2009 will bring little cheer, with continued challenges getting consumers to buy their products and services in the face of a deepening recession.
For starters, businesses participating in the most recent quarterly Business Outlook Survey reported their gloomiest expectations for the economy since the survey began in 1997. Survey data was collected between Nov. 14 and Dec. 12 -- a time period which followed a decline of many major worldwide economies.
In Canada, 71,000 jobs were lost in November, followed by another 34,000 jobs in the final month of the year. Some economists have suggested that Canada could see up to 200,000 job losses from the economy in 2009 before an expected turnaround in 2010.
Overall, the 100 businesses participating in the survey predicted that their sales will decline in the next 12 months. And as a whole, they held negative balances of opinions for both investment and employment over the same period.
Nearly two-thirds of these businesses reported dealing with tighter credit conditions, which the survey said marked "a record-high level in the winter survey."
The businesses surveyed also said it will also not be an easy task to find a job in 2009, as they expect fewer jobs will become available -- though the outlook is better for people working in the services sector.