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The End of Recession in Canada? Think again.

July 28th, 2009 · Add Comment

Is the recession in Canada over? Yes, according to Vancouver Sun. Think again, says Allen Zhu, Capilano University professor, whose article has been submitted to “Where is the Puck?”. Allen suggests that maybe the worst it over, but it will take much more time…

Written by Allen Zhu:

An article titled “The worst of the recession is behind us” was published on the Vancouver Sun, July 23rd. The official announcement of the Bank of Canada can be found on its official website:

Here is what I think:

There seems always a big and positive announcement from the Bank of Canada about the state of our economy even though when people are not feeling the same. I suspect that the Bank of Canada this time is helping the Prime Minister’s Office (PMO). Why? Since the so called “sub-prime crisis” started, whenever there is a political need or a bad news from the federal government, Mr. Mark Carney, the governor of Bank of Canada, will say something to support the Government. This time is the federal’s big deficit (see “The federal government fell $7.53-billion into the red during the first two months of this fiscal year”).

The worst of the recession might be behind us but it will be taking much longer to build up the consumer’s confidence. Surprisingly this time there is no prediction from Bank of Canada on the unemployment rate for next periods (Carney cautioned that the recovery depends on massive government spending and record-low interest rates. And he warned Canadians should not expect employment to bounce back right away). What Mr. Carney implied, I think, is that the federal government still needs to spend massively if Canadians want to reduce the unemployment rate. It is too bad that Canadians need to bear huge deficit in this fiscal year and should get ready for more deficits to occur in coming fiscal years – you simply can not get two things at one time between huge fiscal deficit and low unemployment rate

As for the consumer confidence, one thing that the Bank of Canada may never see as promising as it could be in previous recessions is the unemployment rate both in Canada and in other countries including the United States and the BRIC emerging country markets.

Even though the Bank of Canada has officially claimed with possible political agenda that we are out of the recession, I believe that unemployment rate will still be unprecedented and continuously high in next two or more years. Technology will be one of the major contributing factors for this. The Bank of Canada would have to learn how to get used to it and Mr. Carney has to learn how to turn it around to serve any political purposes.

When the Bank of Canada claims that we are out of the recession, we may have to admit it that small is always beautiful, comparing to our giant neighbor who is not 100% sure about its state of economy. Because our economy is small, it would not likely make that much difference internationally for whatever the Bank of Canada claims but it would produce some impacts for a possible federal election that I believe will soon be in the horizon when the heating summer is over.

Allen Zhu

Tags: Economic Trends

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