As yesterday’s Labour Force Survey confirmed, the recession continues for the vast majority of Canadians, who rely on employment for most of their income. But the technical measure of a recession is consecutive quarterly declines in real Gross Domestic Product (GDP).
Some have suggested that, even by this measure, the recession continues. Of course, we will not have a definitive answer until the release of third-quarter GDP at the end of this month.
The recession officially continues if GDP was smaller in the third quarter (July, August, September) than it had been in the second quarter (April, May, June). We have all-industry GDP for every month but September.
It fell from an annualized $1,188 billion in April to $1,184 billion in May, and then remained at that level (give or take a billion dollars). However, April’s higher figure boosts the second-quarter’s average to $1,185.4 billion.
The figures for July and August are $1,184.3 billion and $1,182.9 billion. Bringing the third-quarter average up to the second quarter would require $1,189.0 billion in September.
After a few months of GDP changing by 0.1% or less, a 0.5% jump from August to September may seem wildly optimistic. However, it is well within the realm of possibility.
If GDP stays flat, the third quarter will fall short of the second quarter, simply because the second quarter includes April’s higher figure. But if September GDP recovers to April levels, then the recession may be declared over.
However, there are two complications. First, figures from other months could be revised with the release of those for September and the third quarter.
Second, as Jim explained very well a year ago, quarterly GDP totals are a little more than just three-month averages of all-industry GDP. We are so close to the line that differences between quarterly and monthly measures could easily determine whether or not the recession officially ends.