Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Rental Wage in Canada July 18, 2019
    Our new report maps rental affordability in neighbourhoods across Canada by calculating the “rental wage,” which is the hourly wage needed to afford an average apartment without spending more than 30% of one’s earnings.  Across all of Canada, the average wage needed to afford a two-bedroom apartment is $22.40/h, or $20.20/h for an average one […]
    Canadian Centre for Policy Alternatives
  • Towards Justice: Tackling Indigenous Child Poverty in Canada July 9, 2019
    CCPA senior economist David Macdonald co-authored a new report, Towards Justice: Tackling Indigenous Child Poverty in Canada­—released by Upstream Institute in partnership with the Assembly of First Nations (AFN) and the Canadian Centre for Policy Alternatives (CCPA)—tracks child poverty rates using Census 2006, the 2011 National Household Survey and Census 2016. The report is available for […]
    Canadian Centre for Policy Alternatives
  • Fossil-Power Top 50 launched July 3, 2019
    What do Suncor, Encana, the Royal Bank of Canada, the Fraser Institute and 46 other companies and organizations have in common? They are among the entities that make up the most influential fossil fuel industry players in Canada. Today, the Corporate Mapping Project (CMP) is drawing attention to these powerful corporations and organizations with the […]
    Canadian Centre for Policy Alternatives
  • Tickets available for Errol Black Chair Fundraising Brunch 2019 June 26, 2019
    You are invited to CCPA-MB’s annual fundraising brunch in support of the Errol Black Chair in Labour Issues.  Please join us to honour: Honoured Guest: John Loxley is Professor of Economics at the University of Manitoba and a Fellow of the Royal Society of Canada. Guest Speaker:  Jim Stanford is Economist and Director of the Centre […]
    Canadian Centre for Policy Alternatives
  • The fight against ISDS in Romania June 24, 2019
    CCPA is proud to co-sponsor this terrific video from our colleagues at Corporate Europe Observatory. It chronicles grassroots resistance to efforts by Canadian mining company Gabriel Resources to build Europe’s largest open-pit gold mine in a culturally rich and environmentally sensitive region of Romania. After this unimaginably destructive project was refused by the Romanian public and courts, the […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

Canadian recession will go beyond first half of 2015

Canadian recession will go beyond first half of 2015

Louis-Philippe Rochon
Associate Professor, Laurentian University
Co-Editor, Review of Keynesian Economics

With news of economic turmoil in China and other emerging economies, repercussions for Canada will be quite “atrocious”. Expect the recession to continue beyond the second quarter of 2015.

This raises questions about the supposed recovery in the second half of 2015. Currently, Canada is in recession. Most pundits are predicting that it is a mild recession, and that Canada will fully recover in the third and fourth quarters of 2015. But those predictions are surely wrong and are based on faulty economic logic.

Just like back in February, when I predicted we were headed toward a recession, I am predicting now that the current recession will stay with us through the third quarter. The macroeconomics are just not adding up for a recovery in the third quarter of this year.

For the record, this is not a mild recession. Some pundits are repeating this, although the economic logic of such a statement is grotesquely flawed. They claim labour markets are not showing signs of a recession. This is wrong. We know that large parts of manufacturing are badly reeling, in addition to the oil sector. Labour market participation is falling leading to false readings with respect to the unemployment rate. Once you factor in the fact that thousands of Canadians withdrew from the labour market, you end up with a much higher unemployment rate. Lastly, jobs being created are overwhelmingly bad jobs: part-time and self-employment. Granted, there have been worse recessions, but let’s not fool ourselves into thinking this is a mild recession as if it is undeserving of our attention. Why else would the Bank of Canada be panicking?

Currently, most economic institutions, from the Bank of Canada to the IMF, and most Canadian banks, have already revised downward their growth predictions for the second half of 2015. Most are now predicting tepid growth at best. This is based on a number of factors, including and in particular, economic growth in the US and other parts of the world. But there are a number of reasons why current events will force observers to rethink their predictions.

Here are 5 reasons not to expect a recovery later this year:

First, in the last 6 months or so, growth forecasts kept being downgraded in light of new information, until we realized that we were indeed in a recession. I fear we are simply repeating the same errors, blinded by our false illusions. The sooner we realize we are in a recession, the sooner we can deal with the proper macroeconomic policies to deal with it. Reducing the rate of interest will have no effect, so let’s stop talking in terms of monetary policy. We need fiscal stimulus.

Second, it is not clear how the US economy is performing. While most were predicting an increase in the rate of interest, now that consensus is weakening and it is no longer clear where US interest rates are going, indicating softer-than-expected US economy especially with respect to inflationary expectations.

Third, the continued weakening of the oil industry continues and will possibly intensify its impact on the Canadian economy. Prices are expected to further decline, some predicting in the lower $30’s a barrel. In fact, one famed financial analyst is predicting prices as low as $20 and even $10 a barrel. Our economy is not sufficiently diversified to overcome this level of weakness in an industry that once dominated our economy. And if prices fall as low as predicted, then expect more ‘atrocious’ news from that sector in the coming months, and its far-reaching impact on the Canadian economy.

Fourth, the near-collapse of the Chinese and other emerging economies will undoubtedly have an impact on our exports, outweighing any advantages the collapse of our dollar may have.

Fifth, current fiscal policy is simply not sufficient to prevent a further deterioration of our economy. Mr. Harper’s obsession with balancing the books is bad economics especially in times of continued crisis. His piece-meal approach, or what has been called boutique-tax credits, is aimed at placating a fickle electorate by offering housing credits and the likes, rather than promoting economic growth. Boutique tax credits are not the same as a bold macroeconomic strategy.

Refusing to discuss the economy won’t do us any good. We must address the elephant in the room before it creates more harm.

Comments

Comment from Thomas Bergbusch
Time: August 27, 2015, 4:49 pm

So, in the face of the downturn, that Margaret Thatcher lover Mulcair only promises more cuts, more cuts! The NDP has officially transformed itself into Social Credit, Vander Zalm style.

Trudeau is the real leader — he actually seems to understand something about government stimulus and the sectoral balances: he promises three years of deficit spending on infrastructure!

Write a comment





Related articles