GDP: The Road to Recovery?

Today’s Gross Domestic Product (GDP) release paints a significantly improved picture of the Canadian economy. GDP rose by 0.4% in November.

Statistics Canada also revised upward its previously released figures. GDP grew by 0.3% instead of 0.2% in October and 0.5% instead of 0.4% in September. While these figures are encouraging, they imply a slower annual growth rate than the 5.7% reported today by the U.S. Bureau of Economic Analysis for the fourth quarter.

Amount of Growth

Real GDP (in chained 2002 dollars) fell from a peak of $1,241 billion in July 2008 to a low of $1,185 billion in May 2009. Today’s figure is $1,201 billion for November 2009.

Canada’s economy fell into a deep hole and has climbed more than a quarter of the way out. After rising by $5 billion in November, annualized output is $16 billion above the bottom but still $40 billion below the top. If real GDP continued to expand by $5 billion per month, Canada would return to pre-crisis output in the third quarter of this year.

However, a return to pre-crisis output does not necessarily imply a return to pre-crisis unemployment. Given any productivity improvement, businesses will be able to produce the same amount of output with fewer workers.

Even a return to the same level of employment would not provide enough jobs to keep up with the continued growth of Canada’s population and potential workforce throughout the crisis. Job creation, as opposed to cutbacks, should be the focus of upcoming federal and provincial budgets.

Type of Growth

November’s growth was driven by natural-resource extraction and wholesale trade. The latter can be a barometer for the wider economy because it links production to retail and export markets.

One hopes that the rebound in wholesale trade presages a coming rebound in production. However, manufacturing output was completely flat in November.

November’s growth was uneven between industries. However, it looks more sustainable than October’s growth, which had been concentrated in utilities and real estate.


  • I am trying to square the increase in output in the education sector for November with labour retrenchment in the same sector as reported in the SEPH for November.

  • I was just about to mention that SEPH came out today and it again is in the opposite direction with the LFS.

    Dropped I believe just more than 33,000 payroll jobs for November rather than the gain of 110,000 estimated by the LFS for November.

    Leaves one scratching one’s head.

  • Month over month figures are not very exact or reliable. Economics is an inexact science to quote a philosopher/economist who wrote a book of the same name.
    I was startled to note that in the U.S. net job creation has been zero since 1999, and that in no other decade has it been less than 20 percent.

Leave a Reply

Your email address will not be published. Required fields are marked *