Canada's recession losses to be long term: report

Thu Jul 2, 2009 3:47pm EDT
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OTTAWA (Reuters) - More Canadians will be out of work in 2014 than prior to the recession, even if the economy recovers quickly and expands at a healthy clip for the next five years, a prominent economist forecast on Thursday.

Canada's economy appears set to stop shrinking in the third quarter of 2009 and begin to grow by year-end. But consumers and businesses should not count on recouping the losses from three quarters of recession for years to come, according to a study by Dale Orr, an independent economist and formerly one of Canada's leading forecasters at Global Insight.

"Moving from negative to positive economic growth is a pretty obvious measure of recovery. But there's quite a few other perspectives that we should be looking at the same time and none of them are quite as optimistic," said Orr.

"And that's not something that people have focused in on too much, and that's very important because it's the long term."

The report is offered as a reality check for markets and pundits cheering over small signs that recovery is on the way.

Orr said advocates of this "green shoots" theory were "losing a bit of perspective."

Unemployment, one of the most important measures of economic performance, will peak at 10 percent but won't fall to 2007 levels of 6 percent, even after average annual economic growth of 3.4 percent in the 2011-14 period, Orr said.

The size of the Canadian economy will not return to the peak seen in the third quarter of 2008 until the end of next year and by 2014 will still be smaller than it would have been had the recession not happened.

And Canadians' standard of living, measured as GDP per capita, will still only be at 95 percent of potential in 2014, Orr said.

(Reporting by Louise Egan; editing by Rob Wilson)

<p>People walk by a Bay Street sign inside the financial district in Toronto October 10, 2008. REUTERS/Mark Blinch</p>