Recession over? Not on Main Street it isn't

Lana
Lana Payne
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In case you didn't hear it, (probably because you were too busy trying to find a job before your employment insurance ran out) the recession is over, according to our esteemed Bank of Canada governor Mark Carney.

But his prediction, if it does prove correct, will be more a technicality than a reality.

According to central banks and economists, a recession occurs when there are two conservative fiscal quarters without growth, in other words, two quarters when the economy actually shrunk.

In case you didn't hear it, (probably because you were too busy trying to find a job before your employment insurance ran out) the recession is over, according to our esteemed Bank of Canada governor Mark Carney.

But his prediction, if it does prove correct, will be more a technicality than a reality.

According to central banks and economists, a recession occurs when there are two conservative fiscal quarters without growth, in other words, two quarters when the economy actually shrunk.

Mr. Carney is predicting that the July-August-September quarter will result in an increase in GDP. It has shrunk the last three quarters. That increase would signal an end to the technical recession.

Still going strong

Unfortunately, in the real world, the recession is very much a going concern and will continue to be as every economist on the planet expects layoffs to continue - what they like to refer to as the "jobless recovery."

Even Mr. Carney, after declaring that the recession was over, confirmed that unemployment will continue to rise. Sounds like we need a new definition for recession.

Just days after Mr. Carney made this proclamation, Statistics Canada released its latest data on Employment Insurance claims and, as expected, the news was not good. Between October 2008 and May of this year, the number of people receiving EI benefits has risen a whopping 55.6 per cent - a reflection of the incredible number people being thrown out of work.

In fact, according to the Employment Insurance Coverage Study by Statistics Canada, released in July, in 2008 more than 100,000 unemployed workers were unable to collect EI benefits because they did not have the required number of hours.

This was even before the majority of job losses.

Alberta, B.C. among biggest losers

The biggest increases in people needing EI have been in the provinces of Alberta, British Columbia, Ontario, Saskatchewan and Manitoba. These provinces, according to Canada's chief statistics agency, recorded their highest level of EI beneficiaries since 1997, when data first started to be collected.

Alberta has seen an incredible 236 per cent increase between May 2008 and May of this year in the number of people receiving EI benefits - leading all provinces. Newfoundland and Labrador and Prince Edward Island have seen the lowest increases in the number of EI claimants.

Clearly, for working people and their families, the recession will only be over when the job market rebounds.

Avery Shenfield, a CIBC economist, noted that "it's not a recovery until (Canadians) start getting their jobs back. And on that score, we could be in for a long wait."

Despite the positive outlook by Mr. Carney, who has changed his economic outlook several times since last fall, there are a number of factors which could quickly dampen that forecast - including a rising Canadian dollar, which has had a horrific impact on manufacturing jobs in Canada since 2005.

Bad timing?

You have to wonder, with all the uncertainty, why Mr. Carney would make another forecast that could prove false. But then he's not the only guy firing darts in the dark.

Finance Minister Jim Flaherty can't seem to make his mind up about things either.

In June, the finance minister mused that it was time to slow down government stimulus and develop an exit strategy for government spending.

This week, despite Mr. Carney's more positive economic update, Mr. Flaherty stated he would be sticking with the federal government's economic recovery plan and refused to call an end to the recession.

"We have to continue with the stimulus to the economy to avoid the danger of some slowness occurring," he told reporters last week.

This, of course, would be the right decision if we also had the right kind of stimulus, including improved EI benefits for the unemployed.

Election in the offing

But you can bet your last dollar that this response from the fiscal conservative Mr. Flaherty has a heck of a lot more to do with politics and a possible fall election than with economics and his personal, ideological preference regarding government spending.

Calling an end to the recession with more layoffs to come is a political minefield for the Conservatives.

Mr. Flaherty does not want to be caught saying the recession is over while more and more Canadians lose their jobs and as unemployed workers begin running out of EI benefits - because, for all these people, technical definitions aren't worth much.

Given the biggest round of layoffs came late last year and earlier this year, we can expect that even long-tenured workers who have lost their jobs will start running out of EI benefits before the end of the year.

For the government, the biggest problem is still ahead as firms are reluctant to re-hire and even if they do it will be to turn part-time positions into full-time jobs.

This, combined with exhausted EI benefits, creates quite a volatile fall for the governing Conservatives.

Election can do what ideology won't

It's also likely the unemployment rate will continue to rise, creating an even bigger problem for the government that has failed to do anything to make EI benefits more accessible. Indeed, the likelihood of an election could very well force the Conservatives to lengthen EI duration and lower entrance requirements.

If they are smart, they will bite their ideological tongues and do the right thing: improve EI benefits. But that would be quite a bet.

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at lanapayne@nl.rogers.com. Her column returns Aug. 15.

Organizations: Bank of Canada, Statistics Canada, Conservatives CIBC Newfoundland and Labrador Federation of Labour

Geographic location: Alberta, Canada, British Columbia Ontario Saskatchewan Manitoba Newfoundland and Labrador Prince Edward Island

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Recent comments

  • Gerald
    July 02, 2010 - 13:20

    Lana: Why don't you be specific about what changes you would like to see in a revamped EI program?

  • Jack
    July 02, 2010 - 13:18

    Lets see if I have this right Lana. You would rather our federal government come up with ways to keep people on EI rather than help keep them off EI in the first place. Great logical thinking there. Lets hear your long term strategy to retain jobs and create more where possible. Oops sorry long term strategy and NDP that would never work anyway. Thats not the Layton way or the Lana way. THINGS ARE STARTING TO COME AROUND LANA. WAKE UP AND GET WITH THE REAL WORLD.

  • Wow
    July 02, 2010 - 13:14

    Such negative NDP Jack Layton garbage from the head of the Federation of Labour. Oh well thats what we have come to expect from Ms Lana. The gloom and doom expert.

  • Sharon
    July 02, 2010 - 13:08

    All talk all the answers but no substance to anything you say as usual Lana. Then again thats what we have come to expect from you anyway.

  • Gerald
    July 01, 2010 - 20:03

    Lana: Why don't you be specific about what changes you would like to see in a revamped EI program?

  • Jack
    July 01, 2010 - 20:00

    Lets see if I have this right Lana. You would rather our federal government come up with ways to keep people on EI rather than help keep them off EI in the first place. Great logical thinking there. Lets hear your long term strategy to retain jobs and create more where possible. Oops sorry long term strategy and NDP that would never work anyway. Thats not the Layton way or the Lana way. THINGS ARE STARTING TO COME AROUND LANA. WAKE UP AND GET WITH THE REAL WORLD.

  • Wow
    July 01, 2010 - 19:53

    Such negative NDP Jack Layton garbage from the head of the Federation of Labour. Oh well thats what we have come to expect from Ms Lana. The gloom and doom expert.

  • Sharon
    July 01, 2010 - 19:43

    All talk all the answers but no substance to anything you say as usual Lana. Then again thats what we have come to expect from you anyway.