Dark clouds of stagnation threaten sunny ways

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Canada lost 31,200 jobs in July, sending the unemployment rate up to 6.9 per cent. Job creation so far this year is the worst since the tanking in the global recession of 2008-2009. “Canadians,” one economist said, “are wondering where the jobs are.”

It wasn’t just the raw job numbers that were depressing. More telling perhaps was the drop in exports. Remember all that talk about how the plummeting loonie would send exports soaring and come to the rescue of our long-ailing manufacturing sector? Hasn’t happened. Our export volumes declined for the fifth consecutive month. Exports of non-energy products have fallen in four of those five months, this despite an improving U.S. economy, which should be increasing demand for our products.

For Canadians, pocketbook issues are becoming an increasing concern. Optimism generated by the Liberals when they took power is starting to fade. Someone, as one wag suggested, might want to change the slogan. How about, “Spare Change You Can Believe In.”

Any government talk of growing the economy is “clearly not happening,” NDP jobs critic Niki Ashton said. Of the job drop, Conservative finance critic Lisa Raitt, no fan of understatement, said “it’s a stunning loss.” Finance Minister Bill Morneau was quiet while Prime Minister Justin Trudeau made the news. Mr. Trudeau inadvertently crashed a beach wedding while holidaying in British Columbia. Topless photos made the rounds.

Mr. Trudeau took the reins of power on the heels of a decade-long run of low economic growth. Canada’s GDP increase averaged less than 2 per cent a year in that time span. You have to go back to the first half of the last century to find a streak that weak.

Any quick turnaround was not to be expected. But with their campaign high talk, the Liberals created the impression things would at least improve. That doesn’t appear to be happening.

Along with the feeble summer numbers are a slew of other negative trends. Commodity prices show little sign of regaining past heights. New pipelines are not yet in the pipeline. New taxes – carbon taxes – are seen as being necessary to fight climate change. Trade agreements signed by the Conservatives are in danger of never being ratified. On top of it all are the gloomy global trends. The stagnation here is part of a much broader pattern of slow growth everywhere. Get used to it, most economists say. It’s the new reality, one likely to last for many years.

Speaking for the government, Rodger Cuzner, parliamentary secretary to the minister of employment, said it’s too early to start evaluating the Liberals’ economic performance. Major infrastructure investments pledged in the budget are yet to take effect. “Canadians understand” that weak commodity prices “had an impact on the job force from coast to coast. You don’t wave the magic wand … and get out of this situation.” The previous government, he said, was a one-trick pony that, instead of diversifying the economy, staked too much on the oil sector.

While Mr. Cuzner may be right to say it’s premature to lay any blame, the Liberals won’t be able to dodge taking the heat for very long. One of the irrational things about the business of politics is that the federal government gets blamed or praised for the state of the economy when in fact, as economists will readily testify, Ottawa is only a marginal player in the grander scheme of things. It’s the global currents that count.

“I don’t think you can blame either the Conservatives or the Liberals” for the continued stagnation, said Paul Ashworth, chief North American economist with Capital Economics in Toronto. The Liberals took stimulative measures in their March budget. The distressing new jobless and export numbers, the Bank of Montreal’s chief economist Douglas Porter said, tend to justify those measures.

But, to use Mr. Cuzner’s expression, there is no magic wand. There is little chance that the infrastructure spending will pack enough punch to turn things around.

Having heightened expectations for ending the country’s long run of economic lassitude, the Liberals find themselves with little hope of reaching the goal.

LAWRENCE MARTIN
Special to The Globe and Mail
Published Tuesday, Aug. 09, 2016 6:00AM EDT

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