Conscientious Stupidity

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Joe Oliver announced at the end of last week that the Canadian economy had grown by 0.3% in July. And he said he doubted we were ever in recession. Now his buddies are waiting to announce that the Trans Pacific Partnership has been signed. Another shiny bauble to hang in the election window.

But Jim Stanford writes that it's too early to declare the recession over:

And while the June and July GDP numbers are positive, in my view it is too early to conclusively declare the recession over. Here are some cautionary notes:

• Seventy per cent of July's GDP growth (and 50 per cent of June's) was due to one sector: oil and mining. In particular, non-conventional oil production rebounded after forest fires and maintenance shutdowns cut its output in the spring. That rebound cannot be repeated.

• In non-oil sectors, the GDP numbers are decidedly more mixed. Of the 19 other two-digit sectors tracked by Statistics Canada (other than oil and mining), 9 experienced zero or negative growth in July. The June and July numbers reflect a major rebound in oil production, but they do not yet indicate an economy-wide recovery.

• Private sector payrolls shrank in the first two months of the third quarter (according to the Labour Force Survey). Total employment grew marginally, solely reflecting public sector hiring.  In fact, private sector employment is still lower (as of August) than in October of last year.

• Remember, the monthly GDP by industry data uses a totally different methodology than the quarterly GDP by expenditure data -- and it is the latter that determines quarterly growth rates (and hence whether or not we are in recession). In particular, the monthly numbers will not reflect the continuing decline in business capital spending which was the dominant factor behind the GDP shrinkage in the first half.

• Other macro indicators weakened during the third quarter, hardly indicating a "recovery" (including commodity prices, the loonie, the stock market, and interest rates -- see chart below). Resource investment, which accounted for 30 per cent of total business capital spending before the downturn, is still shrinking -- and possibly even faster than in the first half, in response to the dismal trends in commodity prices

• Seventy per cent of July's GDP growth (and 50 per cent of June's) was due to one sector: oil and mining. In particular, non-conventional oil production rebounded after forest fires and maintenance shutdowns cut its output in the spring. That rebound cannot be repeated.
• In non-oil sectors, the GDP numbers are decidedly more mixed. Of the 19 other two-digit sectors tracked by Statistics Canada (other than oil and mining), 9 experienced zero or negative growth in July. The June and July numbers reflect a major rebound in oil production, but they do not yet indicate an economy-wide recovery.
• Private sector payrolls shrank in the first two months of the third quarter (according to the Labour Force Survey). Total employment grew marginally, solely reflecting public sector hiring.  In fact, private sector employment is still lower (as of August) than in October of last year.
• Remember, the monthly GDP by industry data uses a totally different methodology than the quarterly GDP by expenditure data -- and it is the latter that determines quarterly growth rates (and hence whether or not we are in recession). In particular, the monthly numbers will not reflect the continuing decline in business capital spending which was the dominant factor behind the GDP shrinkage in the first half.
• Other macro indicators weakened during the third quarter, hardly indicating a "recovery" (including commodity prices, the loonie, the stock market, and interest rates. Resource investment, which accounted for 30 per cent of total business capital spending before the downturn, is still shrinking -- and possibly even faster than in the first half, in response to the dismal trends in commodity prices.

Harper still has the worst economic record of any prime minister since the end of World War II. Shiny baubles and ranting about niqabs can't change a record that bespeaks conscientious stupidity.