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Recovery will take longer

Canadians are in for at least two more years of slowing economic activity and low job creation, a condition that should keep interest rates low until 2014, says the Bank of Nova Scotia.

Canadians are in for at least two more years of slowing economic activity and low job creation, a condition that should keep interest rates low until 2014, says the Bank of Nova Scotia.

In a new forecast, Scotiabank economists Derek Holt and Dov Zigler estimate the economy will likely average 1.9 per cent growth this year, and 1.8 in 2013. The forecast is slightly below consensus, and well south of the Bank of Canada's recently revised projections of 2.1 and 2.3 per cent growth in 2012 and 2013.

The forecast comes on the same day as a Conference Board report that suggests Canada's labour market has run out of gas, and could even register a loss of jobs during July.

Scotiabank's take on the economy also follows this week's disappointing gross domestic product performance in the month of May, a 0.1 per cent gain that suggests second-quarter growth will be below two per cent. At such a slow pace of expansion, the spare capacity in the economy will actually increase over the next two years, rather than be fully eliminated by the end of next year, as the Bank of Canada projected last month.

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