It took only a few days of 2020 for the violence of world events to rattle any tenuous confidence Canadians may have had in our economic prospects for this year. The opening week of January brought us the U.S. killing of a top Iranian commander and the ensuing confusion around U.S. President Donald Trump’s motives, putting financial and commodity markets on edge and prompting Canada to move its armed forces in Iraq to safer ground. Separately, Australia burns, the U.K. churns and Iranian retaliation is in the air.
But as Wednesday morning’s heavy news of 63 Canadians dead in a plane crash in Iran sank in, our vulnerability to the unpredictable brutality of the world suddenly became all too clear.
We are sad, we are muddled, we are fearful for the future. Talk of recession is everywhere. And it won’t take much to knock us off kilter, despite projections for an economy that is expected to march along solidly.
Economists from the country’s biggest commercial banks offered up their annual prognostications for Canadian growth and prosperity on this all-too-troubling day, and they gamely reflected what the data and analysis tell them: Even after an astounding 11 years of expansion, Canada’s economy will yet again inch ahead in 2020. Perhaps not by leaps and bounds, but with oil prices looking better than they have, and with the U.S. still strong, and Canadian labour markets still solid, everything will be OK-ish.
Yes, there are some negative signs. Canadian consumers who have driven the economy for so many years don’t have the oomph that they used to, says Beata Caranci, chief economist at TD Bank.
We’re still spending, though.
Plus, consumer insolvencies are on the rise, especially in Ontario, as indebtedness gains the upper hand in some households, she notes.
And the job market has pulled back recently, shedding 71,000 positions in November and leading to a rise in the unemployment rate to 5.9 per cent — the highest since August 2018.
But businesses large and small say repeatedly that their biggest challenge these days is finding enough workers to fill their job postings. About half a million positions are unfilled.
And Canada’s population is surging, with immigration fuelling growth that makes other countries envious, Doug Porter, chief economist at BMO Financial Group, points out. They’re bringing in skills, entrepreneurialism and down payments for houses that help support stability in real estate markets, especially in our big cities.
With oil prices making a bit of a comeback, Alberta and British Columbia are poised to lead growth in Canada, Porter predicts. It’s probably not enough to inspire a fresh round of capital investment in the oilpatch, adds Avery Shenfeld of CIBC, but things will be better than they have been in recent years.
And the United States, which can usually be counted on to tug Canada along, is humming.
Scotiabank’s recession indices for both Canada and the U.S. point to only very low chances of a contraction in either country any time soon.
Yet those recession fears persist.
The Conference Board of Canada’s consumer confidence index sank dramatically in December to its lowest point in three years. Ontario consumers have become particularly pessimistic, and in Alberta, they're downright dismal.
And, on Wednesday, a survey done for Bloomberg News showed 55 per cent of respondents in Canada believe there’s somewhat of a chance of a recession here this year.
Perhaps that’s not too surprising, given there’s a reasonable sense that we’re due after 11 years of expansion. And with global instability coming at us from all directions at unpredictable moments, of course we are nervous about the impacts on our trade-dependent economy.
But we risk talking ourselves into a frenzy at a time when global uncertainty demands that we keep our wits about us.
That’s where politicians can play a pivotal role.
The chief economists make the case for responsible politics in handling the recession mirage with care.
The Conservatives, however, are feeding the fragility with public statements and ads on social media that accuse Prime Minister Justin Trudeau of “setting the stage for a made-in-Canada recession.” They blame the Liberals for driving away business investment and undermining Canada’s competitive edge with high deficits and new taxes.
The Liberals, for their part, haven’t given Canadians much cause for confidence either.
If — or when — a downturn comes, the traditional remedy of turning to the central bank to cut interest rates won’t work like it has in the past.
Rates are already low, and heavily indebted consumers aren't in any position to respond to them in a way that would lead to an economic recovery.
To a name, the chief economists pointed to the need for governments to stand at the ready, prepared to pick up the pieces with stimulus, tax measures, infrastructure spending or whatever it takes to ease the pain.
So far, though, we’ve heard little in the way of a plan — which only exacerbates the dangerous crumbling of consumer confidence.
Heather Scoffield is a columnist for the Toronto Star.
Twitter: @hscoffield
