economy
NOT ALL RECESSIONS ARE CREATED EQUAL For all the recent discussion around a potential looming recession in Canada, it's mostly neither here nor there.
Are we headed for a recession? That’s a frequently posed question in today’s high inflation and high interest rate environment. It’s a fair question as GDP growth slows and uncertainty looms, but from the perspective of your authors, whether or not we’re in a recession isn’t all that meaningful in understanding the state of our economy. Consider the last three recessions we experienced in Canada, most recently in 2020 as we shut our economy down in myriad ways in order to deal with a once-in-a-century pandemic. That recession was characterized by a huge spike in unemployment but paired with unprecedented government spending and dovish monetary policy. As a result, it was relatively short-lived and followed by a ramp up in economic activity and job growth. Back in 2008 and 2009 we had the Great Recession, which was spurred by a financial crisis originating in the US, before spreading globally. This recession lasted longer, and recovery was much slower as the response was defined much more by austerity measures.
But in between those two, we had another recession in Canada in 2015. You’ll be forgiven if you don’t even remember it, as BC was hardly impacted at all. This recession was driven mostly by falling energy prices and reduced output, particularly in Alberta. For the most recent quarter, GDP growth in Canada was 0.01%, which is technically positive and means we aren’t yet in the beginnings of a recession. It is certainly possible that Q1 and Q2 2023 will bring negative GDP growth resulting in a recession, but that says nothing about the severity or potential duration. To gain a better understanding of how the economy is faring for most people, might we humbly suggest looking at the labour market, explored in previous sections, as a better starting point. Certainly, insofar as our housing market here in Metro Vancouver is concerned, outcomes in the job market are more relevant than trends in the value of goods and services produced.
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