As some of you may know, one of my more consistent ‘go-to’ sources, when it comes to talking about the economy, is Benjamin Tal. And as we carry through Fall of ’09, the latest buzz seems to centre around, dare we say it, recovery. But when & how do we raise the flag that officially signals we’re in the recovery phase of economic growth? Well it depends on who you talk to.
Tal is quick to remind us that the true definition of a recovery is, “when GDP (Gross Domestic Product: the size of our economy) begins to grow again—not just for a single quarter, but on a trend basis.” By that definition, he says Canada is on the brink of the ‘r-word,’ by virtue of the latest numbers indicating Q3 growth. Couple that with the latest U.S. growth trend, over the last 6-plus months, and many economists are convinced the word ‘recession’ will soon be replaced with recovery.
On the other side of that proverbial coin (read: loonie) Tal points out a great deal of Canadians are quick to point to the unemployment rate as a primary economic indicator. And until the job losses stop or more jobs are created, recovery will be significantly delayed – perhaps as long as two years. And Tal alludes to a still weakened global economy coupled with a Canadian unemployment rate expected to hover at nearly 9% until at least 2011, as reasons to question whether recovery will happen sooner than expected.
“Even if the growth in GDP over the next couple of quarters is larger than we project, it likely won’t be enough to lower the unemployment rate. US house prices and credit markets remain challenged, Canadian and US consumers are still cautious given their earlier wealth losses, and businesses are hoarding cash rather than buying equipment.”
The good news seems to be that Canada’s national housing market is in recovery, with the auto industry targetted to strengthen further as well, over the coming months. And Tal says interest rates won’t “be tied to when economists declare “recovery”, but to when the unemployed see a recovery too.” He adds that if the Bank of Canada’s benchmark rate remains well below 2%, in 2010, we shouldn’t expect any significant interest rate hikes in the near future.
So the tendency to trade one ‘r’ word for another (that being the word recession with recovery) will vary depending on who’s doing the talking. Certainly, we’re starting to see signs of things returning to some level of normality – or at least subtle to significant improvement. Meantime, we’ll keep monitoring the usual indicators to see where we measure-up.
Thoughts? Drop me a line.
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