Financial security Governance Housing Monetary policy

Was ‘Great Recession’ deeper in Canada than US, and is that even a valid comparison?

Chart 1 Canadian and US real GDP, 2007-2011
Chart 1 US and Canadian GDP 2007-2011
Source(s): Statistics Canada and U.S. Bureau of Economic Analysis

Editor’s Note: This post was inspired by a note from a friend of and frequent contributor to this site, which has since been posted as a letter to the editor of the Globe and Mail’s Report on Business.

With the Canadian general election campaign in full-swing amid incessant ‘technical recession’ chatter, it should come as no surprise to once again see finger-pointing at the (current/outgoing?) government’s performance during the Great Recession.

A recent Globe and Mail op-ed attempted to do just that. Unfortunately, it was riddled with factual errors and otherwise muddled whatever criticism it intended to parry.

Financial security Housing Monetary policy

Canada’s housing price stats likely contributed to inflating bubble

Chart 1 Statistics Canada,Bank of Canada and Teranet-National Bank housing price indices
Chart 1 Statistics Canada , Bank of Canada and Teranet-National Bank housing price indexes

At the July 2014 Monetary Policy Report (MPR) press conference, Bank of Canada Governor Stephen Poloz announced the Bank would be keeping its policy rate in “neutral” for the foreseeable future. While introducing a new catchphrase – “serial disappointment” – the MPR report and the Bank governor’s comments gave short shrift to the over-heated Canadian housing market, which continues to be fuelled by historically low interest rates. Despite conceding “particularly strong” price growth over the past year and “near record-high house prices and debt levels,” the Bank insists housing is in for a “soft landing”.

While the lack of housing market information has been a popular topic of late, a closer look at the little available info on housing prices may shed some light on why the Bank has downplayed rising home prices, and why if or when the housing bust happens the Bank will say it didn’t see it coming.

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Census 2011: Prison population rose 17.3% as population in shelters rose by only 2.8% (updated 25/09/2012)

With the release today of its 2011 Census families and living arrangements report, media, and doubtless reader, attention was likely diverted by the news that Statistics Canada had mistakenly counted same-sex roommates as gay couples.  What did not receive much attention today was the  2011 Census collective dwelling type release.  The release figures indicated a rise in the prison population of 17.3% as the population in shelters rose by only 2.8% (relative to the figures provided in the 2006 Census collective dwelling type release).  Yet between 2006 and 2011, crime decreased dramatically and the country went through a severe economic downturn.  Given these facts, the opposite outcome would have been anticipated.

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Austerity budgets target those already living in austere conditions: the disabled, the poor and their children

Ontario’s budget will include welfare freeze: McGuinty
The Canadian Press Mar. 25, 2012

According to the Oxford English dictionary:


ADJECTIVE (austerer, austerest)
(Of living conditions or a way of life) having no comforts or luxuries.

Middle English: via Old French from Latin austerus, from Greek austēros ‘severe’.

One could argue few have less comforts or luxuries than those dependent on already well-below-subsistence-level government income supplements such as Ontario Works, Disability Support and Child Benefit programs.

Welfare incomes by household type (Ontario), 1989-2010

These programs have not been indexed to reflect the cost of living over the years.  In constant dollars, social assistance supplements for all recipients are less today than they were two decades ago.  If that’s the case, then how have social assistance payments become such a budgetary burden in recent years?

Ontario Works and ODSP beneficiaries, Oct 2008 - Jan 2012

Answer: Volume.  From October 2008 thru January this year, the number of Ontario Works beneficiaries increased by one third,  and Ontario Disability Support beneficiaries by one fifth.  Both figures are well beyond Ontario population growth over the same period (3.78% from Q3 2008 to Q4 2011, CANSIM Table 051-0005).  It’s not the ageing population either, as the elderly cannot collect federal Old Age Security / Guaranteed Income Supplement and provincial income supplements at the same time.

A significant part of the explanation for the ballooning Ontario Works numbers stems from the Great Recession. Job losses began to mount in October 2008, Ontario’s Manufacturing sector particularly hard hit.  That recession and the current jobless (non)recovery have now spanned more than three years.  However, federal Employment Insurance (EI) benefits, for the increasingly few who qualify for them, only extend for a few months in Ontario’s major (urban) population centres.  As EI benefits lapsed… well, the numbers speak for themselves.