Canada – Not So Bad, Eh?

Topic: Human Interest

Fergus W. Gould CFA

March 30, 2017

Image used with permission: iStock/bukharova


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Canada – Not So Bad, Eh?

You’ve read all the stories. Canada hasn’t exactly been an economic juggernaut of late. Low oil and gas prices, stubborn unemployment, weak exports, a weakened loonie, never ending annual federal deficits, and now Trump taking a baseball bat to our exports. Yes, well, ahem, there is some truth to these things.

However, is it as bad as it seems? As we’ll illustrate using some lies – sorry, that should read “robust statistics” – reports of Canada’s death have been greatly exaggerated. Any good Canadian citizen, resident, or even a newly arrived refugee can justifiably claim that “it’s not so bad, eh?”

Just a flesh wound?

It does feel as if Canada has been repeatedly hacked at… losing one arm and then the other, like the poor knight in Monty Python’s The Search for the Holy Grail. It started with the credit crisis and has been unrelenting. Whatever happened to the good old days when we sold natural gas to the Americans for prices that were in the teens, and that was denominated in U.S. dollars to boot? More recently, after oil prices, along with Alberta employment, also collapsed, we had the Alberta wildfires. “Fort McMurray wildfires dampen job gains”. Fact check – yes, the Canadian Manufacturing Coalition actually wrote that. What next? Pestilence? Oh, not to worry, that was just the Liberal’s budget.

Lies, damned lies, and statistics

Well, we have some good news for you. The phrase “lies, damned lies, and statistics”, attributed to the British Prime Minister Benjamin Disraeli, and popularised by Mark Twain, correctly alludes to the ability of anyone to burnish their argument by using artfully manipulated statistics. However, at times, the facts help to tell the story like it is. Facts or statistics? You be the judge. In the NHL, team managers say all manner of things, but the league tables don’t lie. There’s nothing better than a strict relative comparison to blow away the haze. Picking a starting point of Q4, 2007, chosen as it was the point just before the credit crisis and ensuing 2008/09 recession, it turns out that Canada has had, wait for it… the best real GDP growth amongst the G7 countries. As illustrated in the chart, Canada’s real GDP has grown just under 15% in total since Q4, 2007, comfortably ahead of the U.S. and thrashing the rest of the G71. So there! Off on a tangent, I guess the Maple Leafs are more like Italy than you initially may have assumed.

And it doesn’t stop there. Turning to employment conditions, which are arguably even more directly relevant to all of us on (economic) Team Canada, our employment circumstances aren’t anything to sniff at either. Put aside the actual Canadian and U.S. unemployment rates (as there are differences between how each country measures unemployment and, even at practical “full employment”, Canadian unemployment is always higher than in the U.S.2). Let’s instead look at total real wage growth. This all-encompassing employment measure captures not only the number of people employed, but also average hours worked and wage rate per hour. Since the same starting point of Q4, 2007, Canadians have also enjoyed better total real wage growth than Americans. Canadian real wage and salary growth has been a total of 17.2% compared to the U.S. at 13.7%.

Party like it’s 1999

Prince wrote the song containing these lyrics in 1982. Little could he have known then that 1999 would turn out to be the ultimate party for those enjoying the seemingly boundless opportunities of the tech boom and the immense equity market wealth and employment income that accompanied it. Now it’s our turn to boogie. Why? Sticking to the theme of what is important to us as Canadians, how ‘bout them home prices? For the majority of Canadians, their homes are easily their biggest asset and another reason to feel good. The stats are in. Nationwide, home prices in February 2017 were 16.0% higher than a year ago. The year ago figure showed good growth over the prior year, which showed good growth over the prior year, which… ok, you’ve got the gist of it. On this measure, we beat the Americans cold. There’s no need to even check the comparative figures (especially if you figure that what matters to us is our house prices in our dollars and theirs in their dollars). Canadians now have materially more debt per capita than Americans too but, hey, you can’t throw a great party without buying a few beers, right? Just don’t think about what may happen after the party is over.

To conclude on a more serious note, Canadians have experienced a string of mishaps and the road ahead also presents numerous obstacles. Possible U.S. trade restrictions, high electricity prices hurting the manufacturing sector, stifling regulations, alarming fiscal deficits, bubble-like house prices and frightening consumer debt levels are but a few. On the other hand, some key statistics show that the past nine years have not been as bad as many may feel. So too, the future is likely to be less gloomy than many may fear. Keep your fingers crossed.

The statistics in this article are all sourced from work by Nathan Janzen, Senior Economist at RBC Economic Research.

2 In large part, this is because Canadian unemployed workers have a better safety blanket than those in the U.S., so feel less imperative to get back to work, but is also due to bigger seasonal effects in Canada – think Newfoundland fishermen in the winter.

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