Why it feels like we're in a recession (when we're not) | About That

CBC News

30 Jul 202409:59

Summary

TLDRDespite signs of a recession, Canada isn't officially in one, according to a new consumer survey. Factors like rising unemployment, business bankruptcies, and cost-of-living challenges point to economic struggles. However, GDP hasn't declined for two consecutive quarters, a key recession indicator. High immigration rates boost total spending, masking per capita declines. This unique situation, dubbed a 'per capita recession,' highlights individual financial struggles despite overall economic stability. Economists expect continued interest rate cuts to address these issues.

Takeaways

📉 Canada is not currently in a recession, but nearly two-thirds of Canadians believe the country is or will be in one soon.
💼 Unemployment is rising, and it's harder for new graduates and immigrants to find jobs.
🛍️ People are spending less individually, leading to a feeling of economic strain.
🏢 Business investments have slowed, and corporate bankruptcies are at their highest since 2008.
📉 Despite these recession-like symptoms, Canada's GDP has remained flat, not meeting the technical definition of a recession.
📊 Canada's GDP growth per capita is the lowest in the G7, despite having the third-highest overall GDP growth.
🏠 The rapid population growth, mainly through immigration, has increased demand and inflation, particularly in housing.
💰 The Bank of Canada has kept interest rates high to combat inflation, making it harder to cut rates to help with the housing crisis.
🔍 Experts describe the current situation as a 'per capita recession,' where individual economic circumstances are worsening despite stable GDP.
📉 The Bank of Canada is aware of these challenges and has begun cutting rates, with expectations of more cuts to come to alleviate economic pressure.

Q & A

What percentage of Canadians believe the country is in a recession or will be before the end of the year?
-Almost two-thirds of Canadians believe the country is currently in a recession or will be before the end of the year.
What are the common symptoms of a recession mentioned in the script?
-The common symptoms of a recession mentioned are people cutting back on spending, businesses struggling due to a drop in spending, rising bankruptcies, and increasing unemployment rates.
What is the current unemployment rate in Canada according to the script?
-The current unemployment rate in Canada is 6.4%.
Why does the unemployment rate seem significant despite not being very high?
-The unemployment rate is significant because it has increased quickly, coming off a very low rate after the pandemic, which indicates a massive correction in the labor market.
How has the job finding rate changed according to the Bank of Canada's July policy report?
-The job finding rate has shown a significant drop, meaning fewer unemployed people are finding jobs from one month to the next.
How do recent corporate bankruptcy numbers compare to past recessions?
-Corporate bankruptcy numbers are the highest they have been since the recession in 2008.
Why is per capita spending decreasing while total retail spending is rising?
-Per capita spending is decreasing while total retail spending is rising because of a significant increase in population, primarily due to immigration. More people are contributing to overall spending, even if individuals are spending less.
What was the population growth in Canada over the last 12 months?
-Canada added 1.3 million people to the population over the last 12 months, with more than 95% of that growth coming from immigration.
How does the population growth impact the economy and inflation?
-The population growth increases demand, leading to higher prices and inflation. This situation makes it harder for the Bank of Canada to cut interest rates to help with the housing crisis.
What term is used to describe the current economic situation in Canada where GDP is holding steady but individuals are struggling?
-The term used to describe the current economic situation is 'per capita recession,' where the overall GDP is increasing, but individual economic conditions are worsening.
What has been the response of the Bank of Canada to the current economic situation?
-The Bank of Canada has recognized the struggles on a per capita basis and has started to cut interest rates, with expectations for more cuts to help lift the country out of the current economic situation.

Outlines

00:00

🌟 Canadians' Perception of Recession

Andrew explains that while Canada is not technically in a recession, many Canadians believe they are or soon will be. The video explores the symptoms of a recession such as reduced spending, business struggles, and rising unemployment. Despite these signs, the country has not been in a recession for years, with some economists suggesting Canada is performing better than it feels.

05:04

📉 Unemployment and the Job Market

Andrew discusses the rapid increase in unemployment following the pandemic, highlighting a significant drop in the job finding rate. This surge in unemployment mirrors previous recessions, even though Canada is not officially in one. He notes that new graduates and immigrants face difficulties finding jobs, contributing to the perception of a recession.

🏢 Business Struggles and Investment Decline

The video outlines the challenges businesses face, including reduced investments and a rise in corporate bankruptcies, reminiscent of the 2008 recession. Industries like IT and retail are particularly hard-hit, with many jobs migrating elsewhere and numerous store closures. Capital investment remains weak, a common recession indicator.

🛍️ Consumer Spending and Economic Output

Andrew shifts focus to consumer spending, revealing a paradox where total retail spending rises due to population growth, despite individual spending declining. This population growth, fueled by immigration, helps maintain overall economic activity. Yet, Canada's GDP growth per capita lags behind other G7 countries, reflecting economic strain on individuals.

🏠 Housing Crisis and Inflation

The influx of immigrants exacerbates Canada's housing supply issues, driving up prices and contributing to inflation. The Bank of Canada's high interest rates aimed to curb this inflation. While newcomers boost economic growth, their demand adds inflationary pressure, complicating efforts to address the housing crisis and reduce interest rates.

🔍 Understanding the 'Per Capita Recession'

Andrew introduces the concept of a 'per capita recession,' where GDP growth overall appears stable, but individual economic conditions worsen. This term captures the unusual current circumstances, where economic growth does not translate into better living standards for individuals. The Bank of Canada recognizes these struggles, influencing its decision to cut rates in July.

Mindmap

Keywords

💡Recession

A recession is a period of economic decline characterized by reduced trade and industrial activity, often identified by a fall in GDP in two successive quarters. The video discusses the discrepancy between the economic data and the public's perception, indicating that while Canada is not technically in a recession, many Canadians feel as though they are due to factors like rising unemployment and cost of living.

💡Unemployment

Unemployment refers to the state of being jobless and actively looking for work. The video highlights the significant rise in Canada's unemployment rate since 2022, contributing to the recession-like feelings among Canadians. Despite this, the overall economic indicators do not classify the current situation as a recession.

💡GDP (Gross Domestic Product)

GDP is the total value of all goods and services produced within a country over a specific period. The video's analysis focuses on how Canada's GDP has remained steady, preventing the classification of the current economic situation as a recession, even though other indicators suggest economic distress.

💡Great Resignation

The Great Resignation refers to the significant number of people leaving their jobs voluntarily during and after the COVID-19 pandemic. The video mentions this phenomenon as part of the context for the current labor market changes, where a low unemployment rate was followed by a significant correction.

💡Job Finding Rate

The job finding rate measures the proportion of unemployed individuals who find employment within a given period. The video presents data from the Bank of Canada showing a significant drop in this rate, indicating difficulties in the labor market despite the absence of an official recession.

💡Corporate Bankruptcies

Corporate bankruptcies occur when businesses are unable to meet their debt obligations and are forced to close. The video states that the number of corporate bankruptcies in Canada is the highest since the 2008 recession, which is a strong indicator of economic distress.

💡Retail Sales

Retail sales refer to the total sales of goods to consumers. The video discusses how, despite overall retail spending rising, per capita spending has decreased, reflecting individual financial strain amid broader economic stability.

💡Per Capita Recession

A per capita recession describes a situation where GDP per capita, or the economic output per person, is declining, even if the overall GDP is not. The video introduces this term to explain the current economic paradox in Canada, where individual economic experiences do not match the national economic data.

💡Population Growth

Population growth refers to the increase in the number of people in a region. The video attributes much of Canada's current economic resilience to significant immigration, which boosts overall spending and masks per capita economic decline.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. The video connects increased demand from a growing population to inflation, which exacerbates the financial difficulties felt by many Canadians despite stable GDP figures.

Highlights

Canada is not in a recession right now, despite many Canadians believing otherwise.

Almost two-thirds of Canadians believe the country is currently in a recession or will be before the end of the year.

There is a significant feeling among Canadians that the country has been in a recession for a few years.

Despite the challenging economic conditions, Canada has not officially entered a recession.

Unemployment rate in Canada is 6.4%, which is not extremely high but has risen quickly from a very low rate.

The rapid increase in the unemployment rate is similar to patterns seen in prior recessions.

Corporate bankruptcies in Canada are at their highest levels since the recession of 2008.

Retail sales per capita have been decreasing, indicating that individuals are spending less.

Total retail spending in Canada has been rising due to significant population growth driven by immigration.

Canada's GDP growth has been relatively flat, avoiding the technical definition of a recession.

The increase in population, mainly from immigration, has contributed to overall spending despite individual spending declines.

Canada experienced the third-highest GDP growth in the G7 in 2023, but the lowest GDP growth per capita.

Rapid population growth has led to increased demand and inflation, particularly in the housing market.

Despite rising costs and unemployment, Canada's GDP has remained steady, complicating the recession narrative.

Experts and economists have started using the term 'per capita recession' to describe the current economic situation in Canada.