When our U.S neighbours fell into a recession, there were fears we would follow. The light at the end of the tunnel? We are nine months into recovery from our mildest and shortest downturn in recent history, while the United States has yet to declare their recession over.
The unemployment rate in Canada was 8.10 percent in April of 2010 and has been falling since last August. See Canada’s Unemployment Rate chart here.
Finance Minister Jim Flaherty, attributes our strong performance to the “boring” financial system. Banks were much more conservative in their lending than banks in America, and those who dealt with subprime loans were able to withdraw quickly. It is also reported that the volume and value of home sales in Canada are now at record highs.
During the recession the Bank of Canada cut its benchmark interest rate (to 0.25%), injected extra liquidity and bought up mortgage-backed securities. At its April policy meeting the bank withdrew its pledge not to raise rates. Analysts expect an increase in June. The government has ended tax credits for first-time house buyers and for renovations, which were granted in 2008 to stimulate demand.
There is another factor here at work- an increase in demand for exports of oil, gas, and minerals. At their low point, commodity exports from Canada were still 50% higher than in previous recessions. The energy industry is also looking good, with new investments planned for Alberta’s oil sands.
Our dollar fell as low as 77 American cents during the recession but is now back up close to parity. However, the central bank warns that a strong loonie will slow recovery and could be harmful to manufacturing exporters (car production fell by 31% in 2009).
All in all, much of our resilience stems from policy, bank regulation and sound public finances as mentioned above. We can give some credit to the Bank of Canada also.
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