Canadians Better Off Than Most
Posted by John Malloy on 12/29/2008
It may not feel this way for everyone but, by and large, Canadian families will finish 2008 in much better financial shape than families in many other parts of the world, including the United States. Indeed, the Canadian consumer almost single-handedly sustained the Canadian economy for much of the year, a function of employment and wage growth that surprised professional forecasters at every turn.
But as the new year approaches, the storm clouds that had been hovering on our horizon for much of 2008 are now directly overhead and threatening to soak us all.
The degree to which Canadian households might be hit by the recession will be a function of the strength of the three pillars of a typical household’s economic foundation: a job, a house and some savings for the future and for retirement. Cracks appeared in all three pillars in 2008, some wider than others.
“Overall, despite a modest deterioration, the financial position of the Canadian house-hold sector remains relatively positive,” the Bank of Canada said on Dec. 11, in its semi-annual Financial System Review.
One of the pillars of a household’s financial position, savings and investments, came under severe stress in 2008. At Dec. 15, the benchmark TSX composite index had fallen about 38% since the same date a year earlier, the worst since before the Second World War.
“I think there’s probably a lot of great buying opportunities emerging in the stock market as a consequence of all this panic,” Prime Minister Stephen Harper said in the middle of the October election campaign, a remark many commentators though might have been unwise.
His pronouncements on the economy, in fact, have swung about as wildly as the markets in the past several weeks. During the campaign, for example, Mr. Harper vowed several times that there would be no deficits on his watch nor would the country experience any reversal of economic growth.
“This country will not go into recession next year and will lead the G7 countries,” Mr. Harper said on Oct. 10.
But barely two months later, he was not only conceding that Canada had gone into recession, he told a television interviewer that a depression might even be a possibility.
Depressions are rare economic events that often have, as one of their defining characteristics,
a rapid and massive rise in the ranks of the unemployed. But Canada, at least at year’s end, still had relatively stable employment outlook.
For most Canadian households, this is the most important pillar of financial security.
Canada’s economy has done remarkably well when it comes to job creation in 2008, creating more than 129,000 net new jobs in the 12-month period ending in November. Certainly, there have been massive job losses in the manufacturing sector, but the losses there were picked up in other sectors. Wage growth was also strong through most of the year, remaining well above the rate of inflation and touching some record-highs in mid-year…
www.nationalpost.com
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