Posthaste: Why Canada’s population boom might not keep the economy afloat this time
Good morning,
Population growth in Canada this past year has been historic.
The pace over the last 12 months was the highest in this country since 1957 and eclipsed most of the world including China, India and the United States.
This surge in population is one reason Canada’s economy has appeared so resilient under the weight of rising interest rates — at least on the surface — as newcomers contribute to headline gross domestic product by increasing demand in the economy and the supply of workers.
“Immigration is the only reason why the economy may avoid recession,” writes Stephen Brown, deputy chief North America economist for Capital Economics, “but even this latest acceleration might not be enough.”
GDP numbers out Friday showed momentum remains weak after the economy contracted in the second quarter. July’s reading was flat and August’s growth was estimated at 0.1 per cent.
That puts the third quarter on track for 0.2 per cent growth if September’s reading is also flat.
But it could easily go the other way, say economists. And other more timely indicators are flashing warnings.
The Canadian Federation of Independent Business’ September Business Barometer was the weakest since the pandemic’s first lockdown in 2020 and suggests GDP likely fell last month, said Brown. Such a decline could add up to two consecutive quarterly contractions, the technical definition of recession.
“While recent employment gains mean it would be a stretch to call this a recession just yet, it will begin to feel like one if employment falls next quarter as we expect,” said Brown.
Other data this past week showed a sharp drop in the job vacancy rate for July from 4.3 per cent to 3.9 per cent. A decline in Indeed.ca job listings in August and
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