The Canadian and British Columbian economies are in distress, but you could be forgiven for not noticing.
At a surface level, much appears in shape. Official inflation numbers are abating, and it’s true Canada didn’t get as hard-hit as other G7 countries. Unemployment levels seem relatively low and suggest an ongoing labour shortage in an economy of high demand. And the country’s gross domestic product (GDP) indicates growth, albeit at a slight rate.
Look more closely, though, and many economists say a different perspective emerges in the picture.
As economist and policy vice-president David Williams at the Business Council of British Columbia (BCBC) notes, many of the components of Statistics Canada’s consumer price index are priced higher than the inflation rate. Try telling someone at the supermarket that inflation has been wrestled into submission.
Most of the employment opportunities require no qualifications and are not well-paying. The vacancies have something to do with the fact Canadians don’t think many jobs are worth taking.
Statistics Canada data indicated private-sector job growth has been weak in recent times -- corporations aren’t investing heavily in the near-term – but there is an employment bonanza in the public sector. Of course, we pay for those jobs and they have a different role than to build prosperity.
And, as Williams pointed out recently, we lately owe any GDP growth to an extraordinary immigration surge – six times the historic post-Second World War levels, an astonishing 3.2 per cent growth in the last year alone. Last week we learned we have 2.7 million temporary residents. The top-line GDP numbers don’t tell the full story of stalled per capita GDP for seven years that has slipped into decline.
Without a coherent economic growth strategy based on innovation or investment, the Justin Trudeau government used immigration policy to paper it over. It did so understanding there would be insufficient housing for newcomers, so the population spurt has spurred an unintended consequence of high rent inflation.
B.C. led the country’s economy in the last decade, but that is no longer the case. Per capita GDP declined in 2023 and will again this year and next. People are leaving, not coming. Large capital projects (LNG Canada, the Trans Mountain pipeline, the Site C dam) are approaching completion and no others will replace their economic contribution.
It is true that fewer Canadians are living below the poverty line and income inequity has been reduced. But it is also true we have significant housing unaffordability, high household debt and a large cohort bearing variable rate mortgages. We can’t strike a balance between resource exploitation and our climate change goals.
And our ravenous real estate investment habit, now that housing is an asset class, has likely displaced a sizeable portion of would-be entrepreneurism. It’s proving safer to buy properties and sit back as their value grows than to sweat through a startup.
To add to our problems, last week the deputy governor of the Bank of Canada sounded a warning of a “productivity emergency.” Carolyn Rogers said Canada lags in investment in machinery, equipment and intellectual property – critical elements in productivity gains and in staving off another round of inflation – and that business sector productivity has stagnated for seven years.
The longer-term trend has been even more depressing. She notes that in 1984 the Canadian economy was generating 88 per cent of the per-hour value of the U.S. economy; by 2022, it was 71 per cent. Only Italy among G7 countries has slumped further.
As if the productivity issue isn’t bad enough, an influential business voice to the south sounded his own alarm last week.
BlackRock Inc. sits on US$10 trillion in assets, half of them in the retirement space, and CEO Larry Fink argues it’s time for America to rethink how it ages and works – or doesn’t work.
The notional retirement age of 65 dates back “to the Ottoman Empire” and Fink believes it needs to be adjusted now that we live longer. He argues for a raft of new employee benefits and says we need to spend the same energy on affording life as we do on extending it.
His message shouldn’t be lost on us, with nine million Canadians aged 60 and older. A Deloitte study in November found a majority of Canadians ill-prepared for retirement who face substantial lifestyle changes to avoid outliving their savings. It says the financial services ecosystem and governments have a role to play to improve financial security for more of us as we age.
There, everyone feel better now?
Kirk LaPointe is a West Vancouver columnist with decades of experience in Canadian media.
