Friday, December 2, 2011

Jobs Waning, Debt Mounting, Wages Slipping: A Bleak Outlook

Here are some followup comments that supplement my last post.

The emerging picture of the Canadian economy is bleak.  Inscribed as every government in the Western world is in neoclassical economic policy that shapes the global economy, the blame can be easily spread around, but our own government could be combatting the situation meaningfully with different policies instead of just going along with mainstream economic theory that privileges the financial sector over the real economy and austerity over job creation in the mistaken belief that that sector drives the industrial economy.

First some  relevant remarks from Jim Stanford's post about recent GDP numbers that reveal how bad things really are:

"Exports account for 134% of the expansion in GDP. If it weren’t for the sharp rise in exports in the third quarter, real GDP would have declined.

Energy exports accounted for 60% of that growth in exports in the third quarter.The energy industry alone directly accounted for 26% of the increase in real GDP at factor cost by industry between June and September. Considering that this sector employs about 1% of working Canadians, that is a stunning dependence on one sector.

Consumers and governments have pretty much hit the wall, as far as new spending. Consumer spending and government consumption barely grew at all in real terms. Government investment spending (all that infrastructure money) is now falling at a 5% annual rate, putting a big hole in the demand side of the economy.

Another weak spot was business investment spending, which also declined at a 4% annual rate in the third quarter — even with the enormous spending on tar sands projects (not to mention the “stimulative” impact of Harper’s corporate tax cuts).

In fact, business non-residential capital spending is the only sector of Canada’s domestic spending that is still well below its level in the third quarter of 2008 (as the recession hit). 

All other domestic spending categories (consumer spending, government investment and consumption, and residential investment) long ago regained and surpassed their pre-recession peaks. Government investment spending is 32% higher than that peak (although it is now being clawed back by austerity-minded politicians)."

The Progressive Economics Forum » Canada’s Petro-Recovery 

Here's another set of revealing stats from George Athanassakos - The Globe and Mail

Total Canadian government debt combined with total Canadian household debt is 203% to GDP. Greece is 195%. Just luck, not good economic management, is the main reason we're surviving economically. But if natural commodity exports begin to shrink - and they will as both China's and India's economies slow down - and the housing market begins to slacken off - which it will in an economy clearly slowing down - we're in more trouble than we already are.

In today's Globe and Mail,  Tavia Grant reports the the Canadian economy unexpectedly shed 18,600 jobs last month, the third drop in four months, and the first back-to-back drop since the so-called recession - so-called because we're really still in it, as we can see from the small and medium crises I noted in the previous post that continue to occur. That's roughly 72,400 jobs lost in the third quarter with one more month to go.

And to fill in this disturbing picture even more, Tavia Grant reported yesterday in The Globe that the average weekly earnings for an employed Canadian fell 0.3% in September to $872.75.  Of course annual wages are growing at only one-third of inflation, meaning real wages are slipping, as they have been for quite some time - some would argue over decades. Canada also has, according to the U.K.-based Resolution Foundation, the weakest median wage growth of all OCED countries since the so-called recession.

The bottom line: with such weak wages and so many jobs pooling in low-paying and part-time work, both the resulting reduction in spending in particular and debt servicing will unquestionably slow the economy down. Add to this situation government austerity programs and a lack of government spending and job creation initiatives and we have a recipe for a long drawn out recession - maybe even, as Steve Keen suggests, a depression.

How can either Harper or Flaherty look any us in the eye with such an appalling Canadian economic performance?

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