While Canada's employment crunch isn’t quite at U.S. levels — Canada’s unemployment rate is now 6.6. percent, compared to about 4 percent in the U.S. — the country’s economic growth is expected to equal or outpace America’s in the year.
“The economy is quite healthy,” said Avery Shenfeld, senior economist with CIBC World Markets, one of the nation’s largest financial institutions. “Unemployment is the lowest it’s been in a generation, and the hard times from the budget cuts and fiscal reforms of the 1990s are over.”
For much of the last decade, Canada lagged significantly behind the U.S., as Canadian governments slammed a hard brake on years of deficits and began cutting services and raising revenues to balance the books.
In the short term, the only good news was the pummeling taken by the Canadian dollar, whose southbound drift made Canadian exports a bargain in the U.S. As a result, for most of the 1990s, Canada’s economic recovery was solid for exports, but anemic in domestic growth.
Canadian growth is surging while unemployment is falling.
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The turn of the century also marked the turnaround in the economy, Shenfeld explained, as commodity prices picked up in line with the slow Asian recovery, Canadian governments announced surpluses and tax cuts, interest rates came down and unemployment fell.If they weren’t singing “Happy Days Are Here Again” in the streets of Toronto, they should be, he added, particularly since the country’s major equity exchange, the Toronto Stock Exchange is up nearly 30 percent since January, having past the 10,000 mark and looking eager to smash 11,000.“The TSE has out-performed all the major indicies on a year-to-date basis,” he said.Canada’s $600 billion economy, is expected to grow by 4.5 percent this year and 3.5 percent in 2001, in pace with estimated U.S. growth rates of 4.9 percent this year and 3.7 percent next year.Even in the field of high-tech start ups, Canadian financiers and entrepreneurs are showing the nation is moving beyond drawers of water and hewers of wood.Canada “use to be a ‘Sad Sack’ story because we didn’t have a lot of money that was prepared to take risks on start-ups. In the last few years that’s changed” because of tax changes that made those investments more attractive, Shenfeld added.Unlike the U.S., Canada also has a current account and trade surplus. In 1999, it posted a global merchandise trade surplus of more than $23 billion, mainly due to its huge, $40 billion trade surplus with the U.S., he said.Craig Wright, deputy chief economist with the Royal Bank of Canada, said while Canada has outgrown the U.S. in employment growth over the last three years, Canada has not kept paced with the productivity boom south of the border as a result of massive investments in the new economy.Indeed, Canada’s Industry Department says in almost all areas of the new economy — from biotech and environment technology to new information and communications pathways — Canada is trying to keep “up to the Jetsons” and not succeeding.The industry report said while e-commerce in Canada is expected to hit nearly $4 billion this year, that is a far cry from U.S. online business which is expected to pass $140 billion.Even the Canadian dollar, which has confounded believers who wonder why it has been a currency wallflower stuck under 70 U.S. cents since 1998, is expected to finally make its move back upward by the end of the year, said John McCallum, the Royal’s chief economist.