There are signs of hope, but economic recovery will be slow
In the normal course of a big economic downturn, economists would be picking through the detritus right about now in search of what they call “green shoots” — signs of a natural recovery that will sprout and bring jobs and profits, investment and productivity.
This time around, however, the crisis is unlike any we’ve seen before. A full recovery is well over a year and a half away, even if there’s no second wave of the virus. And while there are some signs of life, they point to a stunted regrowth that will take many more months.
Whether we are able to nurture that budding recovery into something that resembles prosperity depends a lot on how well we, as a country, are able to leverage what looks to be an advantage — our ability to co-operate.
As our neighbours to the south make headlines for civil unrest and the way they have handled the pandemic, Canada seems like a haven of social cohesion and calm — even as we grapple with our own strains of racism, even as public patience frays at the thought of continuing restrictions.
That cohesion is precious, but also precarious.
“It’s one of those intangibles. Yes, Canada has it, and the U.S. doesn’t,” says Rohinton Medhora, a Canadian economist who heads the Centre for International Governance Innovation in Waterloo, Ont.
Medhora is convinced that a country’s ability to solve problems without conflict — and the ability of a country’s leaders to in turn persuade the population to come along for the ride — is central in how a country fares during a crisis.
In contrast to the United States, Canada’s federal and provincial leaders have been able to park their traditional animosity, for the most part, and figure out how to balance power and money in a way that benefits the population as a whole.
And the public has mainly agreed to play along.
Recent polling shows the public is generally supportive of their approach. Abacus Data’s findings on Monday suggest political polarization has diminished during the pandemic, and that Justin Trudeau’s ratings remain skyhigh, despite 7,300 deaths and hundreds of billions of dollars in lost economic activity.
The challenge is to make sure that cohesion has staying power as the recovery grinds along at an excruciating pace that benefits some groups before others.
There are signs of hope. Doug Porter, chief economist at BMO Capital Markets, points to new data showing improvement in business sentiment and manufacturing intentions, not just in Canada but in major economies around the world. In Canada, credit card purchases are on the rise, traffic is coming back, people are out and about, and some companies have reopened their doors. Toronto real estate hasn’t collapsed.
But this is not a recovery. Unemployment numbers for April will be published at the end of this week, and they will be hard to look at. And over the next few months, as retail and restaurants have to operate at half-capacity while also hiring extra people to clean and enforce crowd control, more firms will go under or simply give up.
We took an elevator down, Porter likes to say about the pandemic economy, and we will have to take a very long set of stairs back up: “It’s a long, long way to go, and we’re still in the early stages.”
Where does Canada’s ability to get along fit into that picture? Porter sees Canada’s stability and social cohesion as marginal benefits to the recovery — they help but won’t steal the show. The Canadian dollar, for example, is stronger these days in part because we haven’t caught the contagion of civil unrest that is ripping through so many American cities.
But Medhora says the benefits of social cohesion are more than just marginal. They’re hard to measure, yes. But as long as Canadians largely agree with their leaders that a government-supported rebound is essential even as some forms of restraint remain, the policies and plans stand a better chance of success, he says.
“It’s all going to be public money, so the bond between government and its citizens needs to be strong,” he said.
Being too smug could wipe that all out, of course. Our record on racism and our record on stifling the pandemic are certainly not stellar. For now though, we seem to agree on how to make them better.