It was in the third quarter of 2009 — the July-September months — that Canada and many other major advanced nations began to breathe a little easier in the knowledge they had peered into the economic abyss and somehow survived.
Yet there are no signs of rejoicing, or even relief.
At separate stock-taking events last week, U.S. Federal Reserve chairman Ben Bernanke, Bank of Canada governor Mark Carney and the International Monetary Fund each had different versions of the same message — the global economy still hangs by a thread, growth is painfully slow and full employment is years away.
Europe is suffering through a Japan-style lost decade.
Canadians have been told repeatedly they have done better than most, and the message has become the reality.
France's L'Express magazine last week declared Canada "number one" in a cover story, encouraging readers to pack up and head to the promised land.
The reality is a little more nuanced, although Canada looks awfully good next to much of Europe, which is now expected to be in recession the rest of the year.
But even in Canada, things might have turned out better. The first full year of recovery saw the output expand by an acceptable 3.2 per cent, but slow to 2.4 per cent in 2011. Depending on the forecast, it will likely slow further to between 1.5 and 2.1 per cent this year.
And that's gross domestic product, which includes population growth of about 1.2 per cent a year. Take away the fact there are more people in the country producing and spending, and the picture looks very different.
On a per capita basis, a truer measure of whether a country is getting richer or poorer, Canadians on average are still not back to where they were before the 2008-09 crisis. Per capita GDP in inflation-adjusted dollars peaked at $40,015.79 in the fourth quarter of 2007, and had only returned back to $39,648.11 in the first quarter of this year.
That's not the way these things usually go. Normally break-outs from sharp, deep slumps are just as sharp in the reverse, with growth rates of four, five and even six per cent for several years.
But as Carney said last week, this was not a normal recession and anyone expecting a typical bounce-back would have been fooling themselves. Even so, the recovery has been softer than might have been hoped for.
"The broad brush of the difficulties of the aftermath of a major financial crisis — yes, we would have seen it," he said.
"The broad relative weakness of the United States and the impact on Canadian exporters ... we would have seen.
"I would say the scale and debt of the European crisis — this has proven to have taken longer and has been more acute than we would have anticipated."
And as Carney, Bernanke and the IMF made clear — it could all go terribly wrong if Europe falls off the high-wire act that has managed to contain the crisis without solving it.
What went right, say analysts, is that aggressive policy action in the form of trillions of dollars in stimulus and sharp cuts to interest rates succeeded in breaking the fall. In Canada, Ottawa and the provinces chipped in about $60 billion in stimulus, while Carney dropped the central bank's benchmark interest rate to a previously unheard of 0.25 per cent.
That kept the fall relatively shallow. About 430,000 Canadians lost their jobs in three quarters, but by July 2009, employment began rising again and has continued to build.
CIBC chief economist Avery Shenfeld, who early on coined the phrase the "Great Disappointment" about the recovery, credits the global response for preventing a Japan-style lost decade, with its record of double and triple-dip recessions and real deflation in the 1990s.
The conventional wisdom is that Japan's mistake was that waited too long to react. It took five years to drop the overnight rate to one per cent, and 10 to get into quantitative easing and recapitalizing its banking system.
"We've done better in terms of trying to prevent outright deflation from taking hold," Shenfeld said.
But the benefit of all that stimulus has not been as bountiful as might have been hoped for, especially in Europe and the U.S.
Part of the reason is that unlike Canada, many governments entered the crisis already burdened down with heavy debt loads or large deficits, so could not or chose not to throw all their chips in the stimulus pot. Others might have spent on the wrong things.
The United States spent its way to fiscal no-man's land, but with the exception of the bail-out of the broken banking sector, much went to tax cuts and other short-term relief that provided only fleeting relief, said Derek Holt, vice-president of economics for Scotia Capital.
"With the benefit of hindsight, they'd be in better shape now if they spent more on debt-relief (of the housing sector) and infrastructure projects," he said.
Some, like union economist Jim Stanford of the Canadian Auto Workers, say the problem is that governments didn't spend enough, or gave up to soon.
"Governments stepped in a temporary way," Stanford said. "Within 18 months, most governments, including Canada, turned off the stimulus and moved forcefully to austerity, so I'm not surprised at what's happened.
"If you are in an environment where the private sector hasn't really kicked back into gear and governments start cutting, then it's a no-brainer, your recovery will run out of gas pretty quickly."
Not surprisingly, Carney believes Canadian policy-makers did what was necessary. With the global economy collapsing, export markets for Canadian shippers dried up, leaving little choice but to prop up the domestic economy.
"We've relied on consumption (and) initially the government played an import role on the fiscal side," explained Carney. "We've relied on broader household spending. But there's limits to that strategy and we're seeing the limits on the household debt side."
Canadians in essence rescued the economy by borrowing, building up their household debt to a record high 152 per cent of income by the end of 2012. With the money, they mostly bought homes, leading to a real estate boom at a time of high unemployment and soft economic conditions.
"It's not sustainable," said David Madani of Capital Economics, agreeing with Carney. "You only have to look at housing as a percentage of GDP — (near record seven per cent) — to realize this is not a long-term strategy."
Unfortunately, there's no magic elixir to lift the economy out of its doldrums, either in Europe or the U.S.
Carney said the bridge years should be spent repositioning the export sector by increasing productivity and changing the mix of markets away from traditional to emerging economies, but that takes time.
It means Canada's recovery will stay in the slow lane for a while, maybe a long while, longer.
The Bank of Canada expects the economy to return to full production capacity at the end of 2013, but as Carney conceded last week, the size of the economy has shrunk since 2007. As long as global activity remains sluggish, Canada won't be able to do much better because now consumers are carrying too much debt to keep spending.
"We can continue to use the same tools, including low interest rates, to keep our economy from decelerating, but we're finding it difficult to get that extra lift to growth that we would need to get back to full employment," said Shenfeld.
That means Canadians can expect more of the same for a couple more years, Shenfeld said, and they still have to keep their fingers crossed that European leaders can continue to walk along the high wire. In other words, it won't get much better but it could still get worse.
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