As has been widely remarked, Canadian economic growth slowed markedly in the second half of 2011: the levels of employment and hours worked in December are what they were in July.
I’m not sure why the economy has slowed. The news coming out of Europe is alarming, but recent data from the U.S. have been encouraging. It’s much easier to see where the economy has slowed: Quebec.
The recession didn’t hit the Quebec economy as hard as it did the rest of Canada. Employment fell by only 1.5 per cent during 2008-09, roughly half the fall observed in the rest of the country. In addition, employment growth during the first two years of the recovery was roughly the same in and outside Quebec, so Quebec was able to retain its relative position until mid-2011.
But something has happened since then. Although the month-to-month employment numbers are noisy, it’s hard to dismiss the recent string of bad numbers that have come out of Quebec. The drop of 2 per cent in the seven months since the employment peak in May is more severe than the 1.5 per cent loss it saw in the nine months of the last recession.
I don’t yet know what to make of this. From the point of view of Quebec City, there’s clearly a problem. But since timely provincial data aren’t available, it’s not yet clear what the problem actually is, so we don’t yet know what an appropriate policy response might be.
Ottawa may see things differently. While employment was falling by 2 per cent in Quebec, it grew by 0.85 per cent in the rest of Canada. This isn’t a particularly robust rate of growth, but it was enough to shave a few tenths of a percentage point off the unemployment rate outside Quebec, even while the Quebec unemployment rate jumped back up to levels last seen during the worst of the recession.
A federal government that owes little to its electoral support in Quebec may be tempted to shrug its shoulders and let the provincial government deal with its deteriorating employment situation.
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