As we close the books on this year, we exit without a formal declaration that the Canadian economy was in recession at any point in 2015.
And we may still be waiting in 2017.
The Business Cycle Council, a group formed by the C.D. Howe Institute to place dates on the start and end of business cycles, met in mid-December, reviewed the economic data for the year, and made no decision on calling a peak or trough in economic activity, said Craig Alexander, vice-president of economic analysis at the organization.
The indecision may come as a surprise to those who know that Canadian gross domestic product declined in both the first and second quarters of the year. However, that popular definition of a recession – two consecutive quarters of declining GDP – is used by neither the Business Cycle Council nor the long-running U.S. group, the National Bureau of Economic Research, which dates that country's business cycles.
Instead, Mr. Alexander talks about three major criteria for a recession: the depth of the downturn, the duration of it and the dispersion – whether the economic decline is seen in a wide range of industries or just one or two. And the data on 2015 are inconclusive, at best, for all three.
"The depth wasn't that deep, the duration is subject to revision – so we don't know how long the contraction is – and if you look at the diffusion index of behaviour across Canadian industries, the weakness was certainly concentrated."
The estimates for GDP declines in the first and second quarters stand at 0.7 and 0.3 per cent, respectively, close enough to zero that subsequent revisions by Statistics Canada could swing them in a positive direction. Statistics Canada can take up to three years to revise the first-half GDP data, with the acquisition of income tax data from the Canada Revenue Agency the final step.
At the same time as the reported declines, overall employment was still rising, "so this makes it more difficult to assess whether that first half of the year was a recession or not," Mr. Alexander said.
Philip Cross, a member of the council, says "transitory factors" in the first half of the year such as Chrysler's temporary idling of a Windsor minivan plant and fires and maintenance shutdowns in the oil sands negatively affected GDP and are not indicative of a sustained downturn.
The Business Cycle Council, like its U.S. compatriot, risks some mockery as it waits to sift the data. When the National Bureau of Economic Research dates a business cycle and tells the U.S. that a recession came and went some months or even years before, there's a natural reaction: "Now you tell us."
But, Mr. Cross, who is speaking for himself, not the council, said that's as it should be.
"Lots of politicians and lots of politically motivated economists were very quick to call this a recession. … We have to be correct. We can't say 'it is a recession' and then come along six months later when Statscan revises the data and then we say, "Oh, remember that recession? Never mind.' We'd look like idiots."
The target audience, after all, may not be the general public and the media, but economic researchers who use the declaration in their academic work.
"For the majority of Canadians, this is a largely irrelevant exercise, because for them, the economy was weak in the first half of 2015 and you can call it whatever you want," Mr. Alexander said. "For Canadians living in Alberta, there's no question they're experiencing a recession. For Canadians living in Ontario and B.C., it's evident they're not. From the point of view of what matters to most Canadians, it's jobs. People don't eat real GDP."
David Milstead