Most economic indicators have bounced back since the recession, save one: Canada's jobless rate.
In fact, it will take another four years for the country's unemployment rate to return to pre-recession levels of 6 per cent, according to the Conference Board of Canada's long-term economic outlook.
Closing the remaining gap on full employment "will be a long and protracted process, as real GDP growth will be lacklustre over the next few years," said Pedro Antunes, director of national and provincial forecasts.
Several factors will hold back economic growth. For one, household spending will be stymied by softer wage gains, heavy debt loads and rising interest rates. For another, fiscal restraint by all levels of government will weigh on the Canadian economy.
It sees slower economic growth as the new normal: real GDP in Canada is forecast to grow at an average rate of 2.7 per cent annually between this year and 2016. Growth will slow further to an average of 2.1 per cent after 2016 due to soft labour force growth and a shift in spending patterns due to an aging population, the annual forecast to be released Wednesday says.
In the near term, several trends will contribute to slack in the labour market: high levels of immigration, a greater proportion of older women in the work force and the likelihood that many boomers will delay retirement to recoup some of the losses to nest eggs.
The picture changes after that – after 2014, the board sees retirement rates picking up, a development that will tighten labour markets and put pressure on employers to boost wages. Productivity improvements will be needed to pay for those wage gains.
The report comes a day after the Bank of Canada issued its own views of the economy. It said the picture has brightened in recent months, indicating interest rates will have to eventually rise. The central bank cautioned, however, that households still carry too much debt and several headwinds – from rising oil prices to the strong Canadian dollar – pose risks to the economy.
The Conference Board, for its part, sees the central bank slowly raising the country's benchmark lending rate to about 4.25 per cent by 2014. Posted five-year mortgage rates will return to more normal historical levels of 7.3 per cent by 2015.