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Considering the damage wreaked by the steep drop in oil prices, falling Chinese demand for other commodities and the lack of an effective replacement for Alberta's sputtering growth engine, the Canadian economy appears to be holding up reasonably well.

The crystal-ball gazers have been trimming their national forecasts to take into account Alberta's worsening oil-based woes and their widening impact on investment, output, employment, incomes and consumer spending.

But economy watchers still expect growth this year will average no worse than 1.9 per cent to 2 per cent or so, with most of the damaging fallout absorbed in this quarter. Royal Bank's slightly more bullish analysts chimed in this week with a projection of 2.4 per cent, down 0.3 percentage points from their previous forecast in December.

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Prognosticators are basing their modest optimism for the rest of 2015 on a stabilizing oil price and the anticipated benefits flowing to consumers, manufacturers and other non-resource sectors from lower-cost fuel, a weaker currency and healthier demand from a resurgent United States, our most steadfast export customer.

But as the latest downbeat domestic data underscore, it wouldn't take much to make a hash of the forecasts and turn a moderate growth story into the country's first brush with the dreaded "R" word since 2009 – especially if China runs into even more headwinds and forecast U.S. expansion of about 3 per cent (which passes for a strong rebound in these days of chronically feeble growth) fails to materialize.

As it is, Alberta and Newfoundland will be hard-pressed to avoid an outright recession, as resource cutbacks and plunging revenues take a heavy toll.

With a hefty net loss of 14,000 jobs, Alberta's unemployment rate jumped to 5.3 per cent in February from 4.5 per cent the previous month, the highest level in 41 months. Newfoundland's jobless level rose to 12.6 per cent from 11.4.

The national rate edged up 0.2 percentage points to 6.8 per cent, with job losses cutting across a wide swath of industries.

It will come as no surprise that the retrenchment wave is washing over the once-booming housing market in Alberta, where sales are expected to decline 20 per cent this year and prices to dip by 3.4 per cent, according to the latest forecast from the Canadian Real Estate Association. Newfoundland, too, faces an outright decline in house prices, while they are expected to level off in Saskatchewan, where sales are predicted to slide by 11 per cent.

Housing is still running hot in places like Toronto and Vancouver, fuelled by strong demand and cheap credit. But while the Bank of Canada is more likely to cut interest rates again before it ever starts tightening, we may be witnessing the peak anyway.

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Indeed, the IMF has issued yet another warning that Canadian housing could be headed for a hard landing, and eventually the global monitoring agency may turn out to be right. Even if the landing (outside of Alberta) turns out to be pillow-soft, the overheated market and record household debt levels pose a drag on economic growth.

Here's something else that ought to concern our economy minders. If the U.S. economy is indeed in the midst of a resurgence – and that is by no means assured, despite stronger employment numbers – Canada only benefits if U.S. demand translates into expanded production capacity, job growth and higher wages.

But Canadian manufacturers adjusted to the stronger-loonie years by becoming leaner and more efficient. So they are now better positioned to accommodate expanded market share and reap the bottom-line benefits of a cheaper currency without significantly increasing capacity or their work force.

And if the Federal Reserve decides to begin "normalizing" interest rates, ignoring the fact no inflation pressures have surfaced anywhere, we'll see even more weakness in the loonie. That would be a further boon to Canadian exporters. But it would also increase costs for Canadian imports, saddling consumers with steeper prices and sapping confidence.

All in all, the Canadian economic picture could go from clouded to bleak in a hurry.

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