OTTAWA - Finance Minister Jim Flaherty now expects Canada's economic recovery to be modest and for job losses to mount into 2010 even after growth has begun.
Flaherty gave his most recent and sobering assessment of economic prospects in a conference call from Chile on Friday, after a meeting with finance ministers from the Americas.
Responding to surprisingly high job losses reported in the United States on Thursday, Flaherty said all of his colleagues are concerned with the toll the recession is taking on workers and warned that while the economy may be in the process of stabilizing, labour markets are not.
"We'll start to see stabilization, which we are seeing now, and then a return to economic growth but continuing deterioration in employment," he said.
"We can expect that to happen into 2010, but we're optimistic we will then see the unemployment numbers start to improve."
On Thursday, the U.S. labour department reported that payrolls fell by 467,000 in June -- about 100,000 more than expected -- raising concerns that the recession could persist longer than the consensus, which is for growth to resume in the fourth quarter.
In Canada, the economist consensus is calling for another 30,000 job losses for June, when Statistics Canada releases the latest data next Friday. Since October, Canada has lost 363,000 jobs.
The finance minister has cautioned that difficult times remain for Canadians in the past, but has also expressed confidence that Canada would lead most industrialized countries in the swiftness and strength of the recovery.
In Friday's assessment, he appeared more circumspect, saying there was agreement among finance ministers that the rebound would be tepid.
"The anticipation is that the recovery will be modest, so that we'll experience some continuing increase in unemployment, but as we move into 2010, we'll start to see modest recovery," he said.
In the January budget, Flaherty forecast a relatively robust rebound from the deep recession, with nominal gross domestic product growth of 4.3 per cent in 2010, 6.4 per cent in 2011 and 6.1 per cent in 2012, all above private sector consensus averages.
In the conference call, the finance minister said he believed Canada's low corporate tax regime will begin attracting companies into the country.
Earlier this week, Tim Hortons Inc. (TSX:THI) announced it would relocate its corporate registration from the U.S. back to Canada in order to take advantage of lower taxes. Flaherty said he expected other companies to make the same decision in the future as Canada's corporate tax rates slide to the new 25 per cent floor in combined federal and provincial taxes.
