U.S. jobless rate up as hope dims for quick recovery
It could take several years for Canadians to fully recover from the recession's economic body blow, a new study released Wednesday suggests, as discouraging employment figures were released in the U.S.
Both the Canadian report, authored by Dale Orr Economic Insight, and the U.S. jobless figures suggest that a turnaround is still a long way off, despite hopes that the economy had hit bottom and would soon begin to recover.
In the U.S., the jobless rate hit a 26-year high after the economy shed 467,000 jobs in June. And despite Washington's billions in stimulus spending, unemployment now sits at a dismal 9.5 per cent.
About 14.7 million people were out of work in the U.S. last month, and some analysts say the U.S. unemployment rate could rise to 11 per cent in the coming months.
Despite so-called "green shoots" in the economy, both the U.S. and Canadian reports suggest that consumer spending -- once a powerful tool for economic recovery -- won't be able to come to the rescue.
In fact, consumer confidence on both sides of the border remains muted.
According to the Orr report, once the economy does begin to grow again later this year, deep economic scars will be visible for at least five years.
In particular, the Orr report states that the unemployment rate, productive capacity and overall living standards will continue to slump through 2014.
In terms of unemployment, the prediction is that Canadian figures will echo U.S. numbers and hit 10 per cent next year.
Even with a recovery, the Orr report says that returning to a pre-recession jobless rate of 6 per cent by 2014 will be difficult, if not impossible.
"The average Canadian is going to be hearing of recovery, and they will look around and say, `Gee, my per capita income has hardly recovered, employment levels have yet to recover, what do you mean by recovery?' " Orr told The Canadian Press.
Furthermore, Orr's predictions were made with relatively optimistic economic forecasts that Canada's GDP would rise by a rate of 3.4 per cent each year from 2011 to 2014.
"Over the recession, people lose their jobs and they lose work experience which cannot be fully recovered," Orr explained.
"Business investment and innovation is lost, which is unlikely to be fully recovered. As well, the recession will cause significant changes in the structure of the economy, especially in the financial and auto sectors."
More troubling, say analysts, is that Canadians will be left with a massive hangover after consecutive years of binge government stimulus spending.
Toronto-based investor David Rosenberg, from the firm of Gluskin Sheff, said that growth will incremental and slow.
"My contention is that even when the recession ends, there's not going to be much of a recovery," he said.