Five years ago, the Today’s economy blog launched with a post that posed five burning questions. Are we any closer to answering them?
This post marks the fifth anniversary of the Today’s economy blog. My first entry — back on March 30, 2009 — posed five questions that served as a kind of mandate for the project. Looking back, they seem more naïve than insightful. I think they were the right questions at the time, but mostly they illustrate how little I grasped about what was going on around us.
My five questions and what I now believe to be the answers:
1. How long will this downturn last?
Not that long, if gross domestic product (GDP) growth is the right metric. We ended 2008 weakly, up just 0.7% for the year. And 2009 was worse. GDP growth ended that year in the red, down 2.8%. Compared to the recessions of the 1980s and 1990s, GDP growth held relatively firm. But while the Canadian economy stopped shrinking year over year (we did have one additional quarter of negative growth in 2011), we haven’t enjoyed a strong recovery. We ended 2010 up 3.2%, 2011 up 2.5%, 2012 up 1.7% and 2013 up 2%. We’re told to expect more of the same in the near term. It was a mistake to think about the downturn that followed the financial crisis in conventional recessionary terms. It was certainly wrong to bank on a strong recovery.
2. How bad will it get?
It got awfully bad for investors, right around the time this blog launched. The S&P/TSX Composite index lost nearly 40% of its value in the fall and winter of 2008-09. Unemployment hit a high of 8.7% in September 2009. Again, though, the story wasn’t the immediate after-effect. It’s the slow, painstaking recovery that’s defined the economy here at home and around the world. Canada fared better than most developed nations. But that’s little comfort to the unemployed, under-employed and the many Canadians who had to rewrite their retirement plan.
3. What can people do?
I think we’ve heard some pretty good advice along the way. Whether you decided to act on any of it – to go back to school during a period of slow economic growth, make a strategic career change or just rebalance your investment portfolio – I hope this blog helped present you with options.
4. How is the recession changing (or not changing) behaviour?
Little did I know that the answer to this one had more to do with business leaders than it did consumers. One of the most remarkable stories of the last five years is the growing stockpiles of cash held by businesses across the country. The reluctance by many to spend is both understandable – given the softness of the recovery – and disheartening.
5. In the long term, how will it have an impact on our attitudes about money?
I still say, not at all. Frugality is a necessity for many, but a fad for most. Go ahead and call me a cynic.
In a sign of just how much ground has shifted in the last five years, Bank of Canada Governor Stephen Poloz released the Bank’s annual report on Friday, telling reporters: “We are in uncharted territory.” A good deal was made about the economic models that failed in the months and years leading up to the financial crisis. If the last five years have made anything clear, it’s that our understanding of the global economy remains a work in progress.
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