The slower rate of vaccine roll-out in Canada compared to the U.S. coupled with the massive stimulus about to be implemented south of the border is going to mean significantly different economic growth profiles between the two countries in the coming year.
In a virtual presentation on Wednesday to the Manitoba Chamber of Commerce, TD Bank vice-president and deputy chief economist Derek Burleton said U.S. GDP growth could reach 5.8 per cent this year if President Biden’s $1.9 trillion stimulus goes through.
While he said that the models keep changing — relative to the strength of the virus waves and mutations, the pace of vaccination roll outs and the eventual scope of stimulus packages in Canada and the U.S. — Canadian growth rates for this year are expected to be around four to 4.5 per cent.
That forecast is down from late last year when TD was expecting 4.9 per cent growth in Canada in 2021 and 3.4 per cent in the U.S..
But Burleton said his current forecast calls for stronger growth in Canada than the U.S. in 2022.
That is to say the economic forecasting business has been just as disrupted by the pandemic as every other part of the economy.
"I’m not downplaying the stresses on key sectors, but from the 50,000–foot vantage, we are learning, there is resiliency." – Derek Burleton
But what is not in dispute is that Canada has been lagging in getting the most vulnerable vaccinated, he said, and that does have an effect on the pace of economic recovery.
But even still, Burleton said the resiliency of the Canadian economy has been surprising.
"I’m not downplaying the stresses on key sectors, but from the 50,000-foot vantage, we are learning, there is resiliency," he said.
While there have been some forecasts predicting that Manitoba’s economy might get back to pre-pandemic growth rates quicker than other provinces, Burleton noted that when it comes to employment levels, Manitoba was hit hard by the second wave of the virus.
"Our hope is that the province gets a larger bounce in employment over the remaining 11 months." – Derek Burleton
TD’s data show that between October and January only Quebec’s unemployment rate grew more than Manitoba’s.
He said the second wave of job losses or the drop in employment relative to the post-pandemic peak was highest in Manitoba.
"But thankfully the GDP did not decline as much as some provinces," he said. "Our hope is that the province gets a larger bounce in employment over the remaining 11 months."
But he said the "scarring of the labour market" will still be a challenge in a slowish recovery.
"The transition for low-skilled workers... will still be a challenge," he said.
"The transition for low–skilled workers... will still be a challenge." – Derek Burleton
It has become clear that restrictions across Canada were tougher than they were in the U.S. and the restrictions in Manitoba when the second wave hit the province hard have not benefitted the province when it comes to the labour market.
As has been reported, the housing market has obviously done surprisingly well and Burleton noted that there are very positive headwinds for the agricultural sector which bodes well for Manitoba this year.
But he said it will likely take until 2022-2023 before there is a normal shaped recovery in Canada.
Meanwhile, he said there is little chance that interest rates will rise any time soon, even if there are inflationary pressures and the spike in U.S. economic growth will strengthen the U.S. dollar, meaning the Canadian exchange rate will likely not get above 80 cents which will help exporters, including the grain market.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.