Philip Cross says tiff macklem’s recession debate misses Canada’s larger problem: weak growth over the past decade. After Statistics Canada published first-quarter GDP estimates, Cross argued that the economy should not be judged mainly by whether it meets a “technical” recession test.
Cross points to the first quarter of this year as evidence. Statistics Canada’s income measure of GDP dipped 0.1 per cent, the expenditure measure was unchanged, and the industry measure rose 0.1 per cent, leaving the average of the income and expenditure measures at a microscopic dip of 0.036 per cent.
Statistics Canada’s three GDP readings
Statistics Canada produces three estimates of GDP, and the mixed readings are why the recession label has drawn attention. Cross said there is nothing especially “technical” about using consecutive quarterly declines in real GDP to define a recession, but he also noted that neither the National Bureau of Economic Research, Statistics Canada, nor the C.D. Howe Institute has ever used consecutive quarterly declines alone to decide when a recession has taken place.
The result is a statistical dispute built on different measures of the same economy. One reading dipped, one held flat, and one rose, which is why the economy avoided consecutive quarterly declines and why the debate moved from the numbers themselves to the label attached to them.
Philip Cross on the broader weakness
Cross argues that the brouhaha is about something that did not actually happen. His view is that Canada’s real economic problem is its lack of growth over the past decade, not the question of whether the country has slipped into a technical recession after one quarter of mixed GDP data.
That is a narrower and harsher test than the headline recession argument. A country can avoid the technical label and still remain stuck with weak long-term growth, which is the point Cross says has been obscured.
National Bureau of Economic Research
Years ago, the National Bureau of Economic Research observed that U.S. recessions typically lasted about six months. Cross uses that benchmark to show why the recession debate has centered on timing and definition, not just on the quarter-to-quarter movement in GDP.
For readers trying to judge the numbers, the practical takeaway is simple: the first-quarter figures did not produce consecutive quarterly declines, but they did not erase the longer record of weak growth that Cross says is the real issue. The next debate will turn on whether policymakers and commentators keep focusing on the label, or on the decade-long performance behind it.
