The Economist - USA (2020-11-07)

TheEconomistNovember 7th 2020 29

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C

anada’s economyis often subject to

unfavourable comparisons with that of

the United States, but recently it has been

rivalling its neighbour’s. Like the United

States it has recently enjoyed a big im-

provement in economic sentiment. In July

the Bank of Canada predicted that at the

end of 2020 gdpwould be 6.8% smaller

than a year earlier; on October 28th it re-

vised that forecast to a 4.3% hit.

By many measures, Canada’s labour

market seems to be rebounding even faster

than America’s; in September Canadian

employment was only 3.7% beneath its pre-

pandemic peak, while in the United States

jobs remained 7.1% scarcer, calculate econ-

omists at tdBank (see chart). Yet the coun-

try has not quite overhauled Uncle Sam in

the quest for a v-shaped recovery from the

spring slump. That may be because, as in

Europe, many of its jobs remain propped

up by the government.

In the spring Canada had a tight lock-

down and a big fall in gdp, of over 11%

(compared with about 9% south of the bor-

der). But in the recovery it has benefited

from several advantages. For most of the

year it has been relatively successful in

controlling the spread of covid-19. Unlike

nearly all American states, Canadian prov-

inces can run operating deficits. They have

used their borrowing powers to boost hir-

ing of teachers and health-care workers

during the pandemic. Provincial deficits

are expected to rise to C$96bn ($72bn),

4.5% of Canada’s gdp, this financial year,

from C$18bn in 2019. American states, by

contrast, are having to slash spending as

tax revenues have fallen.

In Washington, disagreement over

whether to bail out the states has impeded

the passing of a second round of fiscal

stimulus. But Canada has reduced for now

the usual friction between province and

nation. The federal government has given

the provinces an extra C$21bn to reopen

schools and cover extra health-care costs.

In August Doug Ford, the Conservative

who governs Ontario, the most populous

province, praised Justin Trudeau for doing

“an incredible job as prime minister”. Over-

all, the 16% of gdpCanada has spent stim-

ulating the economy is even bigger than

the United States’ massive package of 14%

of gdp. “I don’t like deficits. But the alter-

natives were much worse,” said Erin

O’Toole, the recently elected leader of the

opposition Conservatives.

The expansion in Canadian education

and health care has helped women, who

are most of the workforce in those sectors.

Mothers, who were likelier than others to

stop work during the pandemic, returned

when schools and day-care centres fully re-

opened in September. Paid holidays are rel-

atively generous. During the pandemic

federal and provincial governments, which

regulate different sectors, extended the

amount of unpaid leave that parents and

other workers could take. Many allow them

Canada

Northern light

OTTAWA

The country’s economy has rebounded faster than expected. But its labour

market, like Europe’s, still depends on the government

A lesser loss

Employment, % change on a year earlier

Sources:StatisticsCanada;BureauofLabourStatistics

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SAJJMAMFJ

United

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Canada

The Americas

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32 Bello: It’s hard to do good

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