OTTAWA - The United States entered the recession first, but Canada's economy is falling faster now.
And if current trends continues, economists say, Prime Minister Stephen Harper and Finance Minister Jim Flaherty may rue their bold prognostications last week that Canada will exit the slump first and strongest.
Friday's employment and trade numbers paint a picture of an economy, if not literally in free-fall, certainly tumbling at an alarming rate with monthly job losses greater in proportion that those in the United States and as great as any Canada has seen since the Great Depression
Canada lost a whopping 129,000 jobs in January and followed that up with a surprisingly large 82,600 contraction in February -- a two-month total that when the different sizes in population are factored in would translate into a loss or more than two million jobs stateside.
By comparison, the U.S. actually lost about 1.3 million in the two months.
Trade figures released late last week also did not flatter Canada.
While Canada's trade deficit grew to $993 million in January and exports fell nine per cent, in the U.S. the trade deficit narrowed more than expected to US$36 billion from US$39.9 billion the prior month.
The same trends appear to be forming in other key indicators, including retail sales, which have been dropping sharply in Canada but rising modestly south of the border despite the weakness in the housing market.
"The U.S. may have been the epicentre of this crisis but the collapse in world growth beyond is exceeding the pace of decline in the U.S.," says Scotia Capital economist Derek Holt.
"At the same time, we're starting to see possible turning points in some segments in the U.S. economy" while Canada and the rest of the world continues to slide downward.
Part of the explanation is that the United States, as Harper and Flaherty say, did indeed stumble into recession earlier. It suffered its first large jobs decline way back in January 2008 when the Canadian economy was still piling on workers on its way to a 33-year low 5.8 per cent jobless rate.
That means that while Canada is shedding jobs at a faster pace now, its job losses amount to only 1.7 per cent of the labour force before the decline began in November, while the U.S. has already seen its labour force shrink by 3.2 per cent.
The other difficulty in comparing economies that they remain out of sync, says Douglas Porter, deputy chief economist with BMO Capital Markets.
The United States appears to have suffered its steepest contraction in the fourth quarter of last year, when the economy shrank by 6.2 per cent. Canada looks to be going through its worst quarter now and is likely to experience a similar gross domestic product retreat this quarter, the January-March period.
That doesn't disprove the Conservative government's contention that indeed Canada will exit the recession first and stronger than the U.S. and much of the rest of the world, but the evidence is moving away from such a scenario.
The vast majority of private sector economists have discounted the Bank of Canada's official projection of a rebound that sees the economy surging to a 3.8 per cent advance next year, and many expect governor Mark Carney to revise that rosy forecast at the next opportunity in April.
The new consensus is forming around a sharper and longer lasting downturn this year and a more muted up-tick next year of about 1.5 per cent, similar to what is seen for the American economy.
TD Bank director of forecasting Beata Caranci wrote last week that Canada can expect to lose 583,000 jobs and see the unemployment rate hit 10 per cent during the current downturn, proportionally about the scenario economists see for the U.S.
That the two economies would wind up suffering similar levels of pain appears counter-intuitive given all the pluses in Canada's favour going into the downturn, positives that the International Monetary Fund reports should shelter the country where others are left defenceless.
"We have the strongest fiscal fundamentals in the G7, we have paid down debt, we're not creating a long-term permanent deficit... (and) that leads us late into the recession and early out of the recession," said Flaherty last week in defending his optimism.
All true, says Porter, but perhaps not as relevant as may appear.
Canada has positives that the U.S. lacks, but Canada also has two major Achilles heels that undercut its advantages.
"One is our extreme dependence in the auto sector, which represents about double the share of the U.S. economy, and the other is the dramatic plunge in commodity prices and that's obviously a big negative for Canada," he explained.
Porter said the most likely scenario is for the U.S. and Canada to emerge out of the recession together in "late, late 2009" and limp, rather than run, to recovery.
