Economic Recovery in Canada and the US Stalling

Recovery from the recession is slowing quickly in North America based on the recent employment figures released last week. Statistics Canada reported that the unemployment rate edged back up to 8 per cent and is the first decline in jobs this year.

While the Canadian economy is in much better shape than our neighbour to the south, the effect of the sagging U.S. economy recovering from its worst downturn since the 1930s threatens to spill over into Canada. The U.S. economy has been losing steam for two straight quarters and that raises concerns about whether it will fizzle out or even turn into a “double-dip” recession. Economists predict it may take the American economy a decade or more to recover the 8.4 million jobs that were lost in the downturn. U.S. jobs losses reported last week point to a recovery that is stalling and, in turn, raises fears over the potential impact on Canada’s economy. According to Export Development Canada, until the U.S. economy improves, there is cause for worry for Canadian companies exporting to the U.S.

Although the Canadian economy is expected to lose steam later this year, a recent report by the Conference Board of Canada predicts Canada’s will dodge the dreaded ‘double dip’ recession. We will most likely see more pressure by the provinces to extend the government’s stimulus spending program that has helped us weather the recession.

In the U.S., there are fears growth will slow even more in the second half of this year as high unemployment there will hold back consumer spending, which accounts for 70 per cent of the U.S. economy. The impact of the U.S. government’s massive stimulus programs is winding down and with unemployment rates near double digits, there will be more pressure to pass more stimulus measures to speed the recovery.

However President Obama’s sagging popularity will certainly hurt the Democratic Party’s chances of keeping control of Congress in this fall’s mid-term elections. The Republicans are expected to block any additional spending because of their concerns about the size of the deficit.

Based on these recent reports, let’s hope the stall this summer is temporary and a better-than-forecast economic picture emerges this fall. Otherwise, when we head into the busiest retail period of the year, we may have some business challenges facing our economy.

While it may seen good management practice to restrict or turn away business because you’re not comfortable extending higher credit limit in this present business environment to some of your customers for fear of suffering a loss if your customer is unable to pay.

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