Toss out the typical definition of a recession, Canada’s economy is already in one, says C.D. Howe

TORONTO —The C.D. Howe Institute’s Business Cycle Council says Canada has entered a recession due to the economic devastation caused by the COVID-19 pandemic.

In a report released Friday, the council says the economy peaked in February before government measures to slow the spread of the coronavirus helped bring the economy to a standstill.

“Typically, the definition of a recession is back-to-back quarters of negative economic output,” says Mike Eppel in the NEWS 1130 Business Centre. “We haven’t seen that yet, but it is expected that is going to be the case with the pandemic economic shutdown.”.

The C.D. Howe council defines a recession as a “pronounced, persistent, and pervasive decline in aggregate economic activity” and it looks at both GDP and employment as its main measures.

By that definition, the report suggests the country entered a recession in the first quarter of 2020.

“At their meetings, the Council looked at Statistics Canada’s release of estimate GDP data on April 15 that showed a nine percent drop in March GDP resulting in a quarterly drop of 2.6 percent – the largest one quarter drop in GDP on record,” reads the report.

“The Council agreed the magnitude of the contraction makes it extremely unlikely that any future adjustments will overturn the conclusion of a major drop in economic activity in the first quarter.”

They also reviewed employment data for the first three months of the year, showing labour force survey data indicating a 1.5 percent drop in total employment in the first quarter, with a 5.3 percent drop in March alone. That equates to more than a million Canadian jobs lost in the month.

The CD Howe council says even if there are further revisions to GDP, it is “extremely unlikely” they will be significant enough to alter the recession call for the first quarter of 2020.

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