VICTORIA - The governor of the Bank of Canada says he is looking for signs of economic recovery and leadership in the private sector before he can confidently say Canada's economy is on the mend from the effects of what he called the global "Great Recession."
Mark Carney said Monday he needs to see the private sector step up to support the economy or risk that the fragile recovery will fade out along with government stimulus.
A major signal that the private sector is rebounding is found in labour market statistics, especially measurements of hours worked by employees who currently have jobs, said Carney told reporters after a speech to the Greater Victoria Chamber of Commerce.
Businesses usually start scheduling more hours for their current employees before they start hiring, he said.
"But it's a range of indicators," Carney said. "No one simple sign-post that is going to declare the private sector is back."
Carney told business leaders during his speech that governments and central bankers have done about all they can to rescue the economy, globally and domestically, from disaster.
In effect, he said, governments around the world put in place "war-time spending on a peaceful calamity" that likely averted a depression.
"Over the longer term, the pattern and pace of global growth will be significantly altered," he said. "This was the Great Recession, and it will have far-reaching repercussions."
But he warned that although it has worked in the short-term -- most economies have started to grow again -- the recovery faces a long and arduous road back, and it will need the private sector to sustain it.
"Canada is entering this period with many strengths, but the efforts required of us will be historic," he said.
"Our businesses will need to develop new markets as the traditional advantage of relatively open access to U.S. markets becomes less valuable."
Carney's comments came as Prime Minister Stephen Harper lauded his government's economic stimulus plan in Saint John, N.B., saying 90 per cent of the $29-billion plan to stimulate the economy for this fiscal year has been committed to specific projects.
In July, Carney was among the first to publicly declare the recession over, after three straight quarters of economic shrinkage for the Canadian economy. And he remains among the most optimistic of forecasters in projecting growth at three per cent next year.
But the governor does not hesitate to caution at every turn that the forecast is contingent on many factors, including a tame dollar, and that many uncertainties remain that could wildly affect the best laid plans of policy makers.
"In assessing the progress of the Canadian recovery, the bank will not rely on a single data point," he said. "Ultimately, we will be looking for an accumulation of evidence across a range of indicators."
Although Canada has not been as deeply effected by the recession as many other economies, the bank governor pointed out that the unemployment rate has increased by 2.9 percentage points to a 10-year high of 8.7 per cent, and that the gap between what industries can and are producing is at the lowest level in at least a quarter century.
Carney added that as an exporting country, Canada will also be hurt by sluggish global growth going forward as the U.S. and other economies try and repair the damage from years of excess.
As well, he said, although the G20 has committed to a road map for repairing the world's financial systems, that will take some time and will restrain industrialized countries.
In this context, he said, Canada's economy will need to lean more heavily on its domestic sector than normal.
For that to happen, he said "consumer spending will require household decisions that are based on confidence rather than relief ... and firms will need to act with confidence as well" by resuming hiring and capital spending.
He emphasized that the bank's role in this respect will be to ensure that inflation stays as close to the two per cent target as possible, adding at length that while the bank has promised to keep the policy interest rate at the record low of 0.25 per cent until next July, that is "an expectation, not a promise."
If conditions change, Carney said, the bank is prepared to break its "conditional commitment."
Speaking to reporters following his speech, Carney suggested the bank will be watching the Canadian dollar and the impacts a higher dollar could have on the rate of inflation.
"We will do what is required to achieve our inflation target," he said.
On a lighter note, he acknowledged his mother, who lives in nearby Nanaimo where he grew up, was in the crowd listening to his speech.
Reporters couldn't resist asking if she was proud of her son.
"My mom was proud when I got cut from the pee wee hockey team," Carney said. "She's always proud. That's what mother's do."
