OTTAWA - Joblessness is becoming the fixed and painful face of the Canadian recession, with losses mounting even as conditions show early signs of stabilizing or possibly improving.
Statistics Canada's unemployment report for March, to be released Thursday, is expected to continue the wave of job losses that have swept across the country since last fall, battering the manufacturing, construction and resources industries, particularly.
"I expect (Thursday's) numbers to be not encouraging," Finance Minister Jim Flaherty conceded Wednesday.
"We're in the middle of a serious recession, I expect that the numbers will continue to be worse over the next several months. When we lose jobs, it takes a long time to turn that around and we're continuing to lose jobs in Canada, and in the U.S., for that matter in Europe and elsewhere."
A consensus of private sector economists predict about 55,000 jobs likely vanished in March, when layoffs continued to hit the automotive, steel and forestry sectors. Some speculate the job losses could be as high as 100,000.
That would bring to about 300,000 the number of jobs that have vanished this year -- even before the federal budget's $40 billion stimulus has had a chance to get off the ground -- with hundreds of thousands more to come.
That Canada would have suffered a staggering employment contraction so far this year is not a total shock given that economists have dubbed first quarter economic performance as the worst since the Second World War, with a record seven-to-nine per cent retrenchment in output.
Another factor is that Canada is now paying the price for the robust employment record of the first half of 2008, when the economy was at best flat.
"Last year many Canadian businesses thought this was a U.S. problem and held on to their workers. Now you are going to get total capitulation by employers," said Derek Holt of Scotia Capital Markets.
He said job shedding in the construction and natural resources sectors is just now starting to catch up to what's been happening in manufacturing for several years.
The conventional view is that as the economic free-fall begins to slow during this quarter and possibly hits bottom near the end of 2009, labour market deterioration will also level out after about 600,000 jobs have been lost.
Under this scenario, the unemployment rate will hit a ceiling of just over 10 per cent in early 2010, a significant increase from the 5.8 per cent floor of last winter, yet still moderate by historical standards.
The early 1980s recession saw unemployment hit 13 per cent and the jobless rate in the 1991-93 recession surpassed 11 per cent.
But a growing number of respected economists see this as a best-case scenario rather than what is likely to happen.
On Wednesday, U.S. Federal Reserve economists lowered growth projections for the United States for the second half of this year and 2010. The Fed indicated it now expects the recovery from recession to be slow and more muted, a similar view being advanced by Bank of Canada governor Mark Carney in his most recent speeches.
But that is an official view from those who must believe in their institutional power to impact economic performance, say skeptical analysts.
University of Maryland business professor Peter Morici, a former U.S. trade commission official and an expert on economic cycles, has recently added his name to the growing list of economists who believe the United Sates is headed for a depression, a long and sustained period of economic decline.
About Canada, he says, whichever way the U.S. goes, "you are going there too."
Morici compares the current malaise not to the Great Depression of the 1930s, as some doomsayers have, but to the Long Depression of 1876-1897, when the U.S. was also going through a structural transformation from an agricultural economy into an industrial powerhouse.
The noteworthy characteristic of that depression is that it was not uniformly bad. The economy actually shrank for only 161 of the 285 months, but joblessness was rampant, peaking at 18.4 per cent in 1894.
"Employers in high tech, retailing, manufacturing, publishing and elsewhere are not temporarily furloughing workers," he says. "They are restructuring employment downward, permanently, for what they expect to be smaller markets for several years."
Morici expects a bump up in economic activity in the U.S. in the short term -- "a US$800-billion stimulus will do that," he says -- but once that money is used, the economy will fall back into the same ditch, and so will job growth.
The view is consistent with the smattering of relatively good economic news that have appeared in the past month, including resilient stock markets and Wednesday's housing report from Canada Mortgage and Housing Corporation that showed starts rose by 13.7 per cent in March over the previous month.
Canadian economists Dale Orr and Douglas Porter do not dismiss the doomsday scenario, although they have more faith in government policy -- particularly the central banks' slashing of interest rates -- to steer the world away from depression.
But they also acknowledge that the current recession, with the root cause in financial market failure, is unlike the previous slumps faced by the world in the post-war era. And hence, there is no history to show whether prescriptions being adopted by governments and central banks will work.
Orr, who heads his own economic consulting company in Toronto, says what worries him is the wide divergence of forecasts by respected and normally reliable institutions, such as the Bank of Canada and the Organization for Economic Co-operation and Development.
The former is still officially on record as expecting a 3.8 per cent growth rebound in Canada next year, while the latter sees the economy inching along at 0.3 per cent in 2010 -- worlds apart.
"Effectively we have gone through the equivalent of a financial market earthquake and we are still trying to figure out what the new landscape will look like," explained Porter, deputy chief economist with BMO Capital Markets.
"One thing that is different from other recessions is I can't remember so many respected economists openly talking about depression," he adds.
