OTTAWA - The Canadian and U.S. economies will be able to survive the growing uncertainty in the world and avoid a recession next year, says a new outlook from the Conference Board.
However, the fall report from the Ottawa-based think tank came with two big caveats -- both European and U.S. policy-makers must implement policies necessary to stave off disaster.
"All bets are off if we have another financial crisis. It's very scary right now," said economist Pedro Antunes, who authored the paper.
He said he is still hopeful European leaders will find the resolve to backstop banks exposed to Greek and debt from other Mediterranean countries, thereby preventing the problems from spreading around the world as happened in the fall of 2008 with the failure of Lehman Brothers.
European leaders, however, appear to be still apart on how to proceed entering into this weekend's key meetings on the crisis.
Still, the outlook represents a somewhat rosy outlook from what earlier this year was among the most pessimistic of Canada's major forecasters.
The Conference Board said Canada's economy, which is slowing down to 2.1 per cent growth this year, will pick up some steam next year and advance by 2.4, before accelerating to 3.3 per cent in 2013.
By that time, Canada's unemployment may reach as low as 6.3 per cent, the group's economists say, a level not seen since early 2008, before the onset of the global recession.
Meanwhile, the economy in the United States, which ground to a halt over the summer, is likely to rebound to levels similar to its northern neighbour.
The board's call for next year is about half a point stronger than expectations from some of Canada's banks, particularly Scotiabank and the Bank of Montreal. The Bank of Canada will reveal its forecast next week.
For Canadian workers, the best news is that the Conference Board sees unemployment on a steady downward track to 6.3 per cent by the end 2013. It currently sits at 7.3.
"This summer's weakness in private sector employment is expected to be temporary," the report argues. "Despite a decline in infrastructure spending, construction employment will be bolstered by strong investment in the resource sector and in commercial and industrial buildings. Service sector employment will also do well."
The big drag for both the economy and employment comes from government restraint, said Antunes. He said governments will be taking about $12 billion out of infrastructure spending next year as the last projects of the stimulus spending introduced in 2009 to combat the recession wind down.
Still, with businesses continuing to invest and the resource sector rebounding on strong commodity prices, it's hard to see how workers will not benefit, he said.
Antunes notes that next year's growth is still modest by traditional standards, but given continued weakness in the U.S., it may be the best Canadians can expect.
