Canada’s expected to fall into recession later this year, but it may already be there by a traditional definition. Real gross domestic product (GDP) per capita data shows the country is in a per capita recession, one of the traditional definitions. These events are associated with an eroding standard of living, and it’s expected to get worse. Not just in the near term, but it’s turning into a long-term issue.
What The Heck Is A Real GDP Per Capita Recession?
A real per capita recession is when real GDP per capita contracts for two consecutive quarters. If that sounded like gibberish, let’s break it down. Real GDP is a country’s economic output adjusted to remove the impact of inflation. Adjusting it per capita averages it per person, removing the impact of population change.
The biggest problem with aggregate GDP is it’s easily skewed by population change. Countries with poor economic performance may obfuscate the issues with aggressive population growth. Things are getting worse, but there’s more tax units, er… human capital stock, I mean… people generating output.
Still not clear? Think of it like a portfolio filled with poorly performing stocks. Let’s say a friend started a portfolio with $100k, and the value of stocks fell by 50%, leaving them with a $50k portfolio. They deposit another $100k, bringing the value to $150k. Talking about aggregate GDP growth is like them saying their portfolio grew 50% since they first started. Is it true? Sure, and it sounds like they’re doing great. But the reality is you didn’t learn about their performance, just the total.
GDP Per Capita Is Better At Assessing GDP Standard of Living
The question most people should ask when looking at GDP is what are they trying to get out of it. Aggregate GDP is great if you’re a politician looking to have a d*ck measuring contest with other countries. If you’re seeing an eroding quality of life in your city while being told it’s the best economy ever, you probably want to peep real GDP per capita.
“GDP per capita is often used for assessing the standard of living and for making cross-country comparisons in the economic standing of a country.”Weimin Wang, Statistics Canada
Recession is a tricky word to define, especially in the 2020s when it’s political like “inflation.” The Reserve Bank of Australia (RBA) has even stressed there’s “no single definition of recession.” However, all definitions are looking for one thing—a period of eroding economic welfare.
Real GDP per capita is one of the better ways to observe this kind of change. Rising real GDP per capita is associated with quality of life improvements and opportunity. Conversely, a falling measure is associated with stagnating or declining real wage growth, and fewer opportunities. A popular classic definition of a recession is real GDP per capita declining for two consecutive quarters.
“We use GDP per capita partly as it is more related to welfare than is aggregate GDP.”Robert Ewing and John Hawkins, Business Cycles in Australia (2006)
Canada Entered A Per Capita Recession At The End of Last Year
Canada’s smack dab in the middle of a GDP per capita recession. The most recent quarterly data shows a 0.9% contraction in Q4 2022, following a 0.2% drop in the previous quarter. In other words, the country is already in recession by this measure. That might explain a lot for some people.
Canadian GDP Per Capita Growth
Quarterly real GDP growth rate adjusted for population size.
Source: Stat Can; Better Dwelling.
Canada’s Economy Is Expected To Do Poorly For A Looong Time
Canada hasn’t reported Q1 2023 GDP data yet, but it’s not looking good at this point. Stat Can’s preliminary estimate for March is a 0.1% contraction, a little high by some forecasts. It follows lower than expected growth in February, which adds up to a 0.1% drop in real GDP per capita. That would be the third consecutive quarter in the per capita recession, and that’s ahead of aggregate GDP expected to begin contracting later this year.
Is it a recession? Canadians are likely seeing an erosion in quality of life, and while incomes are rising they aren’t rising enough to compete with inflation. At the same time, shelter costs are spiraling out of control, and the economy is preparing to double down on housing investment, despite already being too overly dependent.
Ultimately, it doesn’t matter if your favorite experts or politicians are comfortable with the definition. Canadians on average are heading towards an erosion in quality of life, and fewer opportunities. The trend isn’t expected to end any time soon either.
The OECD forecast shows Canada will have the worst GDP per capita growth of any advanced economy for a 40-year period. Nearly two generations of performance similar to Greece during the Great Recession isn’t exactly the picture people have when they immigrate to Canada, is it?
But hey, that aggregate GDP, right?
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Great analogy and honest review. Keep up the great honest reporting.
Causing a per capita recession is the ONLY REASON for raising interest rates. It is doing exactly as it was supposed to. Less money spent reduces inflation. It is that simple.
It’s curious that the GDP per capita ratios declined in Q3 and Q4 of 2022, at the same time we’re seeing record-high real estate selling (and rental) prices, on top of price increases for things such as fuel and food. If all economic ‘activity’ is supposed to be captured by the GDP calculation, doesn’t the fact that it’s declining per person, at a time when there’s ‘lots of money’ contributing to the total, indicate something both odd and bad? Where has the money, related to these ever-increasing prices, gone to, if not our domestic GDP?
Yes. Something not adding up…in the math here, indeed.
Arizona and Florida mainly some into California in the areas surrounding LA.
I was wondering the same thing, companies have been hitting record profits year after year like grocer’s and yet food prices have doubled. They want to say this is going to last forty years but I’m going to be protesting for the first time in a few months if things don’t change and I am sure others won’t be far behind.
You’ve raised valid points Dennis. One has to pause and wonder WTF is going on? Where is the money even coming from? It is being laundered?
House prices never declined, only what you get for your buck has declined. Last year’s supposed 20% decrease was just a 20% decrease in house size for same buck in certain areas of Ontario for example. Our house budget remains the same, but what we are able to get for in now compared to 2022, when apparently prices were coming down, is sad. Your average Canadian is simply priced out by whoever it is buying up RE. Could it be corporations like Blackstone? Even our very Thurd of a PM is invested in such a company “shelled” in the Bahamas that buys up RE here and in the US. Wish a journalist would take the time to dig that affair up again (hint hint). The Star covered it a year ago and all went quiet.
Something is very wrong with this once flourishing country… we can expect a major brain drain and then we will have nothing but RE again to keep us going since you do not need to be a neurosurgeon to flip houses.
That’s why the money went into real estate because it is considered “safe” investment that also is an essential need. They bet that people have to live someplace and gonna pay through the nose, plus of course speculative opportunities. It is financial global imperialistic stage of capitalism. Money is the main export and product. Money goes where it is the biggest return for the least possible risk and no effort so to speak.
“Capital is said by a Quarterly Reviewer to fly turbulence and strife, and to be timid, which is very true; but this is very incompletely stating the question. Capital eschews no profit, or very small profit, just as Nature was formerly said to abhor a vacuum. With adequate profit, capital is very bold. A certain 10 per cent. will ensure its employment anywhere; 20 per cent. certain will produce eagerness; 50 per cent., positive audacity; 100 per cent. will make it ready to trample on all human laws; 300 per cent., and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged. If turbulence and strife will bring a profit, it will freely encourage both. Smuggling and the slave-trade have amply proved all that is here stated.” Capital. Carl Marx.
The Trudeau governments goal is to achieve GDP growth through population growth via immigration. More people will grow the GDP through more demand for goods and services. But this is not the type of growth that will increase GDP per capita.
Although conservatives will have you believe it’s liberal policy that’s has lead to this that’s not entirely true. Both Conservatives and Liberals’ have been so captured by monied interests that the monopiles, effusive subsidies and protectionist inspired lack of competition and consumer gouging has reduced Canadas competitiveness as much as any perceived overspending on social matters.
We’ve made many financial mistakes (and continue to do so)
Oil/Energy is our #1 export by a wide margin but we’ve demonized our energy sector, stopped pipelines, preventing selling it to Europe/overseas, and siphoned profits via transfer payments for provincial welfare. Our neglect of our biggest asset is ridiculous. It’s incredible to me that a supposedly educated country can be so stupid. Money gives us options. Better healthcare, childcare, social programs, green initiatives, all of it is easier to do if we had an extra 200 billion or more of exports which would have been so achievable…
Mining/resources make up most of our other exports.
Just think about that. We’re an intelligent, well educated population, and the main income is from selling natural resources and similar. And we don’t generally consider these to be luxury/flashy jobs.
So what are our smart people doing? Well the doctors flee to the US where they can be paid more. Engineers often go work for microsoft or google or apple etc in the US where they can be paid more. And as the GDP difference get’s more significant that will just continue. Our government workers are well paid, more than private workers and with way better holidays, benefits, etc than private workers. Yet their salaries are paid by… private workers. You’d think they’d index the pay and benefits to be competitive with private industry but no…
Uor education system is dumb. Lets say a class has 30 kids on a curve. Several struggle, some have family issues, 3 have learning disabilities, a bunch are average, and 3 are very gifted. Who should you spend the most money on? If it was your personal money and you wanted an ROI/payback I’m guessing you’d invest in the top 3 or someone with great work ethic or similar. But we assign aids to the worst performers and slow classes down so everybody can keep pace. We sabotage our best and brightest. We do it all the time. Is it any wonder Canada isn’t competitive globally and we’re tracking worse than everybody else? Morally it seems good to spend the extra time and money on the struggling kids (or struggling adults) but the long term consequences of consistently neglecting our best should be obvious.
NAFTA was probably a mistake. In the 40 years it’s been around we’ve basically seen a steady attrition of canadian companies falling to american ones other than industries that are protected by the government. And that should have been an obvious outcome. Companies in the US had a 10x larger market and had better prices etc. Does anybody believe our dairy industry would survive if we could buy US milk at half the price? Or if we could buy cell phone plans at half the price? But our companies aren’t competitive at all and have nothing to export because nobody in another country would want our expensive cell phone plans…
If fossil fuels are our biggest asset, we’re doomed. Its interesting that you complain about the fact government workers (as in any democratic government are paid for by taxes, yet entirely ignore that we’re still subsidizing fossil fuels 8 years after electing a Liberal government that promised to stop subsidizing the richest industry on earth. The only effect of Mr Trudeau’s pipeline bailout/purchase was to compensate an oil company & its investors for what was essentially a stranded asset which really had no market… and it has already cost us billions, and will continue costing us billions more, and that is without factoring in the increasing costs of Climate Change.
You are absolutely right, we shouldn’t be demonizing our energy sector, but instead of continuing to throw good money after bad propping up Canada’s fossil fuel industry (that doesn’t even clean up after itself), our failure to invest in the transition to clean energy infrastructure is keeping Canada from getting into the growing multi-trillion dollar clean tech industry. Not only would this have the added benefit of generating many good paying jobs (unlike the fossil fuel industry which works hard to automate the few jobs it does generate) it would help mitigate the effects of Climate Change.
And besides, it’s high time Canada stopped working so hard selling off (in some cases practically giving away) our *finite* shared natural resourses, certainly, particularly when the profits for such public largesse disproportionally benefits the 1% without even obljging them to pick up after themselves.
Why is unemployment so low, if there is a so called recession?
The economy is so good people need two jobs to pay rent? Once you realize how employment sampling is done, you’ll realize it’s basically a junk stat in Canada.
Terrance is correct. Even the way we gather that data severely differs from USA collection.
We count only those ‘looking’ for work while the south counts all that could.
Basically, if you are sitting around unemployed and not on some government stat sheet…you are ’employed’ in Canada’s eyes. That’s our data collecting in Canada…Brilliant!!! But I digress.
Very interesting information, a fun read with some of the sarcastic undertones in there as well 🤣 great article!
One of the reason for GDP per capita is lowering of the GDP, while another is increase in population. While we doubtlessly require influx of immigrants, can we not completely stop entertaining refugees? We are getting poorer in an attempt to help the world. One can argue how small fraction it represents, etc., but refugees are burdon to the system in many ways and for multiple decades. They get tons of free stuff, healthcare, education, child care, social support,… the list is endless.
Stop or cut down immigration significantly for the next couple of years and housing crisis will automatically come down and will have a large positive impact on quality of life.
missing Jim Flaherty?
Little did Millennials know that Harper was as good as it’ll get for them.
FUD. Its always the opposite. Get ready for good times ahead!
Real means adjusted for inflation.
Paying more for less.
Equals less widgets consumed.
Per capita gdp is still blow 2012…tell me it ain’t so.
Boomernomics at its best.
Wild, right? Fewer people producing less. and Flaherty and Tiff both said it was a bubble back in 2013.
So we are all doomed and there is nothing we can do about it? Awesome! This is the exact doom and gloom, fear mongering news I was looking to read today!
a lot of stuff you can do. It starts with figuring out why the country is chasing growth for the sake of growth, and grifting immigrants with the promise of opportunity and sticking them in a $2k/month basement bedroom they share with 3 other people.
That is not always true about the Fivernmfent putting immigrants. In a basement with 3 or more people. The immigrants are given way more money than our own people on ODSP they just like to have a group live together t her so their expense like housing are more cheaper per person and they bank their free money so they in turn can do things like buy their own house sooner or make investments that will help carry them on without a desperate need to work. I have honestly seen some of t he cheques the immigrants h et monthly it would blow your mind! But yet our very own people are homeless or living below the poverty line. I’m not against help I ng people b u t you’re supposed to look after your OWN fi t st so they in turn van help more not rob from the poor to make others rich
Canadian sentiment is to view the economy through a jobs and corporate investment lens -see KEI network.net for a sentiment analysis of are the most sensitive measure of economic resilience. GDP is viewed as insensitive and irrelevant among several other measures including: market share, migration, even personal and corporate bankruptcies. As long as employment is steady and corporations aren’t short of financing (interest rates are low), no one is sneezing “RECESSION”! But employment is a lagging measure and the shortage of financing hasn’t been a problem except for innovation that is always a problem. SO maybe the media should help educate the public with more monitoring/ news about GDP.
In the coming month’s will the fiat money supply become worthless ( no pun intended), and hard assets, eg silver and gold become the preferred medium of exchange ?
Justin Trudeau and Anthony Albanese (Australia) have a mutual admiration society. Each butters up the other as a brave “reformer”.
In fact, each has raised immigration to completely mad levels, with no mandate whatsoever. And each has plunged his country into a rare per-capita depression.
No other OECD nation is doing what they are doing. Each is engaged in a radical experiment to change his country forever, and there’s not a damn thing you can do to stop them.
Please excuse my typos lol