Canada’s Economy Falling Behind, US Growing 10x Faster Per Capita

Canada’s economy has been making headlines for leading the G7, but many aren’t feeling the effects. That’s because gross domestic product (GDP) per capita has barely moved. Rather than growing the economy through economic improvements, Canada has only added more consumers through immigration. Adjusting for population, US households have seen their economic picture grow 10x faster over the past decade. The OECD previously warned Canada was heading into dangerous territory with their reliance on a debt-driven housing bubble. 

Gross Domestic Product Per Capita 

Gross domestic product (GDP) is a term everyone throws around but never really considers what it means. It’s the total value of goods and services produced in a year, in aggregate. Since people spending more on goods and services generally means improved wealth, the data is viewed as a proxy for the health of an economy. 

There are a few problems with this measure but the biggest one is the aggregate doesn’t consider population. Adding more people generally means adding more goods and service consumption and production. Afterall, more people need more things. That’s why looking at GDP per capita is so important. 

GDP per capita measures it per person, attempting to minimize the influence of population. If 10 people are making the same as 8 people two years before, things are getting worse. They aren’t actually progressing, despite the increase in the number of people that need necessities. In fact, despite low or flat growth when looking at aggregate GDP—things might actually be getting worse for people. That’s why we’re looking at GDP per capita. 

Canadian GDP Isn’t Growing Nearly As Fast As It Should Be

Canada might be one of the fastest growing economies with the fastest growing population. However, when adjusting to see how that looks on a per capita basis, it’s getting left behind.  

By itself, last year’s annual growth sounds impressive. GDP per capita came in 4.9% higher in 2022 for Canada. However, one needs to consider that virtually everywhere showed substantial growth last year due to the comparison period. Back in 2021, the pandemic produced artificial constraints on trade that restricted the amount of GDP that could be generated—so 2022 should have been larger. It doesn’t sound quite as impressive when viewed in context, coming in at just over half of the growth seen in the US (+8.7%) over the same period.  

Canadians Have Seen Economic Growth Stagnate For The Past Decade

Canadian and US gross domestic product per capita over the past decade. In US dollars.

Source: World Bank; Better Dwelling.

The Past Decade Saw GDP Per Capita Grow 10x Faster In The US

In fact, Canada has persistently lagged the US over the past decade. Over the past 10 years, the country saw 4.3% growth according to World Bank calculations. That works out to less than a tenth of the growth observed in the US, which saw GDP per capita rise 47.4% over the same period. Canada has made international headlines for its aggregate GDP growth, but rarely have people looked at how that looks adjusted for population. 

US GDP Per Capita Has Grown Over 10x Canada In A Decade

The percentage change for GDP per capita since 2012. 

Source: World Bank; Better Dwelling.

Canada’s lack of growth in this area is complex, but a good portion can be attributed to its housing bubble. Large gains have diverted funds from more productive areas like manufacturing, and put them into non-productive housing. At the same time, this has led to the rapid accumulation of debt for end users who are buying a necessity—shelter. 

Debt allows a person to spend their future income today, minus further interest costs. In other words, consumption from a future time period is moved up, leaving a consumption gap that needs to be dealt with later. It makes sense, just not if the easy borrowing is excessive. That tends to inflate home prices, and divert future income even further. 

The issue isn’t expected to resolve itself anytime soon either. The OECD previously warned the housing debt addiction will land the country dead last when it comes to GDP per capita of any advanced economy. Not just this year, but for a period of at least 40 years. 

With Canada’s GDP per capita currently showing negative quarterly growth, it doesn’t appear any lessons have been learned. 

8 Comments

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  • Ron Bruce 4 months ago

    Canada has only added more consumers through immigration. Canada welcomed 107,972 immigrants in the third quarter. From January to September 2023, immigration reached 79.8% (371,299) of Immigration. They’re not bringing jobs.

    Trudeau has hired 98,000 bureaucrats since coming to power
    The feds spent $8 million building a barn at Rideau Hall
    The CBC costs taxpayers more than $1 billion every year

  • Scott 4 months ago

    Historically, only one Prime Minister has had a more devastating effect on the Canadian economy and he had the same last name.

    I encourage everyone to watch a documentary called “The Champions” its on the NFB app/website. Pierre Trudeau was nothing more than a trust fund baby who latched onto Jean Marchand and the Quebec labour movement. He began the destruction of Canada by ironically claiming to save it. His son is finishing the job…

  • Phoulis 4 months ago

    Falling behind the U.S.???

    What do you expect? This is the American’s plan, all the Stupid Poodle countries, NATO members will get fucked see the=losers in Europe and all to restore Nazism in Europe, I hope Germany gets destroyed first🤪🤪🤪🤪🤪🤪

  • Ronald Davidson 4 months ago

    Canadians are so blind to what the eventual outcome of our addiction to housing speculation will result in. We have become a country and culture with no real businesses to supply ongoing employment. Once the bubble bursts and house prices collapse we instantly become a third world economy. Sorry, I am wrong we are already a third world economy masked by housing equity and immigration. There is a very simple question I ask people. In your circle of friends and relatives how many actually are involved in manufacturing? Most people say nobody I know. An economy is only as wealthy as the products it manufactures or the commodities it produce. After WW2 over 40% of the population were in manufacturing. Today it is less than 10%. How can 10% of the population support the whole economy? With the wise guidance of our political leaders we have this amazing economy where we flip houses to each other using mortgage funds created/counterfeited out of thin air.

  • Frank 4 months ago

    When we have powers that be block pipelines, export of LNG, prevent drilling or exporting our vast wealth of natural resources is it really any surprise.

  • Frank 4 months ago

    AI? Ok, when the po we r s that be pre ve nt expor t of our wealth of natural g as , pre ve ent drill ing and shut down pip e lines is it any wonder

  • Robert Michael Angus 4 months ago

    The problem became more severe under Trudeau. Their approach was to measure their goals and performance in terms of gross GDP which as you point out has little to do with personal wealth.
    Even worse is the effect of increased population without a corresponding increase in wealth. This stresses infrastructure such as hospitals, housing, justice system, etc.

  • Honest Fred 4 months ago

    Just remember, the US government has been on a much bigger spending spree than in Canada. US deficit spending is roughly $1.7 trillion (or ballpark 6-7% of GDP).

    When deficit spending is bigger than growth, not a good dynamic.

    Helps explain higher GDP NOW vs the debt payments that are going to be due later.

    Canada is also in deficit, but not as much at the federal level.

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