The job report: explaining Canada’s post-recession bounce

We keep hearing about the amazing Canadian economic rebound—some 300,000 new jobs in the past year. Is Bay Street paving the way for a new economic world order? By Philip Preville

(Image: Lindsay Page)

America’s financial sector makes a tasty carcass, and Bay Street is tucking into the feast, gobbling up staff and tearing off divisions from hobbled U.S. counterparts. CIBC recently purchased Citigroup’s Canadian MasterCard division. RBC has been hiring big guns away from New York’s investment banks. And those two banks aren’t even taking the biggest bites.

TD, the second largest bank in Canada, is on a mission to crack the American market. Earlier this year, it swallowed up three troubled Florida banks, then purchased South Carolina’s South Financial Group, adding 176 branches to its network for the bargain price of $191.6 million—just over $1 million per branch. All told, TD, which has introduced a jolly-eyeballed green foam‑rubber mascot specifically for its American operations, now has 1,300 branches in the States, 200 more than it has in Canada.

The country’s entire economy appears to be working its way up the global food chain. Our GDP grew by 6.1 per cent in the first three months of 2010. Among the 31 market-oriented democracies that make up the Paris-based Organization for Economic Cooperation and Development, only South Korea’s economy grew faster. The United States economy, according to OECD numbers, grew only three per cent, while the median growth within the group stood at approximately two per cent. Canada’s economy has also created 215,000 jobs since the start of the year, 109,000 of them in April alone.

It’s hard to find an economist or an analyst who will admit just how phenomenal Canada’s performance has been. That’s because of their professional culture. Full-time prognosticators—particularly the bank-employed “TV-conomists,” like BMO’s Sherry Cooper and TD’s recently retired Don Drummond—expertly cultivate the perception that they are smarter than any indicator put in front of them. In this crowd, hyperbole is sinful, and astonishment is forbidden—even in hindsight, when the coast is clear and they can’t be accused of lousy predictions. To my knowledge, not a single economist foresaw those April job figures, and even once they were out, it was hard to find anyone who said, “Wow, that’s really impressive” or “I didn’t see that coming.” It got said by other means: in May, the OECD took the unusual step of telling the Bank of Canada governor, Mark Carney, to cool things down by raising interest rates, and when Carney obliged them one week later, Canada became the first country in the G8 to lift its lending rate up off the floor.

That really is impressive, whether the economists acknowledge it or not. But is it a permanent shift or some sort of economic solar flare? Canadians are accustomed to their fortunes following behind those of the United States. Typically, if the American economy is doing well, ours is, too—but never quite as well as theirs. And if America’s economy is tanking, so is ours—worse than theirs. Suddenly neither side is conforming to type. It’s enough to make you believe the doomsayers who, in the wake of the financial crisis, predicted America’s decline as a global economic superpower. Are we the big winners at America’s expense? Is it time for the elephant to salute its mouse overlord?

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