December 17, 2020 – Despite economic recovery since April, it is too early to call the end of the recession, according to a new C.D. Howe Institute Business Cycle Council report.
The Council, comprised of Canada’s preeminent economists in the field and co-chaired by Steve Ambler and Jeremy Kronick, is an arbiter of business cycle dates in Canada. The Council typically meets annually, but also when economic conditions indicate the possibility of entry to, or exit from, a recession.
The Council met on December 7 to review the case for calling April 2020 as the end of the recession based on signs of economic recovery since then.
Entering and exiting a recession implies a change in the direction of economic activity, not its level. In March and April, Canada saw unprecedented declines in economic activity, with regard to both their amplitude and the breadth of industries that suffered. Real GDP fell 7.1 percent in March, and 11.4 percent in April, vastly exceeding anything since the Great Depression. Similarly, employment fell by 5.3 percent in March, and 11 percent in April – both records. In March, economic output fell in 80 percent of industries relative to their February levels, and in April, output fell in 90 percent of industries relative to March. The Council met in April and declared a recession had been entered, with February being the peak of the previous expansionary period.
At their December meeting, the Council debated whether Canada had exited the recession. Despite Canada experiencing broad economic growth since the end of April, both in terms of real GDP and employment, output is still well below its February 2020 peak, and the improvements observed to date have been sustained for only a few months, with the underlying catalyst for the recession – COVID-19 – not yet fully resolved.
Because of this, the Council is not prepared at this time to label April 2020 the end of the recession.
For more information, please contact: Jeremy Kronick, Associate Director, Research, C.D. Howe Institute; or Nancy Schlömer, Communications Officer, C.D. Howe Institute, email: nschlomer@cdhowe.org.