The North American Turtle

The economy of Quebec works at 96 percent of its potential, and that of the United States and Ontario at 92 percent. But growth remains too weak everywhere to launch a real recovery.

During normal times, with low inflation, Quebec’s economy grows by 2 percent each year. During the 2009 global recession, it shrunk by 0.5 percent. This obviously had consequences for jobs. Between the beginning and end of the recession, the employment rate for those aged 15 to 64 went from 72 percent to 70 percent. Nevertheless, this 2-point loss was less important in Quebec than the figures that were reported in the U.S. (5 points) and Ontario (4 points) for the same age group over the same period. As chance would have it, Quebec’s infrastructure plan, which followed the Concorde overpass tragedy, was launched at a moment when the economy was falling into recession. That is what allowed for the drop in employment here.

After a hint of recovery in 2010, Quebec’s economy has not been impressive for the last three years. Growth has not reached the normal rate of 2 percent per year. It was at 1.8 percent in 2011 and 0.9 percent in 2012, and it will probably be at 1 percent in 2013. Thus, instead of decreasing, the gap between actual economic activity and normal trends has continued to increase. Therefore, a real recovery is yet to come. In his news blog, Pierre Duhamel has reasonably described Quebec’s performance as the “Quebec turtle” syndrome.

However, the delay in the recovery is not limited to Quebec. Our two main trade partners, the U.S. and Ontario, are also bogged down in stagnation. Because their revenues are growing very slowly, they are holding back from buying from us. Their sluggishness contributes to ours. In fact, at the moment, growth is more or less the same in all three places. In 2013, the quality of life for working-age individuals effectively went up by approximately 1 percent in the U.S. and in Ontario, just like in Quebec. The turtle is not just in Quebec. It is North American! Nonetheless, we must note a difference, happily to Quebec’s advantage. In part thanks to public investments totaling $115 billion from 2009 to 2014, Quebec’s economy currently works at 96 percent of its theoretical capacity, while the economies of the U.S. and Ontario do not make use of their potential beyond a level of 92 percent.

Last June’s construction industry strike obviously did not help Quebec. It brought on diminishing returns, which was significant for revenues in the whole economy and reduced employment during the summer. Fortunately, a portion of the lost activity will be recuperated before the end of the year.

In 2014, it is unlikely that the economies of the United States, Ontario and Quebec will emerge from their sluggishness. On the monetary side, the central banks will sustain growth by keeping interest rates at their lowest. On the fiscal side, the behavior of the U.S. Congress – dominated by Republicans – does not bode well. In Canada and Quebec, we will hope that our ministers of finance will not persist in reducing the deficit to zero by a certain date, especially if the economy shows new signs of weakening. For the time being, the International Monetary Fund predicts that North America will merely maintain its 2013 rate of utilization of economic potential. Growth per working-age individual will not go beyond 2 percent. We have to wait for a real recovery.

“It is imperative that we pursue the rebalancing of public finances, but also that macro-economic policies support growth,” said Christine Lagarde, IMF chief.