Reality check—Canadians remain mired in a recession

Almost all the media coverage of Statistics Canada’s recent economic report heralded the fact that Canada avoided a recession in the fourth quarter of 2023—the economy shrank by 0.3 per cent in the third quarter, so another decline at the end of the year would have technically meant a recession. But while the country as a whole avoided a technical recession, individual Canadians remain mired in a prolonged and worrying recession.

Why is there a difference between a country incurring a recession and individual Canadians?

Recessions are generally and most easily defined as two consecutive quarters of decline in the overall economy, though as is often the case, many economists take a much more complicated approach to define economic decline. But recessions measure the economy as a whole without regard for how it affects individuals. Consider an economy growing at 2 per cent at the same time the population grows by 4 per cent. While the overall economy expands, the growth is not sufficient to account for all the new people in the country, whether by birth or immigration. In other words, in this hypothetical example, the amount of goods and services produced in the economy (i.e. GDP) on a per-person basis actually declines.

And this is exactly what’s happening in Canada. According to Statistics Canada, the country’s population grew more in the third quarter of 2023 than at any time since 1957, and even more telling, just the growth for the first nine months of 2023 was more than any full year since Confederation.

This combination of a slowly growing national economy and surging population has meant that per-person GDP has declined from $60,178 in the second quarter of 2022 (when it peaked post-COVID) to $58,111 in the fourth quarter of 2023, representing a decline of $2,066 (all figures inflation-adjusted) or 3.4 per cent.

This is a rather marked decrease in Canada’s per-person GDP, a broad measure of living standards, in a relatively short period of time. In the six quarters since the second quarter of 2022—again, when per-person GDP peaked—five have recorded declines and the one positive quarter (Q1 2023) only registered a 0.1 per cent increase. Simply put, Canadians are enduring a period of real decline in per-person GDP.

And this decrease has erased all the gains since 2014. At the end of 2014, nine years ago, per-person GDP (again, inflation-adjusted) was $58,162, which is $51 more than at the end of 2023. In other words, Canadian living standards are now lower than they were at the end of 2014.

Finally, this decline in Canadian living standards is expected to continue for the foreseeable future. According to the OECD’s 2021 report, Canada is expected to record the lowest growth rates in per-person GDP up to 2060 of any industrialized country, which would mean countries such as New Zealand, Italy, Korea, Turkey and Estonia would all leapfrog Canada with higher living standards. This should be unacceptable to all Canadians regardless of political or ideological leanings given our enormous economic potential and opportunities.

And yet, policymakers are essentially ignoring our prolonged decline in per-person GDP and thus living standards, which will continue to hurt Canadians and their families until real reforms are enacted.