OTTAWA, ON (March 5, 2021): The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI) posted slow growth in January. There have been seven-straight increases in the LEI in as many months, which pointed to some recovery from the depths of the economic crisis wrought by COVID-19, but the rate of growth has slowed markedly.
Composed of 10 components, the LEI is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. Slowing down to 0.1 percent growth, this latest LEI update reflects data from January and is the smallest of seven straight increases.
“While not an outright setback, this is much slower growth than what we would hope to see this far into the pandemic,” argues LEI author and MLI Munk Senior Fellow Philip Cross.
“Harsher COVID response measures re-introduced in December and January have clearly stunted recovery efforts.”
Of the 10 components, two fell, one was unchanged, and seven posted increases. Despite broad-based growth, the extent to which employment sharply downturned resulted in the slow growth registered by the LEI.
Specifically, new claims for employment insurance have skyrocketed following a 213,000-person drop in Canadian employment. Much of these job losses were in the already hard-hit services industries, which are among a handful of industries that have disproportionately borne the brunt of economic hardship wrought by public health restrictions designed to control the pandemic. Losses were particularly acute for youth.
This decline in employment marks the lowest level of employment recorded by Statistics Canada since August of 2020. This decline is far steeper than the already significant drop in employment (53,000 job losses) which was measured in December. Roughly 858,000 fewer Canadians were employed in January 2021 than were employed in February 2020.
“Even apart from the COVID-19 crisis, Canada’s economy is facing a number of major headwinds,” warns Cross. “Economic growth lagged somewhat even before lockdown measures were reintroduced, and the costs of running programs like CERB for months on-end has seriously damaged Canada’s long-term fiscal outlook.”
“Ultimately, you can’t have much of a recovery when large segments of the population aren’t able to work.”
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