Canada 'place to be during recovery'
As reported in the Province Newspaper 06/10/2009 By John Morrissy - Financial Post
OTTAWA - After a "lost decade" in which Canadians' standard of living remained stagnant, rising levels of disposable income point to a measure of prosperity that will be unchallenged in the western world, says a new report from CIBC World Markets.
"Is there any place you want to be during this recovery?" asked the report's author, senior economist Benjamin Tal. "It's Canada."
The reason, he said, is that we are on the cusp of a virtuous circle in which rising disposable incomes and employment deliver higher consumer spending, greater economic growth, increased foreign investment and robust equity markets.
Tal's research shows that in Canada, since 2005, each Canadian's annual disposable income - the money left over after paying the bills - has grown at twice the pace of the U.S., to $2,600 Cdn versus $1,300 US south of the border, after adjusting for inflation.
He expects this trend to continue as demand for Canada's commodities recovers from the global downturn. "The fact that the labour market improved so significantly over the past four years vis-a-vis the U.S. suggests we are in a much better position to enjoy this recovery." he said.
"We will outperform the U.S. when it comes to overall economic growth," he said, adding that a recovery in commodity prices "will be translated into higher incomes for all Canadians."
Behind the surge in disposable incomes has been Canada's labour markets, which have outperformed the U.S. in several key respects since 2005.
For one, real wages - adjusted for inflation - have risen by 10 per cent in Canada but by less than half as much in the U.S. For another, overall employment climbed 5.5 per cent in Canada but remained flat in the U.S.
While modest in relative terms, Canada's income gains are unique in the western world. Tal said, with the U.S. strongly underperforming and the euro-zone in even worse shape.