Open this photo in gallery:
Statistics Canada building in Ottawa, July 3, 2019.Sean Kilpatrick/Canadian Press
Claude Lavoie is a contributing columnist for The Globe and Mail. From 2008 to 2023, he served as Director of the Bureau of Economic Research and Policy Analysis at the Ministry of Finance.
Statistics Canada excels at producing reliable and useful data and has a long-standing reputation as one of the world's best statistical agencies. However, in some cases, we may present simple facts that may be misleading.
Many analysts and political activists are attacking the government's economic policies using a recent statistical scan report suggesting that GDP per capita is 7 percentage points below the long-term trend.
The report implicitly assumes that real GDP per capita should continue to grow on average at the same annual rate of 1.1 percent from 1981 to 2023. The report states that under this projection, current GDP per capita would need to grow. It's a very high 1.7% per year and will return to this trend within 10 years.
But there is something wrong with the premise of that argument. Why will future GDP grow at the same rate from 1981 to 2023? Not at the same rate from 1961 to 2023, when Statistics Scan keeps GDP records? Why? Why should we expect real GDP per capita to continue to grow at a constant rate?
Demographic factors such as aging will certainly affect this rate, as older people tend to have lower labor force participation rates. Similarly, globalization and the mass adoption of information and communication technologies accelerated per capita growth from the late 1990s to the early 2010s. As the economic effects of these effects ended and population aging accelerated, per capita growth rates declined in many countries.
Christine Lagarde, former president of the International Monetary Fund and current president of the European Central Bank, characterized the post-2008 era as a “new normal.” Why is Canada's GDP per capita so unusual that we should expect it to continue growing at the same rate as in the past, when growth has slowed in most other developed countries? ”, they would likely have reported a significantly smaller gap.
Furthermore, the volatility of quarterly data means that using current GDP per capita to determine what is needed to “get back on trend” is deceptive.
There are temporary fluctuations in real GDP and population. Periods of abnormally weak growth are often followed by periods of abnormally high growth. Rising interest rates and a large influx of refugees due to continued war will temporarily suppress per capita GDP growth.
If Statistics Canada had released the same report last year and used the period since 2008 to determine the “growth trend,” it might have concluded that real GDP per capita was above trend. . Did people praise the current government's economic policies then? Or do you argue that growth should be slowed?
We all need to avoid making bold claims that are not supported by strong evidence or thoughtful analysis.
It is concerning that Statistics Canada, a federal government agency, has released a highly simplistic analysis of a politically sensitive issue. In the midst of a political debate centered around GDP per capita growth, it was clear that the report, which offered no new useful insights, would be used for political propaganda. Public servants usually want to avoid being on the front page, so it seems like someone at the top of Statistics Canada wasn't thinking things through.
Statistics Canada's report is right to point out that our country's productivity performance lags behind other countries. However, this is not a recent phenomenon. It's been going on for decades. Therefore, it is wrong to place the blame on the current government.
Anecdotes and simplistic analyzes have an undue influence on all political debates and policy decisions. Whatever Statscan's intentions were, it shouldn't have added to this unpleasant cloud.
