Narrative about Canada’s post-recession economic superiority overlooks provincial laggards east of Manitoba
A popular narrative holds that Canada weathered the global financial crisis and recession relatively well, outperforming many advanced countries economically since 2009. This is true for the country as whole particularly when Canada is measured against the United States.
However, an examination of sub-national data complicates this narrative. The reality is that although Canada's national economic indicators look better, the aggregate numbers mask considerable economic weakness in several provinces and regions.
Consider that from 2010 to 2014, inflation-adjusted gross domestic product (GDP) per person in the United States grew at an annual average rate of 1.2 per cent while Canada grew at 1.4 per cent. At a glance, the data seem to support the narrative of a stronger Canada and weaker America.
However, economic growth in the United States during this period was actually higher than every Canadian province east of Manitoba. Average annual inflation-adjusted per person growth east of the Prairies ranged from a low of 0.1 per cent in New Brunswick to a high of just 1.1 per cent in Ontario.
So while Canada as a whole outperformed the United States over this period, the economic performance of some provinces—and entire regions—either closely paralleled or were actually worse than the American average.
Instead of a simple narrative of Canadian economic superiority, the story that emerges from an analysis of sub-national data is that very strong economic performance in specific resource-intensive provinces (namely Alberta, Saskatchewan and to a lesser extent Newfoundland & Labrador) is largely responsible for Canada’s comparatively strong overall economic record relative to the United States.
Specifically, from 2010 to 2014 (before the downturn in commodity prices), Canada’s resource-intensive provinces saw average annual inflation-adjusted per person GDP growth of 2.6 per cent while the non-resource intensive provinces only grew at 1.1 per cent. Put simply, higher growth rates in Canada's resource-intensive provinces pulled up the national average and masked economic weakness elsewhere in the country.
The sub-national data from the United States also point to robust resource-based growth over the same period. The issue, however, is that for Canada as a whole, the resource sector makes up a larger share of the economy (14.2 per cent) than that of the U.S. (5.9 per cent), which means resource intensive provinces played a larger role in pulling up the national average than similarly high-performing American states.
All of this raises important questions about which provinces and regions will propel Canada’s future economic growth at a time when commodity prices have fallen and relatively weak growth in Central and Atlantic Canada persists. The resource boom’s output, employment, and private-sector investment generation is over for the time being, and Central and Atlantic Canada have yet to see their economies surge.
Given the current inability of resource-intensive provinces to continue driving growth in Canada, it is now more urgent than ever to put forth effective government policies that lay the foundation for economic growth in those regions.
Unfortunately, many provincial governments in these regions have a track record of implementing economic policies that hinder growth. Moving forward, it’s critical for governments across the country to ensure their policies attract and retain private sector investment, which will drive growth and ultimately lead to improving opportunities, rising incomes, and higher living standards.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.