Canada’s market is healing, but it will not seem like that for awhile, economist tells NICC

Canada’s recession is over, although it probably won’t feel like that for some time, economist Dr. Christopher Probyn told people attending the National Insurance Conference of Canada (NICC) in Ottawa.
Probyn, chief economist of State Street Global Advisors in Boston, said the North American markets are healing in the wake of the U.S. mortgage crisis that felled the U.S. investment bank sector and caused a synchronized contraction of the global markets.
But one feature of the current recovery is that it is jobless, and so it may not seem to many that the economy is on the mend.
Probyn said production in North America is starting to come back up, although that is relative to a very low level of production during the height of the crisis.
He said production during a recession is often cut well below the level of consumer demand, so that businesses can clear out their existing inventories. Once these inventories are cleared, then production increases to meet demand.
“Inventory accumulations have diminished,” Probyn observed. “Production goes back up to meet the demand once the inventories are cleared out.”
But the increase in production is a slow road. The North American economic recovery is “going to be a kind of jobless recovery” for some time, because although production is increasing, it has not yet increased to meet the level of demand.
In other words, companies’ production levels are not yet at the point at which it is necessary to re-hire employees who were laid off when production was cut to clear the inventory.
Probyn said his near-term economic forecast is not quite as “bullish” as that of the Bank of Canada. Nevertheless, he did predict that Canada would see economic growth in 2009 Q3.
He predicted interest rates would not likely rise until the 2nd half of 2010 at the earliest, and probably more likely in 2011.
He said it would be the second half of 2010 before the global recovery is complete and the global markets start to show synchronized growth.