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Keeping the Canadian Economy Going Strong

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The number of business bankruptcies during the first seven months of this year is actually six per cent below the comparable period of 2008 and the total of small businesses has grown, helping to ensure that the recovery will not be a “jobless” one like that of the 1990s. While many were laid off, the number of self-employed actually rose by 92,800.

Over the coming years, this small-business growth will become one of the key drivers in Canada’s economy, aided by easier access to technology, big-business outsourcing and the propensity of older Canadians to start a business. The number of business bankruptcies during the first seven months of this year is actually six per cent below the comparable period of 2008 and the total of small businesses has grown, helping to ensure that the recovery will not be a “jobless” one like that of the 1990s.

In August, the Canadian Federation of Independent Business, which claims to speak for more than 100,000 smaller firms, found members’ optimism had jumped to the highest level in two years.

The country’s speed in slashing interest rates, paired with the entrepreneurial spirit of the Canadians themselves, combined to keep their economy afloat while things south of the border were seen to be spiralling dramatically out of control. Without collapsing banks and widespread foreclosures, consumer confidence remained relatively high, even as the same industries and markets plunged into a seemingly bottomless pit in the U.S. That helped sustain spending and led Canada to a remarkably quick, powerful recovery in the housing market as cheap homes and rock-bottom mortgage rates created bargains.

And as consumers recovered from the shock of recession, that same resurgence in confidence quickly spread to entrepreneur businesses.

Although unemployment rose, the statistics show remarkable trends in job loss. In business, it seems size does matter. Among firms with fewer than 100 workers, employment fell by only about one per cent during the recession, while outfits with more than 100 chopped about 10 per cent. Smaller firms’ sales tend to be tied to the health of Canadian consumers, rather than the foreign export markets that collapsed so suddenly late last year.

And while they’ve suffered rising unemployment, this recession has still been shorter and milder for Canadians than any other in decades. Although unemployment has jumped 2.5 percentage points over the past year, hitting 8.7 percent in August, this is much less painful than in the U.S., where unemployment shot up 3.5 points to reach 9.7 per cent in August. A more important figure involves the long-term unemployed. As long as the average duration of unemployment doesn’t rise too much, permanent damage to workers’ employability and motivation will be averted.

In Canada, that’s what seems to have happened. The duration of unemployment had edged up to just 15 weeks in August from the pre-recession level of 14 weeks. In the U.S, it rose far higher, from 18 weeks to 25 weeks. The entrepreneurial spirit of the Canadians is averting the recession it seems, and their solution: do it yourself with an entrepreneur business.

Shane Krider

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