With all the doom and gloom with respect to slowing Canadian economic growth and talk of secular stagnation, it is useful to look at a comparison between the last few years in Canada with what transpired during the Great Depression. References are often made that the 2008-09 Recession and its aftermath is a period comparable to the Great Depression.
An interesting comparison to this effect for the United States, the UK and Europe was made in a Forbes article by Neil Howe some time ago. This comparison concluded that the Great Depression was more severe early on than for the current downturn but the present downturn has been longer lasting suggesting we perhaps should call the current period among other things the “Long Depression” or perhaps “The Second Great Depression.”
I’ve provided a slightly different comparison for Canada using real GDP growth rates and unemployment rates for the 1928 to 1935 period. The real GDP numbers for the Great Depression are those constructed by Urquhart and Green while the unemployment rates were constructed from labour force data from Historical Statistics of Canada. The 2008 to 2015 numbers are of course from Statistics Canada (with unemployment rates for 2015 being a 5 month average and the real GDP growth rates being the first quarter). Naturally, any comparisons made need to be qualified by potential differences in the manner in which data was collected and compiled during these two time periods. Pre World War Two macro data for Canada (and other countries) definitely exhibits more volatility than afterwards. This could be to differences in data quality or perhaps it is the stabilizing effects of more activist government fiscal and monetary policy since but that is a debate for another time.
Nevertheless, as the two figures show, when compared to the United States and Europe, Canada has had a relatively benign Great Recession experience in aggregate (though some central Canadian residents may beg to differ). When compared to the Great Depression, at no time have Canadian unemployment rates since 2008 soared anywhere near to the peaks of the Great Depression though interestingly enough, our unemployment rates going into the Great Recession were higher than those going into the Great Depression. By Year VIII (1935 versus 2015) the unemployment rate was still more than twice as high during the Great Depression Era. During the Great Recession era, the unemployment rate peaked at 8.3 percent in 2009 but has since declined very slowly and currently stands at 6.8. During the Great Depression, the unemployment rate peaks at 19.3 percent in 1933 and then reaches 14.2 percent by 1935.
With respect to real GDP growth rates, during the Great Depression Era the economy shrank for four consecutive years and between 1929 and 1933 the Canadian economy shrank 30 percent. During the Great Recession, real GDP shrank about two and one half percent but then grew in every year since (with the first quarter of 2015 posting a decline but the year is young).
Regional variations aside (slow growth in Ontario, a resource boom in Alberta), the overall performance of Canada’s economy during the period since 2009 in comparison to the Great Depression could be termed the “Long Slowdown” or perhaps “The Long Winter's Nap” given the slow rate of decline in the unemployment rate and the lower rates of real GDP growth especially relative to the 1997-2007 period. It is not comparable in terms of relative impact to what occurred during the Great Depression (imagine a 30 percent drop in real output after four years and an unemployment rate of nearly 20 percent). The current slowdown is real and protracted and a concern but in Canada it cannot be considered on par with the "Great Depression."