Signs of Economic Recovery

By now I expect that many people recognize that although the recession is still very much in play there are undeniable signs of a recovery. Regrettably, jobs tend to come later in any recovery since many companies delay taking on the higher payrolls until they are confident that the recovery is real rather than a statistical blip. I like this article since it lays out many of the bald numbers in the federal government's accounts, and which do provide indications that the recovery is truly underway. This does not mean that there will be no backsliding -- nothing is ever certain about the future -- only that there is good reason to make future plans on the probable basis of better times on the way.

I don't often provide a retrospective of things I've said in this blog in the past, but that is what I will do now. A year ago I wrote a couple of articles regarding the source of the extreme impact on government finances due to sharp economic decline and loss of consumer confidence, and coupled that with a cautionary note on the government's fiscal response. At the time I expressed some liking for Flaherty's caution approach to stimulus, arguing that it was more important to raise public confidence than to inject enormous amounts of stimulus. The reason for my stance was that since the upturn in government accounts would likely recover as fast as it dropped, it was only necessary to minimally bridge the economic air pocket so that the entire economy would not spiral out of control.

With the latest published numbers it seems the government's measured approach has been sufficient. As I said in one of those earlier articles, it is the private sector that must build the economy since it is the true source of the country's wealth. All the government can do -- and should do when necessary -- is shift some of that wealth around to temporarily patch problem areas. Now that the government is declining to extend certain programs (such as the home improvement program) and is beginning to recover its investment in ailing sectors (such as the auto industry), there are few complaints. This is a good sign.

We remain at the whim of global economic forces since we are so dependent on exports, therefore until the recovery takes hold elsewhere as strongly as it is domestically we are at risk. This is why, for example, the loonie drops as Europe descends into turmoil; if they do enter a serious period of restraint, they will import less from Canada. It's nice that Canada is doing relatively well at this point, but it is not an excuse to be complacent or smug.