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Canada May Be Suffering Double-Dip : Commerce: Like the U.S., Canada appears to be sinking back into recession. The jobless rate is likely to stay in double-digits until the end of 1992.

December 29, 1991|MARY WILLIAMS WALSH | TIMES STAFF WRITER

TORONTO — After rebounding weakly in the summer and fall, the Canadian economy appears to be sinking back into recession, extending what some say is the worst slump here since the Great Depression.

Even before the current slowdown began, Canada had gone through a grueling recession--far longer and deeper than the one in the United States--and had already lost hundreds of thousands of jobs.

"We've almost put the economy in a pine box," said Douglas Peters, senior vice president and chief economist for Toronto Dominion Bank.

Last week, Statistics Canada, the government agency that collects economic data, reported the gross domestic product, the total value of the country's output of goods and services, rose a scant 0.1% in October from September.

At the end of the third quarter of this year, 1.4 million people in this country of 27 million were out of work. Economists say the unemployment rate here is likely to stay above 10% until the end of 1992.

And the government reports that there are now more than a million Canadian children living in official poverty. The figure marks an increase of 150,000 in two years.

No sector of the economy has been immune to the slump. In retailing, Canada saw several high-profile chain-store closings just before Christmas--normally the most profitable time of year. More closings are expected at the end of the holiday season.

On Canada's breadbasket prairies, the inflation-adjusted price of wheat today is lower than it was in the depths of the Great Depression of the 1930s. Farmers "are bleeding all over the place," said Robert Fairholm, managing economist at DRI/McGraw-Hill's Toronto office.

In manufacturing, reports of new plant closings and layoffs seem to come almost daily. Corporate profits, as a percentage of gross national output, are at their lowest level since the Depression.

And in real estate, the office-space market is in the doldrums and looks as if it will remain so indefinitely. Housing starts and resales spurted earlier this year but then lagged again in November, dashing hopes that residential construction might kindle a lasting recovery.

Against this backdrop, public pressure has been mounting for the government to take sweeping, stimulatory actions. Earlier this month, Prime Minister Brian Mulroney reluctantly called together the country's 10 provincial premiers and two territorial governors to discuss what could be done to rouse the economy.

After the meeting, the first ministers returned to their provinces empty-handed. Economic philosophies among the federal and provincial political leaders vary widely, and the only thing everyone could agree on was to hold yet another meeting in February.

"My friends were saying this was an opportunity grossly missed," said Peters of Toronto Dominion Bank.

Nationwide, Canada lost 305,000 jobs between March, 1990, and March, 1991. Of these, 74% were jobs in the industrial heartland of Ontario, particularly the so-called "Golden Horseshoe," a U-shaped belt of prosperity following the curve of the Lake Ontario shore.

Unemployment in stylish Toronto, the hub of the Golden Horseshoe, has more than doubled since 1990, and the city's welfare rolls have bulged. Last month, (Nov.) the toll of welfare recipients was 283,804--more than the population of seven Canadian provincial capitals.

An estimated 125,000 Torontonians are now relying on food banks, making a mockery of a 1989 City Council resolution to eliminate the need for such banks in one year.

The homeless population has also spiraled in Toronto, a city where down-and-out street people used to be a rare sight. Advocates say there may now be 30,000 homeless.

Farther east, Quebec's economic problems dwarf those of industrial Ontario and could play a key role in Canada's ongoing national unity debate.

In the past, Quebec's federalist government has boasted that it can offer sounder economic management than the separatist opposition; it has told French-speaking citizens that they will be better off economically if they maintain the political status quo and stick with Canada.

But now, nearly one Quebecer in 10 is on welfare, and the argument may be losing its persuasiveness. The proud Francophone province has seen some shocking business setbacks: Its famed Lavalin engineering group collapsed under the weight of a $756-million debt over the summer; two mills in its all-important pulp-and-paper industry ceased operations in the fall, and the provincial government's multibillion-dollar Great Whale hydro-electric dam project has been put on hold.

Quebec is due to vote by October on whether to remain a part of Canada, and separatists are smelling blood. The separatist Parti Quebecois, under the leadership of Jacques Parizeau--himself an economist of London School training--has suddenly found itself in the unusual position of being able to attack the provincial government on the basis of orthodox economic principles.

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