This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Jack Mintz, July 21, 2023
Canadian and U.S. economic growth is diverging in a surprising away. As BMO chief economist Doug Porter pointed out in a memo last week, Canada’s overall growth is super-charged by immigration. But we have trailed U.S. per capita growth miserably in the past three years. Even though a bigger population will create a larger market here, the growing divergence in per capita incomes is bad news for Canada. Workers, savers and businesses will look elsewhere for better economic opportunities, and we won’t be growing fast enough to adequately serve a larger population demanding more in terms of housing, health care and pensions.
As Porter calculates, Canadian and U.S. annual GDP growth rates for the 12 years before 2020 were almost identical (at 1.72 and 1.66 per cent, respectively). Since the fourth quarter of 2019, however, Canada’s annual growth rate has fallen by a third, to 1.12 per cent, while the U.S. growth rate has stayed virtually the same — at 1.67 per cent — despite the pandemic.
Where the countries diverge is in the sources of their GDP growth. Canada’s comes entirely from population growth, which averaged 1.6 per cent per year over the past three years, including this year’s whopping 3.1 per cent. But GDP per working hour actually fell by 0.2 per cent per year over the last three years.
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