Original source: People's Voice (Canada)

The latest figures indicate that the Canadian economy is becoming more deeply entrenched in recession, with no recovery in sight.

Another 34,400 jobs were lost in December, on top of 70,600 in November, for a two-month total of 105,000. The official unemployment rate hit 6.6 percent, the highest level in three years.

But the situation is worse than these numbers, considering the sharper losses in full-time employment. A shocking 70,700 full-time jobs disappeared in December, while part-time jobs rose by 36,200.

The biggest decline came in the construction sector, where employment fell by 44,300, reflecting a sharp decline in new homes and building starts.

Geographically, the December figures show that the recession has begun to spread well beyond Ontario, where the staggering loss of manufacturing jobs which began several years ago has continued.

Looked at another way, young workers were hardest hit in December. For youths aged 15-24, net employment figures fell by 36,600, and the jobless rate zoomed from 12.3 percent up to 12.9 percent.

'Today's dismal data offer additional strong evidence that the Canadian economy has quickly waded knee-deep into recession,' warned Douglas Porter, deputy chief economist at BMO Capital Markets. Other 'optimistic' mainstream economists are forecasting that the jobless rate will hit eight percent by mid-year, followed by a recovery. Even this 'best case scenario' would see another 250,000 Canadian workers laid off by the summer, on top of the 1.2 million already out of work.

Given the Canadian economy's tight links with the United States, things could get much worse. Early figures confirm a sharp drop in US retail sales, as millions of working people face unemployment. Total retail sales, excluding automobiles, fell 8 percent in December through Christmas Eve over the same period last year, according a report in the Globe and Mail. Sales for November fell 5.5 percent. The sales declines are two to five times more severe than most analysts expected. It is the first time that holiday sales have fallen in the US in at least 40 years.

The holiday numbers come a few days after a Labor Department report showed that the number of US workers filing for first-time unemployment benefits rose to a four-week moving average of 558,000, the highest since November 1982. Wages for US workers continue to deteriorate, leaving families even deeper in consumer debt.

The end of the winter shopping season is also expected to result in a surge in layoffs. Retail stores in the US already shed more than 90,000 jobs in November, and several major firms have declared bankruptcy or begun liquidation (including Circuit City, Linens `N Things, Steve & Barry's, and Mervyn's). In another sign of bad news, sales of existing homes fell 8.6 percent in December.

The top economist at the International Monetary Fund, Olivier Blanchard, told the French newspaper Le Monde in early January that continued declines in consumer spending would set off a global depression. 'Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad,' he said. Echoing the right-wing view that the crisis is largely psychological in origin, Blanchard said 'It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression.'

But this 'explanation' avoids the basic reality of declining capitalist production. The US gross domestic product fell 0.5 percent in the third quarter (July-September) from the same period of 2007, but the fourth quarter decline is predicted to hit a staggering five percent. Production in the other advanced capitalist countries is also declining.

For example, in Japan, the second largest economy in the world, production fell by 8.1 percent since October, the biggest such drop since the 1950s. The Japanese Ministry of Economy, Trade and Industry says its surveys show manufacturers expected the decline to continue, with an 8.0 per cent contracted forecast for January.

Other countries are facing even worse situations. In Ukraine, industrial production fell by a massive 28.6 percent in November, following a nearly 20 percent decline the month before. In other words, nearly half of the country's industrial production has been eliminated in the space of two months.

These economies could be the canaries in the mine shaft, if warnings from some economists are correct. Foreign Policy magazine reported on Jan. 5 that 'five prominent economists who correctly predicted the 2008 world economic meltdown say the crisis is only going to get worse.'

New York University economist Nouriel Roubini, who correctly forecast the current disaster several years ago, said the crisis is still in its early stages.

'As the US economy shrinks, the entire global economy will go into recession. In Europe, Canada, Japan and the other advanced economies, it will be severe. Nor will emerging-market economies – linked to the developed world by trade in goods, finance, and currency – escape real pain... The bubbles, and there were many, have only begun to burst.'

Roubini predicted the US recession will last at least two years and could drag on for a decade. He said hedge funds are being forced to sell their assets at fire-sale prices while some financial institutions will go bust, and some governments in emerging economies could default on their debt.

Morgan Stanley Asia Chair Stephen Roach said Asian economies will suffer from being overly dependent on exports to the US and on their own undervalued currencies.

'A similar verdict is likely for the commodity-producing regions of the world, not just the oil-dependent Middle East, but also the resource-intensive economies of Australia, Canada, Brazil, Russia and Africa,' Roach wrote. 'As global growth slows, so does the demand for economically sensitive commodities, resulting in a sharp correction in the bubble-distorted commodity prices and growth rates of the major commodity producers.'

Yale University economist Robert J. Shiller, author of the 2008 book The Subprime Solution, was one of several who cited the example of Japan.

'History tells us there is some precedent for a protracted, weak housing market. After the last housing boom in the United States peaked in 1989, it took a typical city five years to hit bottom,' he wrote. 'This time, prices have only been going down for two years. We might look with caution to Japan, where urban land prices fell for 15 consecutive years, from 1991 to 2006.'