Lowered Expectations

On October 11th, 1975, debuted on NBC. The show’s cast included future Ghostbusters Dan Akroyd and Bill Murray as well as , Blues Brother , Jane Curtain, Garrett Morris and . Saturday Night Live became an iconic hit and redefined the late night comedy genre. So, naturally, it spawned many imitators, some funnier than others. One of the best descendants of the genre was Keenen Wayens’ “In Living Color” but there have been others and its one of those lesser known titles that I’d like to talk about. In 1995 Mad TV launched its late night comedy sketch show which had a memorable ongoing skit called “Lowered Expectations”. The skit’s premise was a video dating site for those who, out of desperation, had decided to settle and accept any potential mediocre mate to avoid being alone. This skit sometimes Vice President and came to mind during the last Federal election when I would hear, Senior Investment Advisor repeatedly, about the remarkable, enduring strength of the Canadian economy. However, when I look at the Statscan economic numbers, T: 604.643.0234 I’m not sure where the strong economy narrative is coming from. [email protected] Strong Economy?

According to Statistics Canada, Canada’s GDP grew across all industries by 1.3% between August 2018 and August 2019. The biggest sector GDP gainer, unsurprisingly, was the Cannabis Sector which grew 16.8% year over year but only represents a minuscule $792* million share of the $2 Trillion-Dollar Canadian Economy. The biggest loser, in GDP terms, was the far more substantial Energy Sector ($177 Billion*) which lost 3.9% in GDP terms year over year. Now keep in mind, Canada’s population grew by 531,497 between July 2018 and July of 2019. By my back of the napkin math, that’s a 1.4% year over year growth rate in the population. In that case, you would expect that the economy would need to grow by that much just to stand still, never mind grow.

* Statistics Canada. Table 36-10-0434-02 Gross domestic product (GDP) at basic prices, by industry, monthly, growth rates (x 1,000,000)

Now, the Bank of Canada has revised downward its 2019 Canadian GDP growth forecast to 1.5%, well below the so-called Goldilocks zone of 1.7% where the bank is comfortable that the economy can grow without the threat of inflation and reduced its 2020 forecast from 2% to 1.6% and to 1.8% in 2021 respectively . Personally, I think the Bank should be aiming for higher GDP growth especially since it has been consistently reducing its forward-looking GDP forecasts.

In that light , if you feel like things aren’t getting any better economically, you’re probably right. The unemployment rate was unchanged on a monthly basis in October at 5.5% and on a year over year basis, employment grew by 443,000 albeit with declines in manufacturing and construction which have been core drivers of employment over the years. So, it seems to my mind that we have a muddling along economy at best. Nothing is really that good but, compared to the outright contraction we see in Europe , we shrug and accept it as the norm.

Settling

The prevailing train of thought throughout most of the developed world’s central banks over the past few decades is that the Goldilocks zone for economic growth, not too hot, not too cold is 1.7%. Growth is seen to be something to be carefully managed, not embraced and nurtured. However, given the current boom of the US economy (yes, there are other short-term factors to explain strong US growth as well: tariffs -ironically, repatriation of corporate capital for tax purposes, reduced regulation etc.) as emphasized by the recent stellar December US jobs numbers versus the losses posted in Canada, I think it may be time to ask ourselves if slavishly targeting a low growth rate in GDP is in our best interest or if, after years of conditioning, we are too afraid to strive to achieve our economic potential and have instead just settled and collectively, lowered our expectations.

“The Only Thing We Have To Fear Is Fear Itself” Franklin D. Roosevelt, 1933

Merry Christmas!