During the first three days of this week, I had the opportunity to meet, in Kansas, with state and federal legislators from the Midwestern part of the United States. The majority of the discussion revolved around the current condition of the North American economy and particularly that in the U.S.
Because of the interconnected nature of our economies and the fact that the U.S. is by far our largest trading partner, Canadians have every reason to watch closely the health of the American economy.
The U.S. recession began in December of 2007 and the Gross Domestic Product has fallen since then by 3.7%. The recession is the longest and one of the deepest since the second world war. 49 states are currently in a recession, with the previous worst being 43 states in 1982. North Dakota has the enviable distinction of not currently being in a recession.
The current U.S. recession, unlike some other previous recessions, hit the housing market extremely hard with drops in housing values of 25% and declining home sales for much of the past 2 years. As well, unemployment continues to rise in the United States with rates over 9%, the highest since the early 1980’s. Every state is dealing with significantly reduced revenues and virtually everyone is cutting back on their budgetary expenditures.
Despite these grim statistics, there was some optimism expressed by legislators this past week. First, the recession in the United States is somewhat regional. While almost every state is impacted, the western states (such as California) and the eastern states (such as Florida) are being much harder hit than the Midwest states. The seaboard states have seen much higher unemployment rates and sharper decreases in housing prices.
Recent statistics have also given some reason to hope the recession is at least reaching its bottom. Both new and existing home sales have increased over the past 3 months in the U.S. As well, the pace of home devaluation has slowed over the past few months.
The financial markets have improved with stocks gaining back much of the ground they lost over the past two years. Consumer confidence levels are also higher than they were earlier this year in the United States and statistics show that the manufacturing industry is stabilizing.
Despite these positive signs, the reality is that recovery for the U.S. economy is expected to be slower than in past recessions and while there may be growth in the second half of this year or next, it will be modest growth.
What is important during these difficult economic times in North America is that trade barriers not be thrown up for short-term political or economic gain. Long-term experience has shown that open trade between our countries benefits both countries more in the long run than having reciprocal trade sanctions.
What happens in the United States economy is important to Canada and the world. Our intertwined economies mean that one countries success helps the other. We can all hope that the guarded optimism being shown by some legislators and American economists is well founded.
