The worst economy since World War II? Well, no…

An ad that has been recently airing on Canadian radio stations and paid for by Unifor, a major private-sector union, claims that Canada’s economy has done worse under the current federal government than under any other federal government since World War II. This is a rather bold claim to make. But is it true?

One rough measure that economists use to measure a society’s economic distress is the Misery Index, which is rather simply the sum of the unemployment rate and the inflation rate. It attracts its share of criticism for giving inflation too much weight and unemployment too little weight: fair enough.

Yet even if one accepts that the weighting could use a little fine-tuning, it appears that recent years have been far from the worst since World War II. That dubious honour goes to a decade-long bout of economic ill health from about 1976 to 1985 (at its worst around 1982) when either high inflation was eating away at people’s savings, or unemployment was wreaking havoc with peoples’ cash flow.

A second difficult period came in the early ’90s, when the misery index briefly spiked and unemployment was persistently greater than 10 percent for a two-and-a-half year period from late 1991 to mid-1994.

Unemployment rates, inflation and the "misery index", Canada, 1976-2014. (Click to enlarge.)

Unemployment rates, inflation and the “misery index”, Canada, 1976-2014. Source: Statistics Canada Consumer Price Index and Labour Force Survey data on CANSIM. (Click to enlarge.)

 

Recent times, by comparison, have been not so bad. Even during the 2008-09 global economic crisis, unemployment rates — which suddenly rose here, as in other countries — were no worse than they were during the mid-to-late ’80s economic boom, and they have been gradually declining since then. Inflation rates have also remained low, much unlike the 1976-82 period when they were trending steeply upward. The only way these could be described as being the worst economic times since World War II is by pretending the tough times of the ’70s, ’80s and ’90s never happened.

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

One Response to The worst economy since World War II? Well, no…

  1. John Pinney says:

    The only fault in your logic is the actual numbers of unemployed rather than the percentage. “Average” is a nebulous thing. You can have one hand on a block of ice and the other on a red hot element, you can have an average temparature of 37C but it still hurts like hell.

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