C.D. Howe Institute Business Cycle Council Issues Authoritative Dates for the 2008/2009 Recession

The newly established C.D. Howe Institute Business Cycle Council has determined authoritative dates for the onset of the 2008/2009 recession and the resumption of economic growth in Canada.  Based on a careful analysis of key economic indicators, the Council determined that the recession started in November 2008 and lasted seven months until May 2009. As a foundation for further work on business cycles, the Council has also agreed on a common set of reference dates for historical recessions in Canada starting in 1929.

The Institute created the Business Cycle Council to act as an arbiter of business cycle dates in Canada.  It comprises a panel of expert business and academic macroeconomists and economic historians.  The Council defines a recession as a pronounced, pervasive and persistent decline in aggregate economic activity, typically resulting in a cumulative decline over adjacent quarters.

In evaluating the 2008/2009 recession, the Council noted that while the Canadian economy began to soften slightly in December 2007, a majority of industry sectors raised output, and employment rose steadily until the third quarter of 2008. In mid-September 2008, the investment bank Lehman Brothers failed in the US, setting off a chain reaction in financial markets that effectively froze credit flows.

The onset of the recession was delayed in Canada, compared to the United States and some other countries, especially with respect to employment, owing to record agricultural crops in September 2008 and a national election in October. By November, plummeting global export demand and a collapse in commodity prices was evident through rapid declines in output and jobs, which persisted until early May.

Parts of the economy began to recover in spring 2009, but overall output and employment continued to fall in May. Monthly output began its recovery in June 2009, while employment lagged slightly, partly because of a new seasonal pattern in education employment. Looking at overall economic conditions, the Council determined that the recession lasted from November 2008 to May 2009.

The Council also adopted a classification system that allows grouping recessions according to their severity from Category 1, the mildest, to Category 5, the most severe. Category 1 recessions have only a short, mild drop in GDP and no decline in quarterly employment. At the other extreme, Category 5 recessions involve extremely rapid contractions of the economy over an extended period of time. The past three recessions were the most severe since the mid-20th Century.

In future, the Council will meet when economic conditions indicate the possibility of entry to or exit from a recession, and assign turning points in the economy as they arise, with a lag sufficient to ensure that potential revisions to economic data would unlikely change the conclusions of the Council.

Members of the Council participate in their personal capacities, and the views collectively expressed do not represent those of any institution or client.

The current members of the Business Cycle Council are:

Chair

Philippe Bergevin (C.D. Howe Institute)

Members

Craig Alexander (TD Bank Group)

Steve Ambler (Université du Québec à Montréal)

Paul Beaudry (University of British Columbia)

Philip Cross (Macdonald-Laurier Institute)

Stephen Gordon (Laval University)

Stéfane Marion (National Bank)

Angelo Melino (University of Toronto)

Douglas Porter (Bank of Montreal)

Angela Redish (University of British Columbia)

Table - Chronology of Canadian recessions since 1929

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A Commentary that explains in greater detail the methodology and the chronology is available here.

For a graph showing Canada’s Gross Domestic Product and recessions from 1947-2012, click here. 

For a three-worksheet Excel file providing the main economic indicators used to establish the historical chronology of Canadian business cycles, monthly data, and quarterly data, see below.

Contact: Kristine Gray — phone: 416-865-1904; e-mail: kgray@cdhowe.org.