OTTAWA - Parliament's budget watchdog is forecasting that 100,000 more jobs will be lost this summer, adding there is no evidence that the government's infrastructure stimulus spending has as yet started to work through the economy.

Kevin Page said Wednesday the $46 billion committed by Ottawa over two years to stimulate the economy won't do much more than "soften" the recession's impact on jobs, incomes and output.

But although the Stephen Harper government issued an update in June claiming "80 per cent (of commitments) already being implemented," Page said it won't be until the fall that Canadians will see the dollars at work.

"There's no way it could be working now. There's no way the money would have flowed. Given the timing of estimates approval and contract approval ... at best you're going to start to see stuff in the third or fourth quarter and in 2010," he said.



Even if the stimulus works as the government hopes, the 190,000 jobs that Ottawa claims will be saved or created will pale to the 453,000 net jobs that will have been lost.

But in comments upon the release of his five-year economic and fiscal assessment Wednesday, Page said the Canadian government needs to start thinking about the aftermath of the recession and what it has done to meet new challenges.

After a dozen years of paying off debt, Ottawa will add $155.9 billion in deficit shortfalls over the next five years.

And even after the economy returns to full capacity in 2014, Ottawa will still have a built-in $12-billion structural deficit, which will require raising taxes or cutting spending to eliminate.

With health care costs expected to rise and aging baby boomers moving to retirement, Page said future governments will be faced with a difficult juggling act to balance demands with revenues.

"The structural deficit will become a major focus in the future," he said.

"If the economy is back to potential and we're in a deficit position, it won't be a good thing ... given our aging demographics and given some productivity issues."

Finance Minister Jim Flaherty has insisted Canada's deficit is cyclical - caused by the downturn and one-time spending - and that the government will not have a shortfall once the economy fully recovers.

Page said his assumptions of growth and revenues closely match those of the government, which has yet to release a revised forecast beyond this year.

Page noted the downturn is at least as bad, and in some instances worse, than what Canada experienced in the early 1980s and 1990s.

But in terms of the lasting impacts, the slump most closely resembles that of 1991-92 recession that took years to exit.

In fact, Page said the Canadian economy won't return to full potential until 2014, by which time the national unemployment rate still won't have returned to the 6.2 per cent average of 2008.

"The sad fact is that recessions are very nasty and they take years for employment to recover," he said.

However, Canada is faring far better than most of its competitors, including the U.S., he noted.

The implications for the federal government are serious, with budgets deficits totalling $155.9 billion over the next few years and the government still stuck with a "structural" deficit in the $12-billion range even when the economy does return to full capacity.

The structural deficit occurs, said budget office officials, because the economic capacity of the country will have shrunk during the recession, partly through plant closures or cutbacks, and because of Ottawa's phased-in corporate income tax cut to 15 per cent by 2012.

Page said the discrepancy between his new numbers and the January budget - which saw accumulated deficits totalling about $85 billion - is because the recession has been much deeper than anticipated earlier in the year.

The Finance Department's new numbers for 2009, released with the update in June, are almost identical to the parliamentary budget office, Page said.

He said if the government were to project deficits out five years, it would likely come to the same conclusions as he has.