TORONTO - Economists are cautiously optimistic that "recession" will not be a prominent phrase in the Canadian vocabulary next year as the economy trudges out from its second-worst annual decline in nearly half a century.
Most economists predict a gross domestic product growth rate between 2.5 to three per cent in 2010, about average by historical standards, but not robust enough to make a dent in the 8.5 per cent unemployment rate.
The growth would essentially reverse the 2.5 per cent decline seen this year.
This year will rank behind only 1982 as the worst year of economic decline since record-keeping began in 1961, said Douglas Porter, deputy chief economist with BMO Capital Markets.
"It's actually unusual to have an outright decline in GDP for a full year, in fact since 1961 (when records began) it's only happened three times in '82, 1991 and 2009."
Statistics Canada reported Wednesday a modest 0.2 per cent month-over-month growth in real gross domestic product in October, leading many economists to believe growth in the last quarter of 2009 could reach as much as four per cent.
Porter said following modest growth in the third quarter of 2009, three per cent growth in fourth quarter would be enough to declare the recession officially over.
"That would pretty much do it, if you end up with two full quarters of growth, that pretty much ends it," he said.
But because the economy is recovering from the second worst decline ever recorded, that growth won't create enough of a thrust for sustained job creation.
Despite a BMO projected growth rate of 2.6 per cent, the bank is predicting the jobless rate will still average 10 per cent in the United States and 8.5 per cent in Canada next year.
Porter said this recession differs from others because "the U.S. consumer is not going to come riding to the economy's rescue like it has so many times in the past."
The recovery is also different because in past cycles industries that were hit hardest tended to see some of the biggest snapbacks, but in the latest report, the finance, mining and manufacturing sectors, some of the biggest losers in the recession, all slipped.
"The question is: do they get all the way back to where they were before the recession began? And the answer is, no they won't," Porter said.
CIBC World Markets economist Krishen Rangasamy said the unemployment rate has peaked and will either stay at current levels or trend down slightly next year.
Thousands of unemployed Canadians who lost their jobs in the recession are looking for work, in addition to the usual new entrants to the labour force and there aren't enough jobs being created to absorb both groups, Rangasamy said.
"To put a big dent in the unemployment rate you'll need very significant growth next year, which we don't see happening," he added.
Millan Mulraine, an economic strategist at TD Securities said although the economic recovery is fragile, Canada is already out of recession.
He expects at least a three per cent year over year growth for 2010.
"That would suggest that not only are we away from the recession but we've retraced some of the lost ground that the Canadian economy experienced during the recession."