Recession hits home as more Canadians bankrupt, collecting EI benefits
New figures showing a spike in personal bankruptcies and employment insurance applications show the recession is causing a lot of anguish with Canadians.
OTTAWA - New figures showing a spike in personal bankruptcies and employment insurance applications show the recession is causing a lot of anguish with Canadians.
And given that the two distress indicators lag what is actually occurring in the economy, analysts say the next 12 months will see many more personal and corporate bankruptcies in Canada.
"This is the real Main Street stuff," said the head of Dale Orr Economic Insight.
"This is people who have been laid off, so this is a direct cause of the bad economy. This is just the beginning, it's going to be the end of 2011 before we're back in equilibrium again," Orr predicted.
The federal Office of the Superintendent of Bankruptcy reported Tuesday that 7,944 individuals across Canada filed for bankruptcy in January, up 21.7 per cent from a year earlier.
Over the past 12 months as a whole, about 12,000 Canadians became insolvent.
TD Bank economist Grant Bishop said he expects to see "more households succumbing" to insolvency through most of this year.
In another indicator of the recession's bite, Statistics Canada reported Tuesday that 560,400 Canadians were getting regular employment insurance benefits in January, 104,000 more or 22.8 per cent more than 11 months earlier and 23,700 more than in December.
Economists said the figures were what would be expected with an economy that has fallen into a deep pit, with output shrinking 3.4 per cent in the fourth quarter of 2008 and expected to shrink further this quarter.
Opposition parties demanded Tuesday that the government improve benefits to the unemployed, saying the current program covers less than half of the unemployed. He noted that of the 1.3 million officially unemployed, only 560,000 are collecting benefits.
But Human Resources Minister Diane Finley, who announced a $60 million program to hire more workers to speed up procession of claims, had her own figures.
She said 80 per cent of individuals who pay into the system qualify for benefits. Many part-time workers and the self-employed do not qualify for EI.
"Those who are not eligible for EI, it is often because in fact they did not pay into EI in most cases because they are not participants, and of course, there are cases where they do not have sufficient hours," said Prime Minister Stephen Harper in responding to a question in the House of Commons.
In a TV interview, Finance Minister Jim Flaherty lamented that the 295,000 job losses of the past four months are just the beginning and that more Canadians will be thrown out of work this year.
But he added that the federal budget's multi-billion stimulus spending and changes to EI rules will help.
The Conservative government says laid-off workers will get an extra five weeks of benefits, expanded work-sharing options and money for training under the revamped EI rules.
"That's a huge stimulus to the economy," Flaherty said. "So we have to pull together on this. This is a difficult time for Canadians."
Most of the budget's provisions won't take effect until April 1, however, and even then, Canadians are not convinced they will have a major impact.
Worries about the length of the recession have been a major reason the stock markets have dropped more than 41 per cent since hitting records last spring, despite recent gains in equities. On Tuesday, the Toronto's S&P/TSX composite index dropped more than 109 points to 8,849, compared with a level of more than 15,000 about nine months ago.
A new poll from the The Canadian Press Harris-Decima showed that while 57 per cent of respondents felt the stimulus would be "somewhat effective," only six per cent believed it would make a significant difference.
"The continuing uncertainty in financial markets, coupled with pessimism expressed by respected economic experts may be dampening confidence that these efforts will achieve the desired effect," said Jeff Walker of Harris/Decima.
In a related matter, a Washington gathering of some of North American's top chief executives and policy makers wound up Tuesday with an informal pledge to co-operation in shoring up the economy and to keep trade routes open.
In a statement, Thomas d'Aquino of the Canadian Council of Chief Executives said there "was unanimous agreement that free trade and efficient markets are essential to an early and sustained global recovery."
On Monday, the World Trade Organization warned that global trade may decline by as much as nine per cent this year.