Biannual Update on the Canadian Economy: Third and Fourth Quarters of 2021

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This HillNote highlights key trends in the Canadian economy in the third and fourth quarters of 2021. Although the economy improved in the second half of 2021, the recovery remains uneven among certain sectors and population groups. This is particularly the case for those working in the agricultural sector, women and Indigenous people. In 2021, the rates of unemployment for Indigenous men and women significantly exceeded the rates for non-Indigenous men and women across all age groups. Moreover, Indigenous and non-Indigenous women had higher rates of unemployment than Indigenous and non-Indigenous men.

Real Gross Domestic Product

Figure 1 shows that the annualized real gross domestic product (GDP) grew in the third and fourth quarters of 2021 by 5.5% and 6.7%, respectively. At the beginning of 2022, the Bank of Canada stated that the Omicron variant of COVID-19 and its related supply disruptions are expected to temporarily weigh on services such as travel and indoor dining, with the effects mitigated by the federal and provincial support programs.

Figure 1 – Percentage Change in Annualized Real Gross Domestic Product (GDP), Canada, First Quarter of 2017 to Fourth Quarter of 2021 (%)

Figure 1 shows the annualized change in real gross domestic product (GDP) on a quarterly basis from the first quarter of 2017 to the fourth quarter of 2021. GDP grew between the first quarter of 2017 and the fourth quarter of 2019 before declining in the first two quarters of 2020, followed by a recovery in the third quarter of 2020. The highest quarterly growth rate occurred in the third quarter of 2020 (at 41.1%), while the lowest quarterly growth rate occurred in the second quarter of 2020 (at -37.4%). Real gross domestic product rose in the third and fourth quarters of 2021 by 5.5% and 6.7%, respectively.Note: Real gross domestic product (GDP) at market prices (measured in contributions to percentage change, annualized) was calculated by Statistics Canada.
Source: Figure prepared by the Library of Parliament using data (adjusted for inflation and seasonal fluctuations) obtained from Statistics Canada,
Table 36-10-0104-01: Gross domestic product, expenditure-based, quarterly, Canada (dollars x 1,000,000),” Database, accessed 23 March 2022.

Real Gross Domestic Product Components

The three main factors that led to the increase in real GDP in the third quarter of 2021 were rises in household consumption, exports and government spending, as shown in Figure 2. These factors contributed 10.2, 2.1 and 0.4 percentage points, respectively, to the percentage change in real GDP. In the fourth quarter of 2021, increases in investment in inventories, exports and business investment contributed 4.2, 4.1 and 1.6 percentage points, respectively, to the percentage change in real GDP.

Figure 2 – Annualized Contributions to Percentage Change in Real Gross Domestic Product, by Component, Canada, First Quarter of 2021 to Fourth Quarter of 2021
(percentage points)

Figure 2 shows the annualized contributions to the percentage change in real gross domestic product (GDP), segmented by components for the four quarters of 2021. The main factors that led to the increase in real GDP in the third quarter of 2021 were rises in household consumption, exports and government spending. These factors contributed 10.2, 2.1 and 0.4 percentage points, respectively, to the percentage change in real GDP. In the fourth quarter of 2021, increases in investment in inventories, exports and business investment contributed 4.2, 4.1 and 1.6 percentage points, respectively, to the percentage change in real GDP.

Note: Household consumption includes consumption by non-profit institutions, and business investment includes investment by such institutions.
Source: Figure prepared by the Library of Parliament using data (adjusted for inflation and seasonal fluctuations) obtained from Statistics Canada,
Table 36-10-0104-01: Gross domestic product, expenditure-based, quarterly, Canada (dollars x 1,000,000),” Database, accessed 23 March 2022.

Inflation

Figure 3 shows the evolution of consumer price index (CPI) inflation on a quarterly basis. Between the first quarter of 2017 and the first quarter of 2020, CPI inflation fluctuated within the Bank of Canada’s inflation target range of 1% to 3%. The CPI inflation rate dipped below 1% in the last three quarters of 2020, then increased to 1.5% in the first quarter of 2021 and has remained above 3% since the second quarter of 2021. The Bank of Canada forecasts that inflation will ease over the second half of 2022 and into early 2023, and that upward pressure from supply shortages will diminish over 2022.

Figure 3 – Year-Over-Year Change in Consumer Price Index (CPI) Inflation and the Bank of Canada’s Inflation Target Range, First Quarter of 2017 to Fourth Quarter of 2021 (%)

Figure 3 shows the evolution of Consumer Price Index (CPI) inflation in terms of quarterly data from the first quarter of 2017 until the fourth quarter of 2021. The CPI inflation rate in the fourth quarter of 2021 was 4.7%, up from 4.1% in the third quarter of 2021. Between the first quarter of 2017 and the fourth quarter of 2021, the highest rate of inflation occurred in the fourth quarter of 2021 (at 4.7%), while the lowest rate of inflation occurred in the second quarter of 2020 (at 0%).

Note: The shaded area indicates the Bank of Canada’s inflation target range of 1% to 3%.
Source: Figure prepared by the Library of Parliament using data obtained from Bank of Canada, “
Inflation: Definitions, Graphs and Data,” Database, accessed 23 March 2022.

Employment

Figure 4 shows that total employment increased by 3.1% between June 2021 and December 2021. The three sectors with the largest increases in employment were information, culture and recreation (10.8%); accommodation and food services (6.0%); and public administration (4.9%).

In absolute terms, the three sectors with the largest increases in employment were wholesale and retail trade (133,800 jobs created); information, culture and recreation (76,600 jobs created); and accommodation and food services (57,000 jobs created). The agriculture, other services, and forestry, fishing, mining, quarrying, oil and gas sectors are the only sectors that experienced a decrease in employment over that period (‑7.0%, or 17,800 jobs lost, -2.6% or 19,500 jobs lost and -2.1%, or 6,900 jobs lost, respectively).

Figure 4 – Variation in Employment, by Sector, Canada, June 2021 to December 2021 (%)

Figure 4 shows the variation of employment across all sectors between June 2021 and December 2021. Overall, employment grew by 3.1% across all sectors during that period. The five sectors that experienced the largest increases were information, culture and recreation (at 10.8%); accommodation and food services (at 6.0%); public administration (at 4.9%); transportation and warehousing (at 4.8%); and wholesale and retail trade (at 4.8%). The utilities sector and the business, building and other support services sector showed the lowest gains in employment (at 0.1% and 0.9%, respectively). Agriculture, other services, and forestry, fishing, mining, quarrying, oil and gas were the only three sectors that experienced a decrease in employment over that period (at -7.0%, -2.6% and -2.1%, respectively).

Note: “Other services” include repair and maintenance; personal and laundry services; religious, grant-making, civic, and professional and similar organizations; and services to private households.
Source: Figure prepared by the Library of Parliament using seasonally adjusted data obtained from Statistics Canada, “
Table 14-10-0355-01: Employment by industry, monthly, seasonally adjusted and unadjusted, and trend-cycle, last 5 months (x 1,000),” Database, accessed 23 March 2022.

Annual Unemployment Rates by Age Group, Sex and Indigenous Identity

Figure 5 shows that the Canadian unemployment rate for the population aged 15 years and over was 7.5% in 2021. This represented a decrease of 2.1 percentage points compared to 2020. In 2021, the unemployment rate for women was 13.6% compared to 6.2% for men.

Unemployment rates for the Indigenous population, particularly women, were higher than the rates for the non-Indigenous population in 2021. For example, Indigenous women aged 15 to 24 had a higher rate of unemployment, at 18.7%, relative to the rates of unemployment for non-Indigenous men and women aged 15 to 24, which were 6.3% and 14.4%, respectively. Moreover, the unemployment rate for Indigenous women aged 25 to 54 was 15.4% compared to 5.9% for non-Indigenous men aged 25 to 54 and 12.3% for non-Indigenous women aged 25 to 54.

In 2021, unemployment rates for men were lower than those for women, regardless of age group or Indigenous identity. However, unemployment rates for Indigenous men were higher than those for non-Indigenous men. For Indigenous men aged 15 years and over, the unemployment rate was 9.8% compared to 6.1% for non-Indigenous men.

Figure 5 – Annual Unemployment Rates, Total and by Age Group, Sex and Indigenous Identity, Canada, 2021 (%)

Figure 5 shows the annual unemployment rates in Canada by age group, sex and Indigenous identity in 2021. The age groups represented are those aged 15 years and over, those aged 15 to 24 years; and those aged 25 to 54 years. Across all age groups and sexes, Indigenous unemployment rates were higher than the rates for the non-Indigenous population. Moreover, both Indigenous and non-Indigenous women exhibited higher rates of unemployment than their male counterparts. In 2021, the unemployment rate for the Indigenous population aged 15 years and over was 11.6% for both sexes, 9.8% for men and 17.1% for women. For Indigenous youth aged 15 to 24, the rate was 12.7% for both sexes, 10.5% for men and 18.7% for women. For the Indigenous group aged 25 to 54, the rate was 10.4% for both sexes, 9.1% for men and 15.4% for women. In 2021, the unemployment rate for the non-Indigenous population aged 15 years and over was 7.4% for both sexes, 6.1% for men and 13.4% for women. For non-Indigenous youth aged 15 to 24, the rate was 7.6% for both sexes, 6.3% for men and 14.4% for women. For the non-Indigenous group aged 25 to 54, the rate was 7.1% for both sexes, 5.9% for men and 12.3% for women.

Note: Statistics Canada does not publish quarterly data on the unemployment rate by Indigenous identity.
Source: Figure prepared by the Library of Parliament using data obtained from Statistics Canada, “
Table 14-10-0364-01: Labour force characteristics by province, region and Indigenous group,” Database, accessed 23 March 2021.

Exchange Rates

Figure 6 shows that the value of the euro and U.K. pound sterling decreased by 1.7% and 0.6%, respectively, relative to the value of the Canadian dollar between June 2021 and December 2021. The value of the Chinese renminbi, the U.S. dollar and the Japanese yen increased by 5.6%, 4.7%, and 1.3%, respectively, relative to the value of the Canadian dollar over the same period.

Figure 6 – Variation of Selected Exchange Rates, June 2021 to December 2021 (%)

Figure 6 shows that the variations in the value of the following foreign currencies relative to the Canadian dollar between June 2021 and December 2021: a decrease of 1.7% for the euro, a decrease of 0.6% for the U.K. pound sterling, an increase of 1.3% for the Japanese yen, an increase of 4.7% for the U.S. dollar, and an increase of 5.6% for the Chinese renminbi.

Note: The exchange rate represents the number of Canadian dollars needed to purchase one unit of foreign currency. An increase of 5% in the U.S. exchange rate would represent an increase of 5% in the value of the U.S. dollar relative to the value of the Canadian dollar.
Source: Figure prepared by the Library of Parliament using data obtained from Statistics Canada, “
Table 33-10-0163-01: Monthly average foreign exchange rates in Canadian dollars, Bank of Canada,” Database, accessed 23 March 2022.

By Andrew Barton and Michaël Lambert-Racine, Library of Parliament



Categories: Economics and Finance

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