The National Post reports in its Tuesday, March 24, edition that Manulife Financial chief economist Frances Donald says the Canadian economy is about to experience "the sharpest economic contraction in modern history." The Post's Jesse Snyder and Naomi Powell write that Ms. Donald says: "It will be faster and more pronounced than we have ever seen. However, it may also be short."
The "optimistic case," Ms. Donald adds, is that the virus is quickly brought under control and people are rehired as rapidly as they were laid off. The "pessimistic case" would see the economy shut down for many more months, leaving companies unable to rehire at the same pace.
The duration of the downturn is crucial, since the longer people are out of work, the more vulnerable the economy will be to additional shocks, particularly in the housing sector, says Ms. Donald. Canadians are already the most highly leveraged in the G7, carrying debt of $1.76 for every dollar in disposable income. Deep job losses that drag on could lead to rising mortgage defaults and delinquencies.
Ms. Donald says the current crisis is "almost uniquely tailored to hit the housing market where it will hurt most."
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