Many world economics specialists insist that the Chinese economy needs to grow at rates nearing 8% in order for the country to generate enough jobs to keep unrest at bay and to continue pulling its citizens out of poverty. Indeed, in China some say growth in the 6% range — as has occurred the past two quarters — is a recession. The country’s economy has been growing so fast that it cannot adjust.
Last week I was graphing the GDP growth rate for major Canadian cities’ since 1988. It intrigued me that economic growth rarely fell below zero for any major city, even when the national or provincial economy did. In dire times nationally, urban GDP growth rates often approached but did not dip below approximately 0.5% (with the exception of Toronto in 1990-1991, which was dealing with some economic restructuring as well as provincial recession).
Yet, these cities often did experience what we would call “recessionary” conditions of job losses, corporate and personal bankruptcies as well as government program cuts in response to lower revenues — despite the positive GDP figure.
This led me to wonder if cities — or at least those major Canadian cities I was examining — are like China. Their economies are so dynamic that recessionary conditions happen when GDP growth is still positive. New people are moving to the cities every day, generating economic activity inherently, for example. It’s the slowing of momentum that causes the challenges rather than the lack of growth itself.
This similarity may also be because China is rapidly urbanizing, and its China’s cities that are pushing the country’s economic growth.
But I’m not an economist. Anyone else care to weigh in?
Note: Unlike in the USA, Canada doesn’t have an NBER (National Bureau of Economic Research) to define recession in ways other than negative GDP growth. It may be that my city graph is evidenceon why GDP alone is a poor measure of economic growth.
