As Canada Heads for the Polls This Fall, the Focus Is Jobs

THE juices are flowing for Canadian politicians in this federal election year and many issues are vying for attention. But economists, pundits, and pollsters all agree one thing will be front-and-center: the economy.

"Unemployment, jobs, deficit, and debt - the economy has become a national preoccupation," says Scott MacKay, a researcher with Angus Reid Group in Winnipeg, Manitoba, a polling firm.

Canada's economy is picking up steam and this year it could end up leading the pack among the major industrialized nations. Last week the government reported Canada's real gross domestic product (GDP) rose at an annual rate of 3.8 percent in the first quarter of 1993, up from 2.6 percent in the fourth quarter.

But whether that good economic news will translate into the sort of political benefits that pump up Canada's new prime minister and her Progressive Conservative Party in this fall's federal elections is questionable, analysts say.

"What's important politically is the public perception of whether the economy is improving or not," says Jon Pammett, chairman of the political science department at Carleton University in Ottawa. "The general perception in the country is that the economy isn't improving. People judge this for themselves by their job situation and their own purchasing power."

Canada's economy is pulling out of recession ahead of Japan and Europe, economists say. Growth in the United States, reported last week for the first quarter, was by contrast at a 0.7 percent annual rate. Canadian exports are up, consumer spending is up, business spending on machinery is up, and inflation is still low at less than 2 percent.

With all these plusses working for the conservative government, logic says the Tories should benefit at the polls. Not so fast, pundits say.

The country's 11.4 percent unemployment rate looms over the coming election and the improving economy, economists and political watchers say. The economy will shave a few tenths of a percent off that number by November, the last month an election can be held, but a drop to the 10 percent range still is not likely to sway the public, they say.

In a mid-month poll, conservatives and their new leader Kim Campbell, with 33 percent public support, still trailed the Liberal Party with 43 percent, Mr. MacKay says. The rest of the support is divided among the New Democratic, Reform, and Bloc Qucois. MacKay says he thinks the economy will "be a boost" for conservatives. But others disagree.

"I find it hard to see the economy improving in a way that the conservatives will be able to ride that to reelection," Mr. Pammett says. "What will hurt them is that if you look back to 1984, the big issue in that election was unemployment. The conservatives' promise then was `jobs, jobs, jobs.' Unfortunately for them, jobs, jobs, jobs is still the issue."

THE growing economy will reduce unemployment only modestly, says John Johnston, a senior economist at the Royal Bank of Canada. The bank forecasts 3.0 percent GDP growth this year and 3.7 percent next year.

That is good, he says, but will only reduce unemployment to 10.9 percent by the end of this year, and 10.3 percent by the end of next. "You need GDP growth of at least 3.0 to do that," he says.

Running counter to last week's good news are some longer-term trends, Mr. Johnston says. First, consumer spending cannot yet be counted on as a long-term source of strength for the economy because continued high unemployment and higher taxes will influence consumer confidence.

Provinces across Canada also have come in with tough budgets this year that cut or freeze spending on many social services while raising taxes to reduce projected budget deficits - also a drag on consumer spending, he says.

Ontario, for example, plans to raise $2 billion (Canadian; US$1.56 billion) more to cut its deficit by raising the income-tax rate, along with surtaxes on "high income" individuals, and extending its sales tax to a broader range of items such as hydroelectric power and car insurance.

"Overall the threat in this election year is that a new government, because of the high unemployment rate, may have to commit itself to costly new government spending initiatives, or raising interest rates to get the economy going," Johnston says. "None is a good idea."