Even when light first glimmers at the end of a tunnel, the view out the side windows remains pretty dark; green shoots are nice, but it's still a long way to harvest.
The key to reading the economy these days is remembering that the best metaphors for hope that the worst is over come with qualifiers.
Take yesterday's news.
In the United States, a new survey showed consumer confidence in May jumped by the most in six years, even as a separate report showed home prices in 20 major cities plunged almost 19 per cent.
This is what it looks like at the bottom of a recession. Investors see bargains in depressed stocks, sparking a rally in equity markets, which gained yesterday. Consumers, seeing discounted homes, automobiles and clothes, run up their debt to take advantage of the lower prices.
This buoyancy about the future masks the broad economic pain of the present.
Bank of Montreal reported yesterday that its profit fell $284-million in the second quarter, mostly because the bank is setting aside more money to cover potential defaults. The bank said it will cut 1,100 jobs.
"There is some misunderstanding between what constitutes a green shoot and where we are in the recession," said Stewart Hall, an economist at HSBC Securities in Toronto. "If you want to point to green shoots there are some out there, but from an economic point of view, we might be confusing the seeds with the green shoots."
The Bank of Canada predicts Canada's gross domestic product will contract 3 per cent this year, which would be the biggest contraction since 1933. The central bank expects growth of 2.5 per cent next year, which means it would be 2011 until the economy makes up for the losses caused by the financial crisis.
That's about how Eric Siegel, the president of Export Development Canada (EDC), sees the recession evolving.
Mr. Siegel, who has observed two previous recessions in almost four decades at Canada's export finance agency, says the country is entering the toughest phase of a downturn that is "broader and deeper" than previous contractions in the early 1990s and the early 1980s.
In 1991, the rate of default on corporate loans rose to about 15 per cent as GDP shrank for four consecutive quarters, starting in the second quarter of 1990, Mr. Siegel recalled yesterday in an interview from Toronto.
Canada will surpass that before this recession ends, Mr. Siegel said.
"We aren't there at this point," Mr. Siegel said of corporate default rates. "We would expect that we would get there and go beyond. This is the point where you expect that to happen and you would expect that to continue through 2009."
Mr. Siegel is in a unique position to observe the economy. His agency either financed or insured trade worth $85.8-billion in 2008, a record, and worked with more than 8,300 companies, both large and small.
Claims on EDC's financing and insurance already have doubled this year to about $100-billion, and are on pace to climb to about $130-billion, Mr. Siegel said.
Rising corporate defaults suggest profits will remain weak, robbing governments of tax dollars at the same time they are trying to pay for economic stimulus programs while avoiding digging fiscal holes that become too difficult to climb out of.
Finance Minister Jim Flaherty told reporters yesterday that the budget deficit in the fiscal year that started March 31 will be in excess of $50-billion, compared with his estimated of $33.7-billion in January.
Unemployment rates likely will remain elevated into next year, and consumers will save more and spend less, meaning the rebound from recession will be "modest," Mr. Siegel said.
Equity investors are shrugging off those assessments.
In New York, the S&P 500 stock index rose 2.6 per cent to 910.33, contributing to a 35-per-cent surge from a 12-year low on March 9. Canada's main stock index, the S&P/TSX index, rose 216.40 points or 2.2 per cent to 10,285.90, extending its 2009 gain to 14 per cent.