When the prime minister-designate wakes up on Oct. 15, the election victor will be confronted with a massive task: managing a Canadian economy that is in the midst of a slowdown.

The winner faces, among other things: soft growth in the country's gross domestic product; an uneven job market and an expected rise in the unemployment rate — and the possibility the situation could get even worse if the U.S. economy falters.

After experiencing a contraction in the first quarter — when GDP shrank at an annual rate of 0.8 per cent — the economy narrowly avoided a recession, at least in the most common definition, when it grew at a rate of 0.3 per cent. A classic definition of a recession is two consecutive quarters of economic contraction.

The employment picture across the country has been mixed. While the overall unemployment rate is around 30-year lows, the economy shed 55,000 jobs in July, followed by a gain in August of 15,000.

Attention is also focused on the sectors, namely manufacturing, that have been hit the hardest. As the rise in the Canadian dollar has crimped exports, manufacturing sector employment has waned.

In August 2008, there were 1.97 million people employed in the sector, down from a recent peak of 2.29 million in 2004. While the manufacturing sector has suffered, overall employment has risen to 17.1 million in August from 15.9 million four years ago.

Income growth, meanwhile, has been solid. The year-over-year hourly wage growth for August was 3.8 per cent, although that was lower than the 4.9 per cent increase seen at the start of 2008.

One economist said the situation in Canada will inevitably be affected by events in the United States because of close economics ties.

"We are calling for the U.S. economy, basically, to go into at least a mild recession over the next couple of quarters, and that will directly affect Canada through our exports, first and foremost," said BMO Capital deputy chief economist Douglas Porter.

Looking ahead, economists are forecasting annualized GDP growth of less than one per cent this year, and under two per cent in 2009.

In a recent commentary, Scotiabank Group economist Aron Gampel said Canada's economic growth prospects through 2009 are "limited," although he sees the Canadian economy ahead of most other developed nations.

Campaign issue with legs?

With the economy in a state of upheaval, Canada's political parties have sought to frame the issue on their own terms during the election campaign, which ends with the election on Oct. 14.


Conservative Leader Stephen Harper delivers remarks during a news conference at a housing project on Tuesday in Kitchener, Ont. ((Paul Chiasson/Canadian Press))

For Stephen Harper and the Conservatives, it has become a message of telling the public to stay the course while the government leads the country through the current slowdown.

"We are on the right track. That is our main message," Harper said.

The Liberals, the NDP and the other parties have sought to portray the Conservatives as mismanaging the economy.

David Herle, a political consultant and former Liberal campaign manager, sees opportunities for the opposition parties in the current economic situation.

"I think, as a basic truism, bad economic news is never good news for the incumbent party — for the government — because it's happening on their watch," said Herle.

Hugh Segal, a Conservative senator and political strategist, believes the question is how voters will respond to the election choices "…which is between, essentially, the continuation of a Conservative government with its fiscal and economic policies, such as they are, or the new proposals being put forth by the Liberals, the New Democrats, the Greens and the Bloc."