Double vision

Think of two solitudes - and, no, we're not talking about French and English Canada.

At this uncertain point in the global recovery, economists are now divided into two camps about Canada's prospects. In one scenario, Canada is an economic oasis in a global desert of gloom. Here, the recession is a fading memory; jobs are relatively plentiful, consumers are spending and business is humming.

There's another view, of course - that Canada's fortunes are inextricably tied to the sluggish recovery beyond its borders, particularly in the United States. And that means the promising first half of the year was a mirage, and the economy is about to stall out. Here, in brief, is the case for each.

The optimistic view

To embrace this perspective, you must be convinced that Canada's economy is markedly different than it was in previous slumps. Or, that the U.S. will bounce back much more quickly and strongly than most analysts believe. Historically, Canada has rarely been able to forge a truly independent course from its southern neighbour, which consumes so much of what we produce.

There is a lot that is different this time. Canada's dependence on the U.S. market is not what it was. Three-quarters of exports go to the U.S., down from 90 per cent a decade ago.

And Canada's recession experience was clearly quite different from the U.S. experience. There was no real estate crash. Our banks suffered little and remain eager lenders to consumers and businesses. Almost all of the jobs lost during the slump have been recovered (though the unemployment rate remains higher because the labour force has grown in size).

Canada's finances are stellar compared with most of the rest of the world, with both the 2010 budget deficit and the longer-term debt looking quite manageable. That means the federal government won't have to make dramatic spending cuts or tax hikes to pay for all the stimulus it's been pumping into the economy.

The net result is that Canada outperforms most of the world in 2010.

The pessimistic view

The first half of the year was a blip, and the second-half is give-back time - in jobs and growth.

Topping the concerns of naysayers are near-record household debt levels and the sinking housing market. They worry that Canadians have been spending money they don't have, artificially propping up the economy.

With interest rates headed higher, many Canadians who overreached to buy bigger, more expensive homes could find themselves in a cash squeeze.

Also poised to slow down is the amount of stimulus spending the federal and provincial governments have been pumping into the economy.

Then, there's our favourite customer, the United States. U.S. banks aren't lending enough, lost jobs are proving slow to return - America is still down about eight million jobs since late 2007 - and consumer wealth is depressed by fallen house prices. That means Canada will export fewer cars, lumber, crude oil and the like.

All of this could push unemployment higher and put the brakes on growth in Canada. And that would feel a lot like a double dip.