One million Canadians lost their jobs in just one week in March. Millions more have applied for the Canadian Emergency Response Benefit, or CERB.

Businesses are closed across the country; almost no one is travelling.

There is a closed sign on Canada's economy. And that will be reflected in dire economic numbers in the coming months.

Canadian economists are expecting that economic activity will shrink somewhere between 25 and 35 per cent over the course of the spring - a drop that is unprecedented in such a short period of time.

Over the course of 2020, the International Monetary Fund expects Canada's GDP to shrink by 6.2 per cent.

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In fact, the only comparable detonation in the economy happened during the Great Depression from 1929 through the 1930s, until the beginning of the Second World War.

Canadian economic activity dropped by about a third over that period, which was much longer than the current situation.

A recession, a depression — or somewhere in between

This has raised the question of what to call this downturn.

Is it a depression, a recession, a great recession? Or somewhere in between?

"You start talking about numbers like negative 30, negative 35, negative 40, then I think that classifies as a depression," said David Rosenberg, founder of Rosenberg Research.

Rosenberg pointed out that the Great Depression lasted for 12 years and was characterized by a real reluctance on the part of government to get involved.

Food line at Yonge Street Mission in Toronto during the Great Depression. (Photo author unknown)

'We're going to use the United States as the microcosm," said Rosenberg. "The Great Depression really began in late 1929, but it wasn't for another four years really until after F.D.R. [President Franklin D. Roosevelt] got elected that there was really an aggressive policy response."

Decades later in Canada, the federal government and Bank of Canada moved quickly to respond to the impact of COVID-19, pouring tens of billions into the economy, while slashing interest rates.

While the stimulus will significantly add to Canada's debt load, the financial pain for Canadians could be much worse without it.

Numbers off the charts

In terms of the longer term impact on the economy, the so-called "Great Recession" of 2008-2009 might be a better point of comparison, even though on the surface, the numbers Canada faces right now are much worse.

Canada's economy went into recession in 2009, and contracted by 3.3 per cent over a nine month period.

That number is a much smaller contraction than we are likely to see this spring, but in 2009 it was stretched out over the course of nearly a year.

Today's economic downturn is happening at top speed, which makes the GDP projections look worse.

"A lot of the reason these numbers look so bad on the surface is that we're compressing what would typically take eleven to twelve months to pull down on the economy into a much shorter period," said Frances Donald, chief economist at Manulife Investment Management.

"So the total extent of the damage on the economy might be similar to 2009 but we're going to go through it much more quickly and for that reason almost every economic figure that we've seen so far and we'll continue to see we'll be quite literally off the charts."

How Canada recovers is key

Whatever phrase we use to describe our current downturn is far from the most important question. What does matter is how Canada's economy recovers.

The general expectation at the moment is for recovery in the summer, but how strong that recovery will be depends on health measures such as the level of physical distancing still required to fight the pandemic.

All of a sudden, we had not just a rainy day. We had a hurricane and there is no cash to draw from. - David Rosenberg, Chief Economist at Rosenberg Research

There is a lot of pent up demand in the economy already.

For example, people will want to go for dinner or get a haircut after weeks of services being unavailable.

But there are also problems looming which are particular to Canada's economy.

"There's another important part of this story which is that Canada, unlike the United States in 2009, did not experience the same sort of pop in their housing bubble in 2009," said Manulife's Frances Donald.

"Canadians did not … reduce their levels debt to the same extent as the United States, and for that reason Canadian consumers are in [worse] health than American consumers are."

That overhang of debt could make Canadians less likely to spend in the coming months.

A shopper uses an escalator in a nearly deserted Eaton Centre in Toronto on March 18, 2020. (Natasha Hermann/The Canadian Press)

As a result, people could change their approach toward savings and spending after this crisis, according to researcher David Rosenberg.

"Because the one thing that we found out is that nobody had any cash on hand. So the old saying about saving up for a rainy day. Well all of a sudden, we had not just a rainy day. We had a hurricane and there is no cash to draw from."

Written and produced by Tracy Johnson.

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