and this weakness is extending into 2019. part of this is due to developments in our oil sector and in our housing sector, but the broader effects of trade uncertainty on investment are clearly there. fortunately, our economy also has areas of strength that are providing a cushion. some services exports have been growing strongly. more than 350, 000 jobs were created over the past year. indeed, labour income grew by almost 5 per cent in the fourth quarter. the data are currently giving us a mixed picture and need to be carefully monitored. but the deeper question we face is whether canada can continue to thrive as a trading nation. trade and globalization to address this question, we need to put recent trade developments into context. trade growth has generally fallen short of expectations since the global financial crisis a decade ago. to understand this, we must first understand why international trade grew so rapidly in the years before the crisis. 1 / 6 bis central bankers'speeches international trade began to accelerate during the 1990s as companies took advantage of opportunities provided by new technology and trade liberalization. many firms found efficiencies by breaking down their products into components. this allowed for unprecedented levels of manufacturing specialization, with components sourced from wherever in the world it made the most sense. instead of a domestic assembly line, you had a complex international value chain. a final product, like a car made in oshawa or a cellphone assembled in mexico, might have contained many components that were traded internationally several times. then the final product was exported, too. this is why international trade rose relative to gross domestic product during this period. as economists would put it, the trade intensity of goods increased. global trade really took off after china joined the world trade organization in 2001. with a massive supply of low - cost labour, china became key to many companies ’ value chains, and trade intensity grew even further. this gave rise to concerns that all manufacturing would move to developing economies. but there was always a natural limit to this offshoring process. a manufactured product can be fragmented only so far, and some pieces require more labour than others. this is what determines where best to produce each component. a manufacturing process that requires many workers and only a bit of machinery can often be made cheaper by moving it to a country where wages are low. but a process that has a lot of complex machinery and relatively fewer workers is much less likely to move to a lower - wage country. importantly, companies must also take into account the relative productivity of

agathe cote : household finances and economic growth remarks by ms agathe cote, deputy governor of the bank of canada, at the canadian club of kingston, kingston, ontario, 10 january 2011. * * * introduction good afternoon and happy new year. thank you for your invitation to speak to the canadian club. this is my first public speech as a deputy governor of the bank of canada, and i am delighted to be delivering it in the historic city of kingston. in my remarks i will focus on the state of the canadian economy, with an emphasis on household finances. why does household financial health matter to the bank of canada? it matters because how canadians spend and how much they spend affect both the conduct of monetary policy and the stability of the financial system. sound household finances are vitally important for a balanced economy. collectively, households play a significant role in the functioning of the economy. household spending accounts for about 60 per cent of aggregate demand in canada, and was critical in lifting the canadian economy out of the recession. at the same time, however, canadian household finances have become increasingly stretched. today, i will touch briefly on growing household indebtedness and the risks that it poses to canada ’ s financial stability, but my comments will centre mainly on the macroeconomic outlook and the linkages between household finances and spending. i will start with an overview of current economic conditions and how the economy evolved during the financial crisis. recovering from the great recession in mid - 2009, the world economy began to emerge from the most severe financial crisis since the great depression. in canada, the recession lasted for three quarters, from the latter months of 2008 to mid - 2009. our exports fell dramatically in response to a steep drop in u. s. demand. firms cut back on employment ; some 417, 000 jobs were lost. in response to the weaker labour market, declines in net worth and increased uncertainty, household spending also fell. government spending was the only consistent source of growth throughout this period. despite these challenges, canada ’ s recovery has been stronger than that of our g - 7 peers. by mid - 2010, canadian output had returned to its pre - recession level and all of the jobs that had been lost were regained. since then, almost 46, 000 positions have been added. canada entered the recession with critically important advantages. our public debt burden was the lowest of the g - 7 countries. our monetary policy was highly credible. our financial institutions were in good health, owing