The Canadian dollar fell from just under 75 cents US in early 1997 to a low of 61.8 cents US in January 2002, before ending the year at about 63.4 cents US. During this time, the cost of labour relative to capital goods declined in Canada because most capital goods are imported and priced in U.S. dollars, while labour is paid in Canadian dollars.
Businesses reacted appropriately to these price signals by increasing their production of services and of those manufactured goods that require relatively more labour and less machinery and equipment. What we have seen over the past couple of years is, in many ways, a mirror image of the 1997-2002 period.