Canada’s unemployment rate has never been this low. Employers are adding jobs and hiring what few workers haven’t already been gobbled up. GDP growth in Canada is also better than any other G7 country.
Yet the economic narrative in this country is dominated by doom and gloom.
In fact, results from Google Trends show that searches for the word “recession” have dramatically risen in Canada, even while the economy continues to churn out growth.
“I think it is a little bit overblown,” said Pedro Antunes, chief economist at the Conference Board of Canada. “I think, obviously, the bad news tends to get more traction in the discussion out there.”
But, he says, the economy is in really good shape.
In fact, Canada’s economy is benefiting from some of the very things that worry consumers — even as it pinches your pocketbook.
High global oil prices are pushing up your cost at the pumps, but it’s acting as a boost to Canadian GDP. Sky-high food prices mean you’re paying significantly more at the grocery store, but they’re driving up the revenue of Canada’s enormous agriculture industry.
Canada specializes in some of the very resources that are globally scarce right now, including oil and agriculture. (Charlie Riedel/The Associated Press)
Still, fear and uncertainty around fast-rising inflation is driving negativity, said Antunes, noting that sentiment matters, because negative expectations can quickly become “self-fulfilling prophecies.”
“If enough people believe the economy is going to tank, and enough people believe equity markets are going to tank, and enough people believe the housing market [is going to tank], then they will,” he said.
The knock-on effect of consumer confidence
Consider this chain of events: Consumers are worried about a potential recession. They scale back on their purchases. They decide to save a bit of money instead of buying that new appliance. Or car. Or jacket.
If you scale that out over Canada’s population, those worries about a downturn can actually cause the economy to slow even more quickly.
Just last month, Bank of Canada governor Tiff Macklem highlighted his concerns that eroding consumer confidence could cause real damage.
“If the economy slowed sharply and unemployment rose considerably, the combination of more highly indebted Canadians and high house prices could amplify the downturn,” he said.
So the Bank of Canada is just as worried as you are — but it also has a lot more data than we do.
Both reports highlighted the negative impact of inflation and concerns that high prices will remain in place for a long time.
But the Business Outlook Survey also highlighted the resilience of consumer demand right now.
“Supported by strong demand, many firms intend to increase their investment spending and add staff,” the bank wrote as part of the survey’s overview.
In other words, even with inflation concerns, many Canadian businesses believe consumer demand will remain sufficiently strong enough to warrant new investment and new employees.
Fresh jobs figures coming Friday
While May’s job numbers brought Canada’s unemployment rate down to a record low of 5.1 per cent, the sheer number of jobs created in June is likely to have slowed. (Those figures will be released on Friday.)
But that’s not because businesses need fewer workers.
“We expect Canadian employment growth slowed to 15,000 in June — driven by a dwindling supply of workers rather than a lack of demand,” RBC economist Nathan Janzen wrote in a report released earlier this week.
“The number of job openings edged lower, but is still running almost 70 per cent above pre-pandemic levels.”
So more Canadians than ever before are working, their pay is rising (though not as fast as inflation), and the economy continues to grow.
Should we then shrug off the concerns about where we are headed? Absolutely not.
Just as the weather was warming up, job numbers for May brought Canada’s unemployment rate down to a historic low of 5.1 per cent. (Helen Pike/CBC)
“We’re increasingly concerned that a conjunction of headwinds, along with [debt] imbalances in the household sector, could push the Canadian economy into recession,” Tony Stillo, a director with Oxford Economics, wrote in a research paper released Wednesday.
“We still view a soft landing as the most likely outcome for the economy, but we estimate the probability of a recession over the next 12 months has risen to about 40 per cent.”
Most forecasts still show the Canadian economy will grow through 2022 and slow to something close to zero near the end of the year. It’s a precarious situation that comes after some of the most volatile years in decades.
The pandemic upended all of our expectations. Just about everyone assumed an economic shock like the one we saw in the spring of 2020 would spark a recession unlike anything we’d seen since the Great Depression.
WATCH | Power & Politcs panel debate: Is Canada heading for a recession?
Is Canada heading for a recession?
2 days ago
Duration 7:39
Canada Finance Minister Chrystia Freeland says a ‘soft landing’ is still possible for the Canadian economy, as inflation levels rise and fears of a recession grow. Is the Bank of Canada hiking interest rates the best way to combat inflation?
But households and businesses were kept afloat by an unprecedented wave of government support.
Experts then said the end of the pandemic would lead to a surge in spending unlike anything we’d seen since the Roaring ’20s.
Again, the forecast missed the mark, as COVID-19 refused to wane and consumers stayed home.
Given the uncertainty of the past 2½ years, who can blame households today for looking past all the good economic data, and focusing on the negatives of what may come down the road.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
