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Special Report-Inside J&J’s secret plan to cap litigation payouts to cancer victims



Johnson & Johnson created a plan last year to limit the financial bleeding from billions of dollars in jury awards to plaintiffs who alleged the company’s Baby Powder and other talc products caused deadly cancers. The healthcare and consumer-goods giant assigned more than 30 staffers to “Project Plato.” In a memo on the project in July, a company lawyer warned the team: Tell no one, not even your spouse.

“It is critical that any activities related to Project Plato, including the mere fact the project exists, be kept in strict confidence,” Chris Andrew, a J&J lawyer, wrote in an internal memo reviewed by Reuters.

The covert team would go on to evaluate a strategy to shift all the liability from about 38,000 pending talc cases onto a newly created subsidiary, which would immediately declare bankruptcy. The goal, as a lawyer for the subsidiary said in a court filing: To halt all the litigation and transfer the cases to bankruptcy court, where plaintiffs would compete for compensation from a limited pool of money.

In court and in public statements last July, Johnson & Johnson said it intended to keep fighting the allegations that its products were unsafe in trial courts. The company was actively defending itself in talc trials, including one that would result in a $27 million jury award that could be nullified by the bankruptcy maneuver. The plaintiff in that case now may have to instead seek compensation through a bankruptcy process.

Privately, J&J took concrete steps starting as early as April to consider and plan the bankruptcy maneuver, according to internal company documents, depositions and other court records reviewed by Reuters. The strategy seeks to ensure the pending cases never reach a jury and instead be handled in a bankruptcy court.

The documents provide the most detailed account to date of how the New Jersey-based conglomerate strategized to limit compensation to tens of thousands of talc plaintiffs.

Reuters exclusively reported the broad outlines of the bankruptcy strategy being explored by J&J in July. The company went ahead with the plan in October, offloading responsibility for the cases to the new subsidiary, which then filed for bankruptcy. Before the filing, the company faced costs from $3.5 billion in verdicts and settlements, including one in which 22 women were awarded a judgment of more than $2 billion, according to bankruptcy-court records.

Now, J&J proposes to give the subsidiary in bankruptcy $2 billion to put into a trust to compensate all 38,000 current plaintiffs, as well as all future claimants. J&J has said in court filings and in public statements that the subsidiary, LTL Management LLC, could also tap a stream of royalty revenues valued at more than $350 million at the time of the bankruptcy filing.

J&J did not answer detailed written questions from Reuters about its planning of the bankruptcy maneuver. In a statement, J&J defended the LTL bankruptcy as a way to resolve the talc claims.

“This filing follows established process, and courts have uniformly acknowledged that equitably resolving these types of claims through Chapter 11 is a legitimate use of the restructuring process,” the statement said. “LTL’s objective is to reach a fair and equitable resolution for claimants through a plan of reorganization and create a reasonable framework to address the unprecedented number of existing and future talc-related claims.”

It continued: “We stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer. We continue to believe resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders. We will continue to follow the process and put forth our position in the court.”

On Thursday, a lawyer for the J&J subsidiary appeared at a bankruptcy hearing and accused attorneys for people who have sued Johnson & Johnson over its talc products of sharing confidential documents with Reuters in a “calculated” effort to try the case “in the press.”

Later Thursday, lawyers for J&J and its subsidiary sought a temporary restraining order from the bankruptcy judge to block Reuters from publishing information that, the company claims, comes from confidential documents.

A Reuters spokesperson called J&J’s claims without merit.

“We reject the factually-unfounded and legally-meritless claims made by J&J’s lawyers and will continue to report without fear or favor on matters of public interest,” the spokesperson said in a statement on Thursday.


J&J started secretly considering and planning the maneuver to redirect plaintiffs to bankruptcy court as early as April, when company attorneys were briefed on the strategy by lawyers at Jones Day, a firm with experience in the tactic, according to deposition testimony from an LTL lawyer.

On July 19, the day after Reuters broke the news of the strategy, a J&J official contacted Moody’s, the Wall Street ratings firm, to ask if the subsidiary bankruptcy would harm the company’s pristine credit, according to emails reviewed by Reuters. She was told it likely wouldn’t because the agency would only consider the maneuver’s impact on the finances of J&J, and not those of the subsidiary in bankruptcy.

The exchange underscores why the strategy was so attractive: J&J could create a related-party bankruptcy to limit liability, while avoiding “the burdens” of declaring bankruptcy itself, seven legal experts argued in an amicus brief filed with the court.

Moody’s declined to comment.

In court papers, a lawyer for the J&J subsidiary said the bankruptcy filing was a “prudent and necessary” step that “offered the only alternative for equitably and permanently resolving” all the talc litigation.

Last July, Reuters reported that one of J&J’s attorneys told plaintiffs’ lawyers that the company could pursue the bankruptcy plan, according to people familiar with the matter. At the time, J&J publicly downplayed concerns about the strategy and did not confirm that it was exploring the option. “Johnson & Johnson Consumer Inc has not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate,” the company told Reuters at the time.

A few days later, in a California courtroom, a lawyer defending J&J against talc plaintiffs told a judge that news of the bankruptcy strategy amounted to unsubstantiated “rumors.” J&J executed the bankruptcy plan starting on Oct. 11, taking the first steps to create the new subsidiary. The new company swiftly filed for Chapter 11, on Oct. 14.


The strategy, while rare, could be adopted more widely by big companies facing liability crises if Johnson & Johnson gets bankruptcy-court approval, according to lawyers for talc plaintiffs and some legal experts. If J&J succeeds, they argue, it could provide a blueprint for Corporate America on how to circumvent jury trials involving allegations of defective products or misconduct.

Such a precedent could allow companies to routinely pursue related-party bankruptcies to escape accountability from juries, said Melissa Jacoby, a University of North Carolina law professor.

“That’s one step closer to making bankruptcy an alternative justice system for big corporations,” Jacoby said. “If a company as deeply pocketed as J&J can do this, where does it stop?”

In testimony last November, a lawyer for the Johnson & Johnson subsidiary said the company pursued the strategy in reaction to an onslaught of litigation with the potential for outsized jury awards. A bankruptcy court, the lawyer argued, could provide a more consistent and equitable process for compensating claimants. Johnson & Johnson has said it would provide a fair amount of money to the subsidiary to pay claims.

Johnson & Johnson, valued at more than $450 billion, had about $31 billion in cash and marketable securities on hand at the end of the third quarter, securities filings show.

The New Jersey judge overseeing the subsidiary’s bankruptcy is scheduled on Feb. 14 to begin hearing arguments on plaintiff-creditors’ contention that the bankruptcy should be dismissed because it was filed in bad faith.

The October bankruptcy temporarily halted the litigation against Johnson & Johnson. LTL has said it will seek to “permanently” resolve the talc litigation through a reorganization plan that would prohibit current and future plaintiffs from seeking redress in a trial court. Instead, their claims would be directed to a trust, which would divvy up a limited amount of money through an administrative process approved by the bankruptcy court.


J&J’s bankruptcy strategy is the latest example of the company’s efforts to manage liability amid mounting allegations that asbestos lurks in its iconic Baby Powder and other talc products. A December 2018 Reuters investigation revealed that the company knew for decades about tests showing its talc sometimes contained carcinogenic asbestos but kept that information from regulators and the public.

Tens of thousands of plaintiffs, many with mesothelioma or ovarian cancer, have filed lawsuits alleging that exposure to talc in J&J’s Baby Powder and other company products made them sick. Records J&J produced in response to those lawsuits led plaintiff lawyers to refine their argument: The culprit wasn’t necessarily talc itself, but also asbestos in the talc.

That assertion, backed by decades of science showing that asbestos causes mesothelioma and is associated with ovarian and other cancers, has had mixed success in court. The company has insisted in lawsuits and public-relations campaigns that the product was safe and asbestos-free.

One plaintiff is Thomas McHattie, 78 years old, who traveled the world as an obstetrician-gynecologist before receiving a mesothelioma diagnosis in March 2020. McHattie said he recommended Baby Powder to “countless pregnant women” while also using it himself. McHattie said he endured five courses of chemotherapy to treat tumors in his abdomen, and has suffered from pronounced fatigue and shortness of breath.

He sued J&J in New York in July, a few months after receiving his diagnosis. His case had not yet gone to trial when LTL Management filed for bankruptcy.

In a 2020 court filing, J&J said it denied “each and every allegation, statement, matter and thing” asserted by McHattie in his lawsuit.

McHattie told Reuters in an interview that he was “disappointed they’ve chosen to do what is expedient and not what is right.”

“There is no excuse for them filing a bankruptcy,” McHattie said. “Why? This is a solvent company.”


J&J’s subsidiary bankruptcy is one variation of a longstanding and increasingly controversial tactic of limiting liability through so-called nondebtor releases granted to companies, owners or executives. The releases can allow companies or executives to piggyback on the bankruptcies of other entities to obtain broad protection from lawsuits and restrict litigation payouts. The party receiving the release typically agrees to contribute a lump sum to the company in bankruptcy to pay off plaintiffs in exchange for an exemption from all future liability.

That was the case with members of the Sackler family, the billionaire owners of Purdue Pharma LP, which filed for bankruptcy as a hail of lawsuits alleged it had contributed to a deadly addiction epidemic with its opioid painkiller, OxyContin. In a landmark decision in December, a U.S. district judge in New York invalidated Purdue’s bankruptcy reorganization plan on the grounds that it improperly insulated the Sackler family from liability through nondebtor releases.

Purdue has appealed the ruling. The company pleaded guilty in November 2020 to three felonies covering misconduct regarding its handling of opioids. Sackler family members, who also faced litigation, have denied allegations they contributed to the opioid crisis.

J&J’s bankruptcy takes the approach a step further. Instead of seeking releases from liability in an existing bankruptcy proceeding, the company created a bankruptcy by forming a company that plaintiff-creditors allege has no business purpose other than to limit J&J’s legal exposure.

Lawyers for talc plaintiffs contend that the J&J maneuver amounts to an abuse of the bankruptcy system, which is intended to help a struggling business reorganize – and not to help a well-capitalized conglomerate limit legal liability for alleged wrongdoing.

“This case is all about litigation advantage” for J&J, said Robert Stark, a Brown Rudnick LLP lawyer representing a creditors’ committee of talc plaintiffs during a December hearing of the subsidiary’s bankruptcy. J&J successfully halted the claims by tens of thousands of plaintiffs “while people are dying of cancer” and trying to prepare their families financially for their deaths, Stark said at the hearing. “It does not get more inhumane than that,” he said.

The Purdue and J&J bankruptcy strategies have sparked efforts in the U.S. Congress to stop such tactics. U.S. Senator Dick Durbin of Illinois is co-sponsoring legislation with other Democrats that would all but outlaw the strategy J&J is using and restrict the ability of companies to obtain liability releases without declaring bankruptcy themselves.

“Our bankruptcy code and civil procedure has to be explored to make sure that this exploitation does not take place,” Durbin said in an interview.

Business groups and some bankruptcy lawyers say that nondebtor releases can be an effective tool to resolve litigation to the benefit of both plaintiffs and the companies they sue. While limited amounts for compensation are often criticized, they offer plaintiffs better odds of getting paid than if they take their chances in trial courts, said Donald Workman, a Baker & Hostetler restructuring lawyer who isn’t involved in the J&J subsidiary’s case.

“You have an elegant solution to resolve burdensome if not crushing obligations,” Workman said, that “provides funding for constituencies that might otherwise receive nothing.”


J&J turned to the bankruptcy plan following a series of setbacks.

The U.S. Food and Drug Administration found trace amounts of asbestos in a bottle of Baby Powder purchased online, forcing the company to issue a recall in October 2019. In May 2020, the company stopped selling talc-based Baby Powder in the U.S. and Canada, citing “misinformation” and “unfounded allegations” regarding the product’s safety.

In April, J&J attorneys consulted with Jones Day lawyers, who explained how the company could use a Texas law to split the company’s consumer-product business into two parts. One would absorb all the talc liability; the other would carry on the business free from the threat of billion-dollar judgments. Texas pioneered the so-called divisional merger, which allows companies to break apart and more easily divvy up assets and liabilities among the resulting companies.

Jones Day helped Georgia-Pacific, a company owned by conglomerate Koch Industries, execute the maneuver in 2017 to offload mounting asbestos litigation. Georgia-Pacific faced allegations regarding asbestos exposure from building products that spanned decades.

Georgia-Pacific used the Texas law to create a new subsidiary called Bestwall to shoulder asbestos liability. As the subsidiary declared bankruptcy, the “new” Georgia-Pacific continued to produce Brawny paper towels and other lucrative brands. The maneuver came to be known in legal circles as a “Texas two-step.”

Georgia-Pacific paid nearly $3 billion in dividends to Koch over the next several years, according to a court filing, that it might have been unable to dole out had it filed for bankruptcy itself. Georgia-Pacific has proposed giving Bestwall $1 billion to settle all asbestos claims, an amount plaintiff-creditors are still challenging in bankruptcy court.

Koch Industries and Georgia-Pacific declined to comment; Jones Day did not respond to a request for comment.

When J&J needed help last year, it hired Dallas-based Jones Day partner Greg Gordon and other members of the firm’s Georgia-Pacific legal team.

As the bankruptcy planning moved forward, a major court defeat heightened the urgency. In June of last year, J&J lost a bid to reverse a watershed verdict in favor of 22 women who blamed their ovarian cancer on Baby Powder and other talc products. The women had initially won a verdict of $4.69 billion from a Missouri jury. A state appeals court reduced the award to more than $2 billion.


By July 12, the company had secretly set up the Project Plato team. The more than 30 employees staffing it came from J&J’s finance, risk management, tax and business development operations, according to the internal J&J memo and deposition testimony.

A week later, J&J treasurer Michelle Ryan reached out to Moody’s to get guidance on the impact to J&J’s credit rating.

“We are looking at a number of ways of capping our talc liability,” Ryan said in a July 19 email to Michael Levesque, a senior vice president at the credit-ratings firm focused on pharmaceutical companies. One scenario under consideration, Ryan said, would be to “capture the liability in one subsidiary” and then “basically bankrupt that subsidiary.”

Ryan asked whether the bankruptcy would hurt the company’s credit rating. J&J at the time was one of just two U.S. companies with a triple-A rating, the other being Microsoft.

Levesque replied that the “technical aspect” of the subsidiary bankruptcy wasn’t likely to cause concern about J&J’s creditworthiness. Rather, he said, Moody’s was “highly likely” to focus on how the subsidiary’s Chapter 11 filing affected J&J’s finances, which the maneuver intended to help.

Ryan did not respond to a request for comment.

To execute the plan, J&J created a limited liability company on Oct. 11 in Texas through a series of transactions. That company then merged with J&J’s existing consumer products business. The merged company then divided itself under the state’s divisional merger law, creating the subsidiary that would take on all the talc liability.

The consumer business could then go on as if the lawsuits had never been filed.


Early on the morning of Oct. 11, Andrew, the in-house J&J lawyer who initially sent the internal memo to the Project Plato team, sent an email to eight J&J colleagues, including several senior executives. He asked them to approve the Texas two-step bankruptcy plan “as soon as possible” and no later than that day, according to Andrews’ email to his colleagues, which was reviewed by Reuters.

He attached a detailed memo outlining the impending bankruptcy’s purported benefits. It would allow, the memo said, the bankruptcy court to determine the final amount of money for resolving all of the litigation, in a process enabling claims to be settled in an “equitable and efficient manner, without the waste and abuses experienced in the state court tort system.”

The memo warned of risks. The plan would be consummated under a tight time frame and would be scrutinized by the media. “Appropriate messaging (internally and externally) will be required to avoid or mitigate misunderstandings about the nature of the restructuring and negative publicity,” the memo said.

Andrew quickly received the green light, within hours of the request, internal emails reviewed by Reuters show.

LTL, the new subsidiary, held its first board meeting on Oct. 14.

The board members and lawyers discussed that LTL faced what they viewed as “exorbitant” costs if the current talc litigation barrage continued, which included 12,000 lawsuits alone through the first nine-and-a-half months of 2021, according to meeting minutes and deposition testimony Reuters reviewed. The group noted that J&J faced a total of about $5 billion in costs from judgments, settlements and legal fees.

The board voted to pursue a Chapter 11 filing. J&J disclosed the move in a news release that evening as one that would “equitably” resolve the litigation.

A plaintiffs’ lawyer grilled Robert Wuesthoff – a J&J manager appointed president of LTL Management – on that point in a Dec. 22 deposition.

“One of the considerations was to treat claimants equitably; it was for their benefit? Is that what you’re saying?” asked Jeffrey Jonas, a Brown Rudnick lawyer representing a creditors committee comprising talc plaintiffs.

“Yes, it would be more equitable to the claimant. Yes, we believe that,” Wuesthoff responded.

“But the real reason we filed for bankruptcy,” the LTL executive said, was that the large and growing amount of talc cases – some with “lottery-size” awards – put J&J’s consumer products business in “financial distress.”


(Reporting by Mike Spector and Dan Levine; editing by Janet Roberts and Brian Thevenot)


Oil drops as hawkish Powell testimony amplifies recession fears – BNN



Oil dropped as Federal Reserve Chair Jerome Powell’s testimony before a House committee heightened concerns of an impending recession.  

West Texas Intermediate dropped to near US$104 a barrel, with prices having shed more than 10 per cent in the last week. Powell said his commitment to fight inflation is “unconditional.” Warnings about a potential recession and economic slowdown have overshadowed oil market fundamentals that indicate a growing supply crunch. Crude’s recent swings have been too volatile for many traders. Open interest across the main futures contracts has fallen to the lowest since 2015 in recent days.  

“Future demand destruction from a possible looming recession is countering near-term real demand that remains very strong,” said Dennis Kissler, senior vice president of trading at BOK Financial. “As long as the fear of a recession remains, the near-term strong demand is keeping crude choppy.”

Updated statistics on the state of US inventories won’t be released this week. The Energy Information Administration’s stockpile report is delayed after a power disruption damaged some of the agency’s hardware.

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As a result, markets will have to rely on a US industry report to parse out weekly inventory data. The American Petroleum Institute reported crude holdings rose by 5.6 million barrels last week, while gasoline holdings also climbed, according to people familiar with the data.

Over the past two weeks, oil has been rapidly giving up gains in what’s been a volatile quarter as investors attempt to gauge the trajectory of the global economy and its impact on raw materials. There’s about a 50 per cent chance the world economy will succumb to a recession, according to Citigroup Inc. and Deutsche Bank AG.


  • WTI August delivery fell US$1.92 to settle at US$104.27 in New York.
  • Brent for August settlement declined US$1.69 to settle at US$110.05 a barrel.

There’s still little consensus among major banks on the outlook for oil. Goldman Sachs Group Inc. said in a note Tuesday that demand is still running ahead of supply, while warning that the Fed “cannot print commodities.” Citi sees crude dropping through this year and beyond.

So far, there’s only been limited relief in refined product markets — where bigger surges have occurred. Diesel futures in Europe closed Wednesday at more than US$57 a barrel higher than crude, a record in data since 2011.

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Technology layoffs show high-flying sector not immune from slowdown – CBC News



Canada’s technology sector has grown rapidly in recent years, as homegrown startups and foreign giants set about hiring hundreds of thousands of well-educated and talented workers. But that expansion has recently slowed to a crawl, as high inflation, interest rate hikes and a downturn for cryptocurrency have taken a lot of optimism out of the sector.

Chris Albinson, CEO of Waterloo-based incubator Communitech, says the pullback in the U.S. is more pronounced because there are more of what he calls “go for the moon” companies with dubious fundamentals suddenly finding themselves unable to adapt to the new reality.

Canadian tech companies are faring comparably better at the moment because generally speaking they are much better stewards of capital, he says, but that doesn’t mean there isn’t anxiety.

“There are some founders that were 18 years old when the last recession happened,” he told CBC News. “There’s going to be stress on the system, but I think they’re ultimately going to come out of that much stronger.”

Valuations for tech giants like Meta, Amazon, Apple and Netflix have cratered in recent weeks, and where once there was a fierce war for talent, many tech giants are implementing hiring freezes and even cutting staff.

U.S. streaming giant Netflix announced Thursday it’s cutting another 300 jobs, the second time in as many months it has announced layoffs of that size.

Crowdsourced website has documented more than 20,000 tech job cuts in the past two months alone, mostly in and around major U.S. technology hubs like Seattle and San Francisco.

While cutbacks in Canada are less dramatic, they are happening.

Canadian financial tech unicorn Wealthsimple laid off 13 per cent of its staff last week, citing “unprecedented” levels of volatility in explaining the cut of roughly 160 positions. “Many of our clients are living through a period of market uncertainty they’ve never experienced before,” CEO and founder Michael Katchen told staff in announcing the news.

Silver lining

Jacqueline Au was among those let go from the Toronto-based business. She suspected something might be up when she noticed the company started spending less on her department, marketing, earlier this year. “When that happens … it’s natural for the team to think, well, what’s gonna happen to my job, if we’re not spending any marketing money?”

It was her first time being laid off, and while she said it was unpleasant, she’s enjoying the time off to think about what her next career move may be. She enjoys the technology sector, she said, but she knows that more job cuts are coming so she’ll be choosy about who she signs on with next.

“I think that this is just the beginning, I think the industry is going to have to keep trimming the fat to stay afloat,” she told CBC News. “I think there’s going to be ups and downs, but winter is here to stay.”

Jacqueline Au was one of dozens of people who got laid off from fintech firm Wealthsimple earlier this year, and she thinks more layoffs are coming for the tech sector. (Jacqueline Au)

Vancouver-based Thinkific laid off about 20 per cent of its staff in April, and Sumeru Chatterjee was one of the 100 or so people let go. Originally from India, Chaterjee came to the U.S. to attend university and worked in various tech jobs for about a decade before making the leap to come to Canada in 2020.

“Last year, the general sentiment across the industry … was we need to grow, we need to rapidly expand our market lead to hire lots of people,” he told CBC News. “So the layoff was sort of a dramatic turn of events.”

He says the technology sector grew so quickly in the past decade largely by burning through venture capital cash to gain market share without having to worry about things like profits. “Normal business metrics like profitability and cash flow were … frowned upon almost, and I think a lot of people are reawakening to the fact that if you if you want to run a business, you need to have some fundamentals like a profitable business and customers that pay you.”

‘Surviving so you can thrive’

The mood from the stage of the Collision Conference in Toronto, where tens of thousands of technology lovers from more than 100 countries converged in person to discuss all things digital, was unabashedly positive this week. But on the sidelines, there were whispers of bursting bubbles.

Sumeru Chatterjee recently lost his job at a Vancouver-based technology company, and has since turned his attention to helping other technology workers network with each other. (Dillon Hodgin/CBC)

“Right now everyone who is innovating and/or investing in tech or in startups is trying to understand what exactly is happening in this moment,” said Deena Shakir, a partner at venture capital firm Lux Capital, based in Silicon Valley. “We’re the topic of conversation at every partner meeting, and every lunch and coffee.”

While she pushes back on the notion that the tech sector is back in a bubble, she adds one thing that’s clearly bursting are expectations of endless growth at the expense of profitability — which is a good thing, she says.

“We’ve been advising … our companies to think long term to make sure that they have enough capital reserves to weather this storm,” she said. “Surviving so you can thrive is an important mindset to think about.”

Survival is key in the cryptocurrency space, which was rocked when a $12 billion trading platform known as Celsius froze withdrawals earlier this month. That impacted major companies like and Coinbase. Though they ramped up during the pandemic, they’re now laying off thousands of workers in the U.S. and Canada, and rescinding job offers.

Deena Shakir is a partner at venture capital Lux, which invests in technology companies. (CBC)

Many crypto companies were scheduled to attend Collision in person, but Paddy Cosgrave, the conference’s founder and CEO, said many of them pulled out at the last minute. Celsius CEO Alex Mashinsky was one of those slated to attend, but didn’t.

“I can understand why [he] had to pull out,” Cosgrave said. “I think he’s got a major fight on his hands to sort this situation.”

Whatever dark cloud may be overhanging the crypto space, Cosgrave says it had no impact on overall attendance, which topped 35,000 — a zeal that makes perfect sense to him.

WATCH | Cryptocurrencies are in a freefall:

Bitcoin, other cryptocurrencies collapse as investors flee risky assets

11 days ago

Duration 1:55

Bitcoin and other cryptocurrencies are in freefall as investors flee risky assets amid rising interest rates. The world’s largest cryptocurrency trading platform, Binance, has also temporarily suspended cryptocurrency withdrawals.

“When things become uncertain, everybody goes searching for answers,” he said. “And certainly in the last few weeks, there’s been a lot of big questions about what exactly is going on in technology and in particular in crypto.”

While layoffs may be on the short term outlook, Cosgrave says the future for technology in Canada and abroad still looks bright.

“What happens when you lay off very smart software engineers? Many of them go and start new companies, and some of those companies are already here,” he said.

WATCH | Tech sector hit with layoffs, cutbacks:

Uncertainty hits big tech with downturns and layoffs

12 hours ago

Duration 2:03

After years of steady growth, global tech stocks and cryptocurrency prices are on a downturn, leading to layoffs and hiring freezes at notable companies.

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Is Canada heading into a recession? Here is what you need to know. – CP24 Toronto's Breaking News



As gas prices and food costs continue to escalate and another interest rate hike is expected next month, many Canadians are wondering if a recession is coming and how to prepare for a possible economic downturn.

Sixty-eight per cent of Canadians believe the country is heading towards a recession, while 17 per cent believe it has already arrived, according to a new survey from Yahoo Canada/Maru Public Opinion released earlier this week.

However, 15 per cent of Canadians believe the concern about a recession happening now or later is exaggerated.

But if a recession were to occur, what does that mean for Canadians and how should they prepare for it?



A recession can simply be defined as a sustained decline in economic activity for at least six months. This could result from a decline in consumer spending, which in turn could cause sales to drop, businesses to cut costs and ultimately more layoffs.

Toronto shopping

“I think the simple rule of thumb is two straight quarters of economic contraction and production of goods and services,” Derek Burleton, deputy chief economist for TD Bank Group, told CP24.

“So we tend to refer to gross domestic product (GDP) as being that overall measure of activity. If we have two straight quarters of decline that passes the simple litmus test of recession.”

The country’s last recession was in 2020 during the height of the COVID-19 pandemic.



With inflation at a nearly 40-year high and the Bank of Canada expected to raise its key interest rate next month, these factors could kick start another recession.

Statistics Canada said its consumer price index in May rose 7.7 per cent compared with a year ago, the fastest pace since January 1983.

“It’s not an oil price issue or food price issue, it’s widespread inflation across the economy, that tells us and that tells policymakers the economy has just been running too hot for too long. We have an inflation issue rooted in the psychology of Canadians and among businesses, and it’s going to have to be dealt with,” BMO Senior Economist Robert Kavcic told CP24.

Toronto gas

The Bank of Canada has said that Russia’s invasion of Ukraine, COVID-19 lockdowns in China and backlogged supply chains are fuelling “uncertainty” and higher prices for energy and food, prompting a need to increase interest rates to control inflation.

The central bank has hiked its key interest rate three times so far this year to bring it to 1.5 per cent.

But many economists, including Burleton and Kavcic, expect the central bank to raise its key rate once again by at least three quarters of a point next month to mirror the U.S. Federal Reserve’s recent interest rate hike.

Burleton said this hike could dampen consumer spending, which in turn could eventually ignite a recession.

“I mean as rates go up, the bigger the chance that economic activity will weaken next year but the Bank of Canada feels from a longer-term perspective if they can bring inflation down to their target that will serve Canadians the best over the medium to longer run. So unfortunately, it’s going to come at the cost of some output foregone over the next four to six quarters,” Burleton said.

BMO is not forecasting a recession but Kavcic said if “sticky price pressures” continue and the central bank has to continue raising rates then it will be a “big pill for the economy to swallow.”

“Our view on this is that we’re going to see economic growth really stall out through the latter stages of this year and the first half or so of next year.”

TD Bank is also not predicting a recession but said in its quarterly economic forecast that “there is a very thin margin for error if another shock hits economies.”

Burleton noted that Canadians are currently experiencing an unusual recovery after the recession in 2020 and that nothing “is a given at this stage.”

“The economy has shown me real resilience. We saw it with the April retail spending numbers. Our own high-frequency data internally…still shows resilience through May. So the economy is holding up in the first half. I guess the question is, to what extent it softens going forward.”

Burleton added that although risks are rising, he thinks a recession does not seem imminent.



In anticipation of a possible recession, 56 per cent of the respondents from Maru Public Opinion’s survey said they have set stricter priorities and reduced their spending in the past month.

Eighty-six per cent said they spent more on food this month compared to last month, while 82 per cent also said they spent more on gas.

grocery shopping

Burleton said it’s a smart move to put away additional savings in preparation of a potential recession.

“It’s probably not a bad thing to kind of start thinking about ways to protect yourself as a household in the event (of a recession). I think the good news is that based on aggregate data of the Canadian economy, a lot of households are holding on to additional deposits and savings…and we’re counting on some of that cushion to help defend against deeper outcomes in the economy going forward.”

Sixty-three per cent of survey respondents said food is the biggest expense that they have cut down on in the past month, followed by entertainment and clothing and footwear.

The Yahoo Canada/Maru Public Opinion survey was conducted between June 17 and 19 among a random selection of 1,515 Canadian adults who are Maru Voice Canada panelists. The survey has an estimated margin of error of +/- 2.5 per cent, 19 times out of 20.

With files from The Canadian Press

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