Based on coverage from CTV, Financial Post, HCA Mag, BPM, and BenefitsCanada.
As the economic clouds gather over Canada, whispers of a recession are growing louder. Former Bank of Canada governor Stephen Poloz has warned that both Canada and the United States are on a slippery slope towards economic downturn, driven by factors like tariffs, geopolitical tensions, and a shaky labour market. While the word "recession" isn't being thrown around lightly, the signs are hard to ignore.
Canada's labour market is showing some troubling signs. In August alone, the country lost 66,000 jobs, pushing the unemployment rate to 7.1%, the highest since May 2016, if we set aside the pandemic blip. Youth unemployment is even more concerning, sitting at a staggering 14.5%. According to Desjardins Economics, this level is typically seen during a recession. Poloz suggests that artificial intelligence might be playing a role in this shift, particularly affecting entry-level positions.
David Rosenberg, chief executive at Rosenberg Research and Associates, notes that the economy has shed a net 40,000 jobs since March, marking the steepest downturn since August 2020. He points out that the private sector continues to lose positions, and full-time employment is pulling back, which is crucial since it's a key driver of consumer confidence and spending.
South of the border, the U.S. isn't faring much better. The country added only 22,000 jobs in August, far below expectations, and revisions to previous months' data paint an even bleaker picture. Rosenberg describes the U.S. job market as flashing recession signals, with the Household Survey showing a significant loss of full-time jobs over recent months.
Despite these gloomy indicators, there's a silver lining in Canadian consumption numbers. Poloz notes that retail sales have remained buoyant, thanks in part to Canadians vacationing domestically and buying local products. This consumer resilience is one of the few bright spots in an otherwise grim economic landscape.
As Canadians brace for potential economic turbulence, a survey by Express Employment Professionals reveals a confidence gap between employers and workers. While 80% of employers feel confident in providing long-term job security, only 66% of employees share that optimism. The survey also highlights that 51% of workers are more concerned about job loss than they were a year ago, compared to 42% of employers who perceive increased anxiety among their staff.
The looming decision by the Bank of Canada (BoC) on interest rates adds another layer of uncertainty. With the labour market softening and growth slowing, there's speculation about whether the BoC will cut rates to stimulate the economy. BeiChen Lin, a senior investment strategist at Russell Investments, suggests that a rate cut could be on the horizon, potentially offering some relief. However, the path forward is fraught with challenges, as inflation remains sticky and economic signals are mixed.
In this climate of uncertainty, both employers and employees are adjusting their strategies. Companies are focusing on transparent communication and skill development to retain talent and build a workforce capable of navigating change. Meanwhile, workers are altering their job search strategies, with many expressing a willingness to accept lower pay or explore different industries.
As the economic narrative unfolds, one thing is clear: Canadians are bracing for a bumpy ride. Whether the country can avoid a full-blown recession remains to be seen, but the current indicators suggest that caution and preparation are the orders of the day.
