Is a Recession Looming in Canada? Economist Says It Might Not Be as Severe
If Canada is moving towards a
recession,
How serious might this be?
This is the issue being discussed by numerous economists and financial analysts who caution that the primary catalyst for this situation is the trade war initiated due to U.S. President Donald Trump’s tariff policies.
The labour market has already been shedding jobs as
Tariffs come into effect, prompting businesses to prepare for increased expenses.
, with at least one economist predicting the loss of thousands of jobs in the upcoming months.
During an interview with The Globe and Mail, TD Group’s chief economist and vice-president Beata Caranci stated that the bank is “concerned” about the possibility of Canada slipping into a recession, along with potential
job losses
approaching the end of the first half of the year.
Perhaps we could witness an additional loss of around 100,000 jobs,” stated Caranci during that conversation. “In just two months, we have already experienced more than 70,000 job losses within the private sector.
Regarding that prediction, Caranci stated in an interview with Global News that a lot hinges on how efficiently the federal government can put into action their commitments to “bolster employment, specifically within the manufacturing sector.”
“Although 100,000 positions may seem substantial, this figure represents just 0.4 percent of the total workforce,” Caranci stated in an email to Global News.
Previous downturns have been associated with employment reductions ranging from one to five percent of the workforce. This suggests that there might be an initial significant shift in the tariff landscape; however, this change is expected to be relatively mild.
She stated, “However, currently, there’s clear visibility into positions that might be eliminated, instead of focusing on potential new opportunities.”
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Several methods can be used to identify a recession, with the official definition typically agreed upon by economists and central bankers being a situation where the Gross Domestic Product (GDP) experiences a decrease over two successive quarters, which equates to half a year.
This indicates that the aggregate worth of products and activities generated within Canada during that timeframe would be lower compared to the corresponding duration from the previous year.
Increasing joblessness and rising price levels may also serve as indicators of an economic downturn.
Should Canadian companies decide to reduce their production of goods and services because of increased tariff costs, this decline will be reflected in various economic indicators such as GDP.
The trade dispute has similarly been
impacting Canada’s labour market with unemployment rising
As businesses let go of employees, this is evident in the periodic employment statistics released by Statistics Canada.
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Indicators such as GDP figures and employment reports often emerge weeks or even months following the onset of a recession. A downturn is officially declared retrospectively, contingent upon reviewing data from the preceding two quarters of economic activity.
There are several
informal hypotheses suggested to attempt measuring an ongoing economic downturn in real-time
, but they are largely viewed as imprecise or old-fashioned when compared to what economists currently utilize.
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An upcoming recession, should one occur soon, is not anticipated to have an economic effect as devastating as that of the COVID-19 pandemic in 2020 or the Great Recession spanning from 2007 to 2009.
Nevertheless, the intensity of this economic downturn might hinge on the Canadian federal government’s reaction to President Trump’s tariffs.
Caranci highlighted suggestions like the federal government’s proposal to invest $2 billion in an “entirely Canadian” production network.
The upcoming GDP report from Statistics Canada is scheduled for release on May 30, providing insights into economic expansion across various industries for the month of March.
This would also provide the complete GDP report for the initial quarter, which covers the first three months of the year.
According to
TD Economics
In the first quarter of 2025, economic growth is predicted to reach 1.8 percent. However, this momentum is anticipated to slow down as the second quarter is forecasted for a decrease of one percent. The following quarter, the third, is also projected to see a drop of 0.2 percent. This downturn in the third quarter aligns with what constitutes a recession; nonetheless, recovery is expected during the final quarter of the year.
Nevertheless, that entirely relies on the data — and that aspect remains uncertain at this point.