Canada’s economy is making progress but the average worker is in a rut. A new report from the National Bank of Canada (NBF) explains to investors that the economy is doing much better than most anticipated. Unfortunately, that’s going to be short-lived as economic anxiety takes control of households. Consequently, they see up to 190k jobs lost within the next few months.
Canada’s Economy Exceeded Expectations, But Still Not Enough
Canada’s economy was heading towards the gutter until a flurry of economic revisions. It turns out the economy has been doing much better than previously believed, especially in the face of tariff threats. NBF notes that cutting the policy rate by 225 basis points since June 2024, had Canada on track for a soft landing.
“Indeed, the economic recovery has recently exceeded economists’ expectations, with the Citi Economic Surprise Index reaching its highest level in almost three years,” says Matthieu Arseneau, Deputy Chief Economist at NBF.
Though he warns, “… the upturn is likely to be short-lived, if consumer confidence level is anything to go by, which was at a record low in February.”
Source: National Bank of Canada.
As discussed yesterday, despite the upbeat data—most households are focused on the dark clouds accumulating. The lack of confidence means consumers will put away a little more cash, and hit pause on major purchases and investments. The bank warns this insecurity has pushed consumer activity to “extreme” lows, and businesses will feel this pressure.
“A weakening of the Canadian labour market is all the more likely as consumer pessimism is shared by business owners,” he notes.
Canada’s Unemployed Population To Surge In The Next Few Months
Less spending means lower revenues for businesses, which in turn will result in cutbacks. The bank estimates GDP growth of 1.2% in 2025, which is better than no growth but not by much when contrasted with the population boom. As a result, they’re forecasting unemployment (6.6% in February) will rise into the range of 7.0-7.5% over the next few months. That works out to 90k to 190k more unemployed workers, not accounting for population growth.
Economists generally believe that a 0.5 point unemployment increase within 12-months is enough to kick off a recession. In this case, they’re estimating that it can be nearly that volume over just a few months. Yeesh. No wonder people have such a dreary outlook despite all of the positive data revisions.
It’s fun to promote not buying American until we realize them doing the same would hit about 1 in 10 jobs. Boomers are helping politicians play a dangerous game with country’s future just for the election, and hope things can go back to normal right after.
Why on earth go back to normal? Normal is not sustainable, as we’re finding out. Our future now is to find better trade relationships. Removing interprovincial trade barriers, finding different trading partners, having more support for Canadian products and better control of our natural resources should be the focus, not playing games, only to be held hostage by the elephant next door. Sure it will be painful, but our future will be more secure and prosperous in the long run.
Anyone who thinks low rates can mitigate anxiety has never spoken to a real person. It doesn’t matter how cheap credit gets, if people are worried about losing their job they won’t the next step in purchasing hardgoods which literally drive our economy.
100% this
Reading that article I took some umbrage at the constant (mainstream) characterization that it’s simply “consumer pessimism” that is accounting for the real contraction in the economy. As IF my actual household budget hasn’t been affected by the very real price rises of common goods while wages STAGNATE (I swear, gone down?! my partner is jobseeking rn and yikes). As you say, it doesn’t matter how cheap credit gets for the average person bc we do not buy bonds and play on that casino of “cheap credit bonanza”, we try to avoid leaning on credit now more than ever bc we are already in debt. And wtf all these supposed rate cuts have done f*ck all for my actual debt burden (mortgage & credit card) so yeah, things are bad. This is what happens when the financial class makes public policy.
/rantover
When we say ” buy Canadian”, we have to becsure we are supporting the right people. It doesn’t help much if we support a Canadian company that creates product in the US. At the same time, patronising your local McDonald’s means you are helping the neighours working there, as well as the franchise owner who has put her life savings into the store.
If we get this right, we can grow our economy and send a loud message to the Trump administration.
With they’d stop growing the population so that id have a chance to get a job, home and family ever. Probably never again for either. Will become a dependent of the state for no good reason.
Have you thought of not eating avocado toast? Carney’s electorate told me it would help
Canada MUST increase immigration.
When Carney wins he will increase immigration to help drive economic growth.
Interest rates should be cut to support house prices and increase wealth.
So, since we are an equal opportunity country, these guys will get the cap at 2gs per month unemployment just like the rest of us who were forced out of work by government during covid right?..especially since the Liberals continued international flights and allowed bars/restaurants open in government owned international airports.
Will the ceos also be reduced to 2gs/month or will they keep collecting millions while the workers are unemployed and collecting 2gs/month taxable income?
And, does the bank actually think** that by reducing interest rates by a percent or two that suddenly everyone can afford a million dollar home? Lol. Whether it’s 5% or 1%, it still costs too much.
Inflation may be at 2.9% from last month..but its still 20% higher than 2020, which is the real picture.
I have my Elbows up but it doesn’t seem to be doing anything
How long should I go around like this? Can I put them down when I eat and go to the toilet?
Please advise.
Simon says: stop following your stupid tv!
Red tape unfortunately. Record immigration was a nice bandage over a serious wound that was getting worse. Sure, Mark Carney seems sensible and very approachable. I like the guy as a person but that doesn’t mean that we are in for a very very rough ride.
We will have absolutely no middle class moving forward. You can’t tie up money in housing alone. Most immigrants are barely scrapping buy. It’s not immigration that caused this mess. The red tape and inefficient government has brought this on. Things are going to get a whole lot worse, but not for the wealthy. Affordable housing is a pipe dream. Not going to happen. Houses are bank accounts and not for living in.
It’s investors tearing down and building something as cheaply as possible. Your greatest asset is disposable and unfortunately so are you. The wealth gap has never been so wide. Big payouts to corporations and CEO’s. Look at Hudson Bay recently. We are already living in the most overinflated housing market Canada has ever experienced. Good luck when the hot water tank goes, the foundation needs repair ect ect. Most people can barely afford the mortgage. Renting is awful and that’s a whole other miserable endeavour. This is and has been completely unsustainable.
Excuse the typo: I meant to say that we are in for a rough ride. Apologies
The big issue with ratw cuts as the only economic lever to use is that first of all the boc cant control bank lending, govt stupidity or foreign trade.
Firther we know that stats cans cpi is wrong, and by design, allows the boc to pretend that their changes have the riggt effect.
Since sc cpi measures interest expense seperate from the item it finaces, it artificially show a reduction in inflation with any rate cut at all.
This.is how canada managed to have the lowest cpi inthe g7, despite having the worst consumer debt, housing price inflation in the g7.
What we need is a focus on growing real gdp per capita , not building houses no one can afford. Investme t in residential or even commerxial real estate is not productive, while investment in pielines, rail, etc generates a prodictive flow of forex and improces sfandard of living.
Thw liberal game of using forex declines to hide failed economic policy will see us with a 40c dollar, and still nothing agfordanle to live in.
If our gdp per capitacatchs up with the usa in tue next 5 years, we will all be able to upgrade to a better home and still have money to eat. The liberal argumdnt that supply will lower prices is nonsense.