On the labour front, the 0.5 percentage point increase in Canada’s jobless rate over the past four months is the largest outside of the pandemic since the 2008/09 recession, said RBC Economics.
“Since the 1970s, there have been just six periods when the jobless rate rose by that much in such a short timeframe prior to this year — and four of them were during recessions,” RBC economists wrote in a report entitled “Canada’s economic engine is gearing down.”
Nor is economic data the only warning sign. Bank earnings last month were lacklustre and not just because lenders are putting away more money for bad loans, said Jean.
Banks are getting more careful about their spending and job vacancies in finance jobs dipped below their pre-pandemic averages in June, he said.
Some say the recession is already here.
The weak second-quarter GDP left Oxford Economics more convinced that the economy has slipped into a moderate recession that will last until early 2024. They have lowered their growth forecasts for Canada to 0.7 per cent in 2023 and a contraction of -0.5 per cent in 2024.
They also see the unemployment rate climbing as high as 7.2 per cent (it’s 5.5 per cent now) by mid-2024 as hiring slows and job losses rise.
Other forecasters expect less damage. Desjardins sees real GDP at 1.1 per cent for 2023 and flat for 2024 and RBC’s forecast is 1 per cent for 2023 and 0.6 per cent for 2024.
What does this mean for Canadians?
The mild recession that Desjardins expects at the turn of the year means that interest rates won’t be higher for too much longer, says Jean.
“By next March, we anticipate the Bank of Canada will deem the supply-demand rebalancing process well entrenched enough to warrant some monetary policy relief,” he said.
However, with inflation expected to persist until the end of next year, the Bank won’t be injecting as much stimulus into the economy as it has in past downturns.
That means while the recession might not be extremely painful, the recovery could be painfully slow, he said.
