Could Canada pull out in a recession?

Could Canada pull out in a recession?

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A rapid cooling in the housing market, high household debt and the Bank of Canada’s aggressive rate hikes have all raised the specter of a recession in recent months.

But Capital Economics says there’s another force threatening to slow Canada’s growth and asks the question, “Will Canadians retire in a recession?”

The July jobs figures have been a bit of a “headache” for economists recently when the economy lost 30,600 jobs instead of gaining 15,000 as expected. The drop in employment follows a loss of 43,200 jobs in June, but the unemployment rate remained at a historic low of 4.9% due to a shrinking labor force.

The surprise drop was partly due to retirements hitting an all-time high, Capital said.

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Retirements have been rising for years due to aging baby boomers, but the recent spike appears to be because people had delayed retirement during the pandemic, where the labor market attachment of Canadians aged 55 at 64 has far exceeded pre-pandemic norms.

National Bank of Canada economists said 70% of job losses in July were among workers aged 55 and over, with Statistics Canada reporting that a record 300,000 Canadians retired in the last year. “Unforced retirements, not layoffs, appear to be the primary cause of the reduction,” National said.

While Capital economists don’t think retirements will rise much more, they also don’t think they will fall much from the current rate of 25,000 per month, as the share of the population over 55 years continues to increase.

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Nor is there any relief on the horizon from the younger generations. The participation rate of Canadians aged 25 to 54 hit an all-time high during the pandemic, but has since started to decline. According to UN projections, without immigration, the number of people aged 18-54 will decline by 100,000 or 0.5% each year.

Canada will then depend on immigration for labor force growth, said Capital economist Stephen Brown. But even that can fail.

“Future waves should be more beneficial to the working population but, if history is any guide, the government’s annual target of 450,000 new arrivals will still only increase the working population by 26,000 per month, which does not would only marginally offset the likely number of retirees,” he wrote.

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Capital now sees its job growth forecasts of 0.6% in 2023 and 1.2% in 2024 in jeopardy. The economy could get a boost if hours worked per person and output per hour improve, but with these two recent declines, that shouldn’t be counted on, Brown said.

“All of this increases downside risks to GDP, particularly if retirements increase further,” he said.


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Ballard Power Systems Inc., the Vancouver-based maker of hydrogen fuel cells used in trucks, trains and ships, got a boost on Friday when the US Cut Inflation Act was passed. The bill includes tax credits that could finally create a clean hydrogen supply — a critical missing ingredient if companies like Ballard hope to participate in the energy transition, writes Gabriel Friedman of the Financial Post. As the illustration shows, North America still has some way to go in the development of hydrogen infrastructure.

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  • Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development; and François-Philippe Champagne, Minister of Innovation, Science and Economic Development, will meet Tatiana Clouthier, Mexico’s Secretary of Economy, for the first virtual event of the Canada-Mexico High-Level Economic Dialogue
  • Premier Jason Kenney will share details of the Government of Alberta’s new talent recruitment campaign that will target Toronto and Vancouver
  • 2022 Association of Municipalities of Ontario AMO Conference
  • Benoit Charette, Quebec Minister of the Environment and the Fight Against Climate Change, will make several announcements regarding the environmental requirements that the government proposes to impose on Glencore’s Horne aluminum smelter
  • Bank of Canada Releases Survey of Senior Loan Officers
  • Today’s data: Existing home sales, manufacturing sales and wholesale trade in Canada

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Another sign of Alberta’s economic strength came recently when the province’s unemployment rate fell slightly below the national average at 4.8%. BMO Senior Economist Robert Kavcic gives four reasons for the relatively strong outlook. First, Alberta is heavily dependent on oil and right now it’s a blessing, increasing government revenue and revenues. Second, people are moving around the province. Third, the housing market is unique, entering the pandemic boom with attractive valuations and avoiding the excesses of other provinces like Ontario.

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“All told, the change in the jobless rate highlights what we think will be an extended Alberta outperformance barring another oil slump,” Kavcic wrote.


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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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