finds itself on the brink of a potential recession, with both traditional and unconventional indicators flashing warning signs.
The C.D. Howe Institute defines a recession as a "pronounced, persistent, and pervasive decline in aggregate economic activity," typically marked by two consecutive quarters of declining GDP. Current forecasts suggest storm clouds may be gathering:Meanwhile, Canada’s job market is under strain. As of April 2025, the unemployment rate rose to 6.9% — the highest since November 2023 — leaving more than 1.6 million Canadians out of work. That month, the economy lost 30,000 jobs, while adding just 7,400 new ones.

The Bank of Canada, in its recent Financial Stability Report, outlined scenarios in which prolonged U.S. tariffs could trigger a year-long recession, with GDP declining for four consecutive quarters.

Consumer sentiment is sending more ambiguous signals. The Bloomberg-Nanos Canadian Confidence Index rebounded to 48.6 as of May 9, approaching the neutral 50-point threshold. Data scientist Nik Nanos attributes the boost to the election of Prime Minister Mark Carney.But some economists warn the rebound may not last. Walid Hejazi, professor at the University of Toronto, notes that fear alone can drive downturns. “If consumers fear a recession is coming,” he says, “they may reduce their spending, and reduced consumer spending makes the economy slow down even more.”

Reading the Quirky Economic Tea Leaves

Beyond the traditional data, economists are watching more unusual trends:

Uncertainty Reigns

The road ahead is anything but clear. Isabelle Salle, a behavioral macroeconomics professor at the University of Ottawa, says we’re navigating uncharted waters.

“Tariffs and this uncertainty shock just added to existing problems, at the worst time possible,” she explains. “With uncertainty, you cannot easily assign probabilities to the different scenarios. You really have to operate with just options.”