Former Bank of Canada governor Stephen Poloz is sounding the alarm that both Canada and the United States are edging closer to recession, weighed down by tariffs, geopolitical uncertainty, and weakening labour markets.
Speaking on CTV’s Power Play with Vassy Kapelos, Poloz said the trajectory for both economies is “not a positive one,” with clear signs of slowdown emerging. “What we’ve got is two economies, actually, that are sliding — not in recession, probably, but sliding in that direction,” he warned.
Canada’s unemployment rate hit 7.1 per cent in August, the highest since 2016 outside the pandemic period, as the country shed 66,000 jobs. Youth unemployment climbed to 14.5 per cent, a troubling figure Poloz linked in part to the early effects of artificial intelligence reshaping entry-level work. “We may be beginning to see the first concrete evidence that AI is having a wider impact on labour markets,” he said.
Despite these headwinds, Poloz pointed to resilient consumer spending as a rare bright spot, noting that Canadians vacationing at home and purchasing domestic goods have helped buoy retail sales. “It’s the one positive in there, at least from a macro standpoint,” he said.
The U.S., though somewhat more insulated, is also showing signs of strain with housing and labour markets under pressure. Consumption remains steady, but Poloz cautioned that could be the next to weaken. “As businesses here, we need to get ready for this new structure or new world that is facing us,” he said, adding he is less convinced political leaders will shift course to soften the blow.