Canada Faces Recession Warning and Job Loss Surge, Says TD Economist
As of now, the economic outlook for Canada is turning increasingly grim. According to Beata Caranci, Chief Economist at TD Bank, the country is on the verge of a formal recession, and we could be looking at another 100,000 jobs lost in the coming months. This isn’t just a statistical forecast—it’s a stark signal that many Canadian families could soon face financial pressure not felt since the last major economic downturn.
Despite the S&P/TSX Composite Index recently breaking the 26,000 mark, stock market optimism seems to be misleading. That upward momentum might not hold. Behind the scenes, economic indicators are flashing warning signs—private sector job losses are climbing, consumer confidence is falling, and even historically reliable sectors like housing are failing to respond to interest rate cuts.
Beata Caranci highlights that Canada is already seeing the early stages of a recession. GDP is expected to shrink in both the second and third quarters of this year. The housing market—typically a reliable spark for broader economic growth—is faltering. Sales have fallen 20% since November, despite a full percentage point cut in interest rates. Even with cheaper borrowing, Canadians aren’t spending or investing like they used to. That’s a confidence issue, not a cost one.
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The current trade environment is making things worse. Tariffs—especially those affecting steel, aluminum, and non-USMCA goods—are hovering around 12%. Although that’s expected to drop to around 5% by year-end, the damage is already filtering through the economy. With another USMCA deal potentially on the table by late 2026, there’s hope for stabilization, but for now, uncertainty reigns.
Job losses have already surpassed 70,000 in the private sector over just two months. Caranci warns that sentiment is not only poor—it’s actively shaping economic outcomes. Unlike the U.S., where negative sentiment has not yet severely impacted economic performance, Canada’s consumers and businesses are responding to uncertainty with caution and cutbacks.
Looking forward, TD forecasts Canada’s real GDP growth to sit at a sluggish 0.8% for this year and slightly above 1% next year. That’s a downward revision from earlier projections and paints a picture of an economy moving in slow motion, or worse, in reverse.
This economic stress isn’t just cyclical—it has structural roots. Canada is trying to simultaneously reduce its dependence on U.S. trade, boost domestic economic resilience, and increase its global market share. These are ambitious and costly transitions. The government’s challenge will be to execute complex, multi-billion-dollar projects efficiently. If not, we could face rising debt without the economic growth to offset it—meaning future generations may bear the burden.
So where does that leave us? Interest rates are low, but they’re not delivering the usual stimulus. The Canadian dollar has held steady in the low 70-cent range, not because of economic strength, but because markets are cautiously optimistic a U.S. trade deal might emerge. But optimism is fragile, and with job losses looming and economic contraction already underway, Canada’s path through 2025 will require strong leadership, precise policy action, and a lot of resilience from Canadians themselves.
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