Canadians should brace for recession because odds are 'not zero,' says Stephen Poloz
Former Bank of Canada governor Stephen Poloz sees recession conditions in many parts of the Canadian economy, as growth fails to keep pace with an increasing population.
Canada’s unemployment rate rose to 6.4 per cent in June and ticked up again to 6.6 per cent in August.
“These are close to around two percentage points above the low point,” Poloz said. “That’s a very decisive recession signal in most situations, many of our normal signals about recession are clouded because of what I mentioned earlier, which is the immigration numbers.”
Poloz, now a special adviser at Osler, Hoskin & Harcourt LLP, detailed his views of the economy during a webinar Thursday.
He noted that the population is growing at 3.5 per cent, but the economy is growing at around one per cent. This is also an indication that spending per household is shrinking significantly, something that only happens during a recession, he said.
“So that just means, if we didn’t have the population growth, it’d be growing as a minus two per cent,” he said. “Well, that is a recession.”
While the labour market’s downturn so far has been mostly a result of too many people chasing too few jobs, Poloz thinks layoffs could increase in the new year as mortgage renewals strain more households and further sap consumer spending.
“It’s probably just the beginning, because we are getting into the most stressful phase of mortgage renewal,” he said. “So, it doesn’t matter the rates are coming down, you still have to renew higher from where you were, and that just means more people join that group of constrained spending until we get through this thing.”
Preliminary estimates of July gross domestic product by Statistics Canada were flat and economists are predicting annualized
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