Posthaste: The wait to see how Canada's economy lands is almost over
Canadians won’t have to wait much longer to find out if the slowing economy sticks a soft landing or suffers a hard one.
That’s because the labour market over the next six months will show whether employers are responding by merely implementing hiring freezes or going into full-blown layoff mode, said Charles St-Arnaud, chief economist at Alberta Central.
The labour market is in good shape right now, but, as a lagging economic indicator,“labour statistics are usually strongest on the eve of a recession,” the former member of the Bank of Canada’s economics team said.
The current unemployment rate is 5.7 per cent, close to a historic low, and the number of people working remains high. Still, signs of an economic slowdown are growing.
Economists such as Benjamin Tal at CIBC World Markets say Canada is in a downturn as measured by gross domestic product per capita. Others believe the economy is likely already in a technical recession, which is two quarters of negative growth.
After increasing interest rates to a two-decade high of five per cent, the Bank of Canada in its Oct. 25 decision said its policy decisions are cooling inflation and economic activity. As higher rates work their way through the economy, a process that usually takes six to seven quarters, their effects are expected to finally hit the labour market.
“The next six months may be the window to observe a more meaningful deterioration in the labour market,” St-Arnaud said, and should establish whether Canadians find themselves in the midst of a hiring freeze or broad-based layoffs, which will make a huge difference to indebted households and to the economy.
For example, people are allocating 15 per cent of their disposable income to service their debts. The
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