Canada’s Economy Stumbles—Early Recession Signs Flash Red

Another day, another economy teetering on the edge—this time it’s Canada’s turn.

Warning lights blink as analysts whisper the R-word. GDP contractions, rising unemployment, and that telltale consumer spending slump? Classic recession playbook. But don’t worry—your friendly neighborhood central bankers will probably ’fix’ it with more monetary duct tape.

Meanwhile, crypto markets yawn and keep stacking sats. Because when fiat stumbles, decentralized assets just tighten their bootstraps.

Job losses mount as central bank freezes

Unemployment is also moving the wrong way. Forecasts suggest Canada’s jobless rate will jump to 7.2% in the second half of 2025. The combination of weaker trade and cautious domestic spending is dragging down hiring. Most of that pressure is falling on households, which are now dialing back consumption as income uncertainty grows.

Inflation isn’t letting up either. The cost of goods and services is set to run above the Bank of Canada’s comfort zone — economists project 2.1% inflation in Q3 and 2.2% in Q4, just above the 2% target. That makes things more complicated for policymakers, especially when monetary options are limited.

Right now, traders see less than a 30% chance of any interest rate MOVE at the Bank of Canada’s next meeting in June. The bank’s governor, Tiff Macklem, said Thursday that “the more we can get uncertainty down, the more we can be more forward-looking as we move forward in our monetary policy decisions.”

One reason that uncertainty won’t disappear anytime soon is that housing activity is tanking. Sales are down. Prices are down. New housing starts are projected to be lower in the second half of the year than in the second quarter.

Macklem pointed to ongoing questions around Canada’s relationship with the US as the biggest reason families and businesses are holding off on big decisions.

“I know Canada is keen to sit down with the US and work through our differences and come to an agreement,” he said. “If we can get that clarity, we can get back to growth. Clearly if things move in the other direction, yes, it will be worse.”

That face-to-face may come sooner than expected. Prime Minister Mark Carney is scheduled to meet with TRUMP during the G-7 leaders’ summit, which is taking place in Alberta this June. It’ll be Trump’s first official visit to Canada since returning to the White House.

Expectations are low. Carney has already made it clear that the long stretch of economic integration between Canada and the US is no longer intact. That’s left companies unsure about what to plan for, and many are just waiting it out.

Still, not all growth is off the table. Economists see the broader Canadian economy expanding by 1.2% in 2025 and 1% in 2026, assuming conditions don’t get worse. Those projections haven’t changed from earlier this year. But that’s cold comfort in a moment when everything else is pointing down.

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