The Current - Are we in a recession?

Episode Date: June 8, 2026

By one definition, Canada is now in a recession. But last week Canada also had a strong jobs report, and posted its first trade surplus in months. So what the heck is going on? We speak to three leading economic analysts — Charles St Arnaud from Servus Credit Union, Angelo Melino from the University of Toronto and the C.D. Howe Institute and Armine Yalnizyan, Atkinson Fellow on the Future of Workers. 

Imagine you've been charged with a crime, and the only witness pointing the finger at you isn't even human. I remember thinking, are you serious? What is this thing? It's something artificial, created by a mysterious Canadian. And it's coming for all of us. A life-defining technology. Crime as we know it will never be the same. I'm like, oh my God, he's lying.

From CBC's Uncover, The Expert Witness. available now on CBC Listen or wherever you get your podcasts. This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. Canada's had two consecutive quarters of shrinking GDP, the only country in the G20 that can say that. We've lost 112,000 jobs in the first three months of this year. And that has left our country with a quarter of its people in food insecurity.

will the Prime Minister tell us whether we are in a recession or a technical recession? As a conservative leader, Pierre Pahliav in the House of Commons last week, whether the recession is real or technical, there is no question that for a lot of Canadians, these times are tough. High inflation, post-COVID hangover, a trade war, it's a lot. And now, after two quarters of shrinking GDP and many Canadians wondering how long this will last, how bad it could get, and what do we do about it? We're joined by three people who think a lot about the answers to the.

those questions. Charles Sendano is the chief economist at Service Credit Union. He's in Calgary. Armini Annizian is the Atkinson Fellow on the Future of Workers and past president of the Canadian Association of Her Business Economics. She's in Ottawa. And Angelo Molino is a professor of economics at the University of Toronto and a fellow at the C.D. Howe Institute. He is in Toronto. Good morning, everyone. Good morning. Charles, let's start with Pierre Polyev's question to the Prime Minister. Are we in a recession or a technical recession? Well, that's always a thing. Technical recession. and it means simply two consecutive quarter of negative growth, which we've had. But those are very, it's a very simplistic definition of a recession to start with.

It kind of lacks the context of what's happening. And a recession means traditional to be more of a prolonged and deeper contraction in economic activity, which we do not have right now. When we look at the economy, for me, it looks more like it's completely. stalled rather than in a recession. We'll get to that context in a moment, but Charles, does it matter if we are or aren't in a technical recession if many Canadians are feeling squeezed right now? It's a definition. It would be more meaningful if we're really seeing a significant drop in

economic activity that was coming with also big job losses. We're seeing also big decline in income. It should be more broader weakness. than what we're seeing in deeper weakness, which we need to see. But it's still, for many households, the problem we've seen is that it has been years where the kidney economy has not been really performing well, especially on the household side. Angela, it's interesting because shortly after Pierre Pauly, I've made that comment referencing the job losses. On Friday, we got good news about jobs.

88,000 new jobs added in May, erasing most of the losses from the first part of the year. and we've actually seen an increase in exports as well, despite the trade war that's going on. There's a trade surplus that we saw in March. So what's happening, Angelo? There are a lot of conflicting signals. As you pointed out, that employment report, well, it's hard to find anything to complain about in it. It was strong across all age groups, across industries, across provinces. Yeah, that was a great report.

But, you know, the employment reports are very noisy. So when I talk to people, I'd say, yeah, it's plus 88,000 plus or minus 60,000 is the way to report it. We'll have to see if that continues for another month. And it basically says that the labor market's been flat to slightly negative, which lines up with the slowing population growth that we've seen in Canada since we've lowered our immigration targets. Are there parts of the economy, if you take a look at the jobs, Angela, are there parts of the economy that are doing well? Well, of course. I mean, if you're in the commodities business, if you're in Alberta and you're producing oil, you're doing really well. And I mean, I haven't seen the numbers, but I'm sure there's still huge demand for things like health care and those kinds of government services. Armin, you wrote in the Toronto Star in April. These are your words. A Canadian recession is inevitable. The question is, and the only question, is how long it will last and how deep it will cut. How do you understand the mixed bag of economic signals? that I've just run through with our previous two guests.

Look, you can't be a country that is next door to the chief agent of change and not be expecting this kind of an impact. We have been looking at uncertainty since Liberation Day. So the April that you are referring to was last April. I haven't written for the star for a while. And in fact, I was surprised that we didn't have a recession in 2025. Good for us. You know why we didn't have a recession in 2025? We measure it in dollars and cents, and we exported, we lost about $31 billion in customs trade with the United States. We made about most of that back up by selling more gold to the United Kingdom. So yeah, you can make up for it. In fact, we're selling more gold in the first quarter of 2026 than we were in at the same, like double the pace of 2025. same thing though in terms of oil and gas. We're actually shipping less to the United States. They're more independent. They're pulling more out of their inventories. That story is going to change. We are running out of runway on oil and gas. And that has been one of the biggest slowdowns for economies around the world. And so, you know, now with the Houthis in the Strait of Hormuz, we can expect to see more disruption in terms of one of those basic inputs in the way the economy.

of the world work. You know, we may dismiss that this is a technical recession, that it is a rounding error in GDP measures, but the economy has either slowed or fallen for three of the last four quarters. So we are looking at only headwinds to come. Just one of the points that I think Charles made about household spending is that household spending has been one of the only sources of growth in GDP, but wages are slowing, and we are now looking at the highest number of insolvencies

since 2009 in the first quarter of this year. So we're not in good shape going forward. I was going to mention the insolvencies, also the statistic that's come out that something like 40% of Canadians fear job loss in their household or in their family. How do you characterize how Canadians broadly are feeling? Again, individuals, you know, may have different experiences,

in this, but broadly, how do you think we as Canadians are feeling in this moment, Armeen? Well, I'm not going to speculate. I'm going to tell you what Lejeet found when they were working with the United Way of Canada, and they found that 89% of Canadian households in the spring of 2026 felt a great deal of financial insecurity, and 46% of them said that they didn't think they could cover all of their bills by the end of the month if they lost their job that month. So the Prime Minister was asked about the GDP numbers last week. Here is a little bit of what Mark Carney said. This government's been in the process of laying the foundations for a stronger, more resilient,

more independent Canadian economy. That process is settling in during that time as we make major investments, major changes to how the government operates, how we do major projects, how we have new trade agreements with other countries. As we do all that, the... the data is going to be uneven. The data is going to be uneven. Charles, do you buy what the prime minister says?

Yes, because a lot of what the plan is, is that all those investments will only come to fruition or have a deep positive impact on the economy with a certain lack. It's not something that will be instant. So between now and when we start to see the positive impact of all those investments, it will take time. And until then, we'll still have a lot of volatility. will still have the kind of, in some ways, environment we have now.

And I think we also need to take into account this significant change we've had in terms of demography just over the past two and a half years is quite significant. We used to have population growth at a bit more than 3% back in mid-20204. Now it's slightly negative. That's a really big support for your growth that's disappeared or completely evaporated. in about two years. And that reduced dramatically the potential growth for the Canadian economy, which is basically our speed limit.

It's not very dangerously close to zero. So it doesn't take much underperformance to fall into negative growth in that context. But if the prime minister says this is going to take time to resolve, I think a lot of Canadians are asking how long is this pain going to go on? You have grocery prices that are soaring. You have gas prices that are soaring. To our means point, you have people wonder. whether they're going to be able to pay the bills at the end of the month if they lose their job.

So, Charles, when can Canadians expect relief in this moment? That's where it's very complicated in this situation, is that there is no quick fix. There is, but it's just superficial fix because the problem of the Canadian economy right now are structural. We have been lagging in terms of productivity growth for decades now, and it's showing up, in our income growth. For example, the average Canadian has only gained one percentage point in a personal disposable income per person compared to where it was in 2019. Only 1%.

We should be easily 10% above where we are now. And affordability is as much an issue of higher prices as it is right now of very weak in income growth. And that has been one of the major problem from households right now is that income is no longer growing at what we used to be. It's about a full percentage point lower now over the past 10 years than it was between 95 and 26 and 2015. So on 10 years, again, it's a loss of 10% in purchasing power over the past decade.

And that is the longer it lasts, the more you start to be behind. We'll be right back with more of the current podcast. Imagine you've been charged with a crime and the only witness pointing the finger at you isn't even human. I remember thinking, are you serious? What is this thing? It's something artificial, created by a mysterious Canadian. And it's coming for all of us.

A life-defining technology. Crime as we know it will never be the same. I'm like, oh my God, he's lying. From CBC's Uncover, The Expert Witness. Available now on CBC Listen, or wherever, you get your podcasts. Angelo, Armin talked about living next to the agent of change, which some people might see as an agent of chaos when it comes to the global economy.

How much of this has to do what we're going through right now, Angela? How much of this has to do with the tariffs and the economic disruption with the United States? Well, I think the uncertainty that Donald Trump has created, our Canadian business, has really hurt our investment. I was pleased to see that in the quarter one figures, machinery and equipment investment picked up. That's usually a good predictor of subsequent economic growth and productivity improvements.

But it's, as I said, one quarter. Overall, though, the investment environment in Canada has to be very reserved. People don't know how the uncertainty is going to be resolved, and until it's resolved, they're going to be very reluctant to take important investments in interest. in the Canadian economy. And while that's going on,

it's difficult to grow. It's difficult to improve productivity and do all those other things. So, yeah, I think Donald Trump's economic policies and in particular the renegotiation of the Kuzma Agreement are really hanging over the Canadian economy

and hurting it. So, I mean, Mark Carney in part, large part, presumably, was hired as prime minister because people believe that he, in this moment, was the man to address the situation. That his background, his CV is in finance, in dealing with moments like this.

He has been traveling the world to try to connect this country with new nations in terms of trade deals. He's off to France and Ireland in advance with the G7 later on this week. What is that going to do to address the moment that we're in right now, do you think? Well, I think he has to be doing what he's doing because we are looking, as both of my colleagues have been saying, we are looking at the potential for a massive wave of disinvestment because of all of the uncertainty and the degree to which foreign investors own our major productive capacities, except for in the oil patch, which is primarily Canadian-owned. When you say disinvestment, you mean companies that because of what's happening with the United States

will not put money in here, perhaps might put it down south, or at least just hold off while this moment continues. Or maybe actually close up shop if they can't sell at good rates to the United States. To Angela's point, Kuzma's coming. And, you know, the guy loves to tear up. everything that he has ever seen and say he's making it better, which usually is not the case. So if Kuzma gets torn up, a large reason for some of these aluminum producers, steel producers, car producers might disappear for actually being located in Canada.

So we don't know what's happening, but you can only not invest for so long before you start losing money. We have been shipping far fewer autos to the United States in the first quarter of 2026 than we did in all of 2025. We're shipping less oil and gas there. What we are shipping more of is gold. And that's, you know, I just came back from Berlin at a Berlin-Canada trade discussion. And what Europe wants is what the world wants is our raw materials. We are shipping more raw materials than manufactured goods. We are not moving up the value chain. And it's very, very problematic for the prime minister to move out there and say, yeah, we will, ship your rare earths that you want. But like what we keep doing through the major projects and through these kind of deals is subsidizing and socializing the risks of production and privatizing the profits. And I don't see any direction in which we are paying attention to the things that are really moving. Angelo mentioned that one of the biggest movers in the Canadian economy is the care economy, health care, social services, and education.

We are not investing in ourselves. We are waiting for others to come and invest in us. That's not going to play out well. How worried are you, Armin, about the fact that there's still two more years of this Trump administration, and there's no guarantee that whatever follows will be better for Canada than what we're in right now? Oh, I completely agree with you, Matt, that there is no guarantee that things will be better. There's a lot of writing on the wall that things will be worse, and we will get through it, Because we, as a people, have gotten through much, much worse in the past.

What can governments do to help us get through it? Well, I think we could be investing much more in ourselves, not just in companies that want to invest in us. Because that's an own goal when we don't invest in our own selves. Like right now, you had an item talking about the opioid crisis that's coming up. We have got a crisis in care across this country, not just for drug users, but for people that are waiting for surgeries, people waiting to get their parents into long-term care, people waiting to find child care for their kids. This is an own goal for our own productivity. You want productivity and growth to improve.

Don't drag productivity growth by not providing the care people need. That's something we can do for ourselves. Why aren't we doing it? Charles, what can Canadians expect in the coming months, do you think, and into the next year? One of the reasons why we wanted to have this conversation now, outside of whether this is or is not a technical recession or not, It's just because people feel pinched. People feel uncertain and they don't know what the next few months are going to look like. What would you say to them?

Yeah, well, I think it's more of the same, at least in the short term. I think the uncertainty from the Kuzma renegotiation and renewal will continue to hang on businesses, continued uncertainty on the job front, whether it is from threat of from AI, threat of economic activity not being relatively strong. We're going to continue to see still some, we're going to see some improvement in purchasing power, still remain very marginal. So what we've been seeing where households have felt uncertain about their future will continue,

where I'm more optimistic is that I'm seeing at least more and more understanding at the policy side of what has been our problem. in Canada over the past few decades is that we've been. In some ways, what we're seeing right now is that all the disruption we've seen are actually bringing to front all our issues that have accumulated over the past 30 years. Our constant lack of investment, whether it's business investment for our productivity, whether it's investment or economy to be more prepared for disruption. And that's just coming up and really boiling up to the surface and showing

a lot of our issues, but at least we're seeing policymakers that are understanding what's going on. The problem is really the fix is not going to be quick. And we'll probably require some sacrifices from the general population to understand that, yes, it might be hard in the short term, but we'll be better off in the long term. Angelo, briefly, look into your crystal ball and tell us what we have in the next few months ahead. I'm a deer in the headlights, so I can't tell what's going to happen. You and me both. Would you, is there, I mean, it's uncertainty. Is that, that's what it is?

You know, the, the, the Kuzma thing is a really big deal in the, and it's staring at us, you know, where it's imminent now, that, that deal has to be renegotiated. If it's not, we'll have uncertainty for quite a long time, as the deal is renegotiated every year until, I guess, someone changes their mind. And then, as, as was pointed out, AI's coming. And that's also a big deal. I mean, right now it's sort of pie in the sky, but, you know, I've just been watching in my own, you know, research ability what AI has been able to accomplish within the last six months. And I'm amazed. And so this is going to be a real game changer. I mean, you know, the Internet was a real game changer. AI is going to be a real game changer. There's going to be a lot of jobs disappearing, jobs being created, a lot of churn in the near future. I mean, last minute to you, looking into your crystal ball. What do we have? to look forward to if we're looking forward to anything?

Right. I mean, I chalked me up for number three in uncertainty and the deer being caught in the headlights. But I guess what we can look forward to, guaranteed, is very rich discussions about what is an economy for and who is it for? Because that's the moment we are in. And all the shibolists we've been living with since free trade began with Margaret Thatcher and Ronald Reagan in 1980. and our free trade agreement in 1988, that whole world of growth based on exports has been turned on its head,

and so has the world of more markets less government. We are now, because of population, aging and falling birth rates, into a brand new type of world order that is going to require more of us pulling for each other. And whether we do that or not, is a test for each one of us. Really good to talk to you all about this.

This is bracing, but important. Thank you very much. Thank you. Thank you. Charles Lennan is Chief Economist at Service Credit Union in Calgary. Armenian-Nizian is the Atkinson fellow on the future of workers.

She was in Ottawa, and Angela Molino is a professor of economics at the University of Toronto and a fellow at the C.D. Howe Institute. He was in Toronto as well. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening.

I'll talk to you soon. For more CBC podcasts, go to cbc.ca.ca.