The Current - What’s ahead for Canada's economy and your wallet in 2026.

Episode Date: January 5, 2026

As Canada moves into 2026, a lot of people are feeling unsure about the economy. After a year of trade tensions, job worries, and high living costs, many Canadians are asking: what happens next? And how does it affect my money? We break down what’s shaping Canada’s economy in 2026, from uncertainty in trade with the U.S. to longer-term challenges around growth and productivity. We’re joined by Pedro Antunes, Chief Economist at the Conference Board of Canada and Shannon Lee Simmons, financial planner and founder of the New School of Finance.

Viking. Committed to exploring the world in comfort. Journey through the heart of Europe on a Viking longship with thoughtful service and cultural enrichment, on board and on shore. Learn more at viking.com. This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. If the economy feels frustrating to you right now, you are not alone. A lot happened last year. we navigated, you need a deep breath before you say all this kind of stuff, a trade war, high unemployment rates, unsteady living costs, threats to our sovereignty from housing and jobs to investing in savings. A lot of Canadians are wondering what might come next. And so as we begin 2006, we are unpacking the big economic forces shaping the year ahead and what they might mean for your wallet. Pedro Antunas is the chief economist at the Conference Board of Canada. Shannon Lee Simmons is a financial planner and founder of the new school of finance. They both have

crystal balls and they're going to peer in them to predict the future. Good morning to you both and Happy New Year. Good morning. Good morning, Matt. It's hard. I mean, there are a lot of people who probably don't want to look back at the year that was because there was a lot that went on from tariffs to this 51st state talk. If you had to, we'll start with you, Shannon. If you had to give a letter grade to how well Canada's economy weathered all of that that we were thrown in 2025, What would that grade be? I think it'd be like a B plus. I think we did okay all things considered.

You know, the TSX outperformed the S&P 500 for the first time in like over a decade. That was pretty impressive. We had, that was mainly driven by, you know, gold prices and materials. That was awesome. We did have lower interest rates, which really helped to stabilize. We didn't have the mortgage cliff renewal crisis that we were anticipating happening with all the people that were renewing their mortgages because we had interest rates drop. We did have, I mean, consumer spending and debt is up, which is, you know, why we're not in an A plus situation. And also there was unemployment. And I think the uncertainty of that is going to continue. So I can't give it full marks. But I think all we had a very roller coaster of a year and all things considered on the personal finance front, I think people weathered it relatively well because there were certain supports in place.

Given everything, a B plus is all right. Pedro, what grade would you give up? us in terms of how we manage this? Yeah, well, I appreciate the kind of positive outlook on consumers, and it's true that consumer spending held up fairly well. Employment held up fairly well as well, and I think that's part of the answer to that, and inflation was down. So on the consumer front, it was not a bad year, and we did weather the tariffs. And I think really the entire world, including the U.S., weathered the tariffs a little better

than expected because in fact, the tariffs, there was more bark than bite to the tariffs here, in fact, a lot lower than we would expect. And so that's part of the reason I think that we didn't get hammered quite as hard as we initially thought. Where I would urge some prudence here in terms of the performance is really on the business investment side of things. And, you know, we keep talking about our productivity performance and our productivity performance is really related to the amount of physical productive capital that we have per worker. And if we look at that metric, that is a disaster in Canada. We've not seen investment do well at all across the board, private investment outside

of residential, I should say. And I think that's an ongoing concern. So overall, GDP growth was, you know, we figure just under 2%. 2% is kind of a normal pace. Employment growth for 2025 was held up fairly well. you know, just a little below normal as well. But as we look ahead, we're not expecting to see a better performance next year, I'm afraid. This sounds like a B minus maybe or something like that.

Perhaps, yes. Pedro, you mentioned the tariffs and the fact that, I mean, you said they were more bark than bite, but people are feeling the bite and people are worried that the bark could get louder if I can keep that metaphor running. What are you seeing from the federal government that is working to counter the impact and the threat of tariffs? Well, to be honest, not a whole lot yet. We need some sort of certainty around where the tariffs are going to be settled.

We have the Kusma renegotiation coming up this year. We failed to get a deal prior to that. So I think it's that uncertainty really that is holding back investment. I mean, you know, private investment, the business world out there is just sitting on its hands as to, you know, what to do. Will we have access to the U.S. consumer? Where will we sit in terms of this tariff war? And I think that has been the biggest issue. I would say that we've done some positive things in terms of trying to entice and encourage

business investment, especially in the resource sector in this country. There's some in the, you know, there's enough money in the budget to hopefully leverage and get investment going again, but that will take time. And so for the immediate future, I think we're still feeling this challenge, this really this challenge around uncertainty for the business sector. Shannon, there are specific sectors where people are being pinched because of tariffs. You think of steel, aluminum, the auto sector, canola as well. If you aren't specifically affected by those industries, you're not working or tied into the communities that are based in those industries,

what should Canadians be thinking about when it comes to how tariffs impact personal finance? Yeah, I think on the personal finance front, it's basically coming down to the cost of goods and what's going up and what's not. And do you spend money on it or do you wait? And so it's almost similarly to the business investment that Pedro was just speaking about. It's like personal investment. Do you do a home renovation and keep those people employed if the cost of goods has gone up? Do you buy that appliance? If that's gone up, do you buy a new car?

Like, it's a lot of waiting to see sort of what happens. What are you telling people? I mean, again, those are big decisions, but they're life decisions. They are. And the thing about personal finance that I find fascinating is that ultimately, what can you afford is really what it comes down to. instead of trying to time things, right? So I don't have a crystal ball. Don't tell anyone.

I don't. I wish I did. I wish I did. But we don't know exactly what's going to happen. We don't know where it's going to impact. And you can sit and wait for a period of time. But if your car breaks down or you need a new fridge or you need a thing, at some point, you're just going to have to do it. And so on the personal finance front, what I'm telling people is like, when there's uncertainty, which is what we're dealing with here.

I mean, I think that that's like the overall theme here when it comes to the tariffs. When there's uncertainty, the best thing that you can do is sort of stockpile a little bit of money on the side and an emergency account so that you have a little bit of extra and sort of look to those expenses cutback where you can sort of loosen the slack if there is any. So you can handle a bigger purchase if it comes to. Yes, if people are wanting to buy something that is right now exempt and they're worried that it may not be at the end of the renegotiations, then sure, that would be something to take a moment and say, okay, well, we know for now. certain. This is covered right now, but in the future, it may not be, if you have the money to do it. Go ahead. Peter, do we, we as Canadians, have any leverage against the United States and Donald Trump in the Kuzma review that's happening this summer? Well, I do think we have leverage. We have a lot of resources, especially, that the U.S. absolutely needs. And I think I've been saying this from the start. There just doesn't make sense at all for the U.S. to tariff resources, things like uranium, oil, natural gas and many of the minerals and inputs that the U.S. absolutely needs to keep their

production efficient. So they have put tariffs on specific products. I'm in fact surprised that the tariffs on aluminum are still there because aluminum, I mean, the U.S. just doesn't have the capacity to produce aluminum, the aluminum that it needs. So yes, I do think we have some leverage here. Of course, the trade flows are very much in our disfavor. When you look at how much we depend on the U.S. consumer, the big picture there is obviously very, very difficult for us. But I do think on the resource side, on the key critical minerals, we do have some pieces that we can leverage in this negotiation. We've spoken with people on this program, the Lentel King of Saskatchewan, for example, who have said that Canada has been complacent in its dependency on the United States when it comes to trade. Are you encouraged by what the prime minister has put forth in terms of trying to diversify our trade partners?

Yeah, I mean, I think it's just a natural thing that we've seen over the long, well, since 1994, certainly, our free trade agreement with the U.S. We've just, you know, essentially flowed to where the market is the biggest, where it's the closest, you know, it's an English-speaking nation. It's a close partner and close tie. So obviously trade has been grown very strongly with the U.S. just by that nature. So now we're in a situation where we do need to diversify. And I think we have seen some signs that we are being successful at that. do have free trade agreements with many other very developed, very large, very fast-growing parts of the world.

And I think there's essentially incentive on both sides. In fact, when you look at European countries, they want to do more with Canada. We want to do more with them. And that, you know, applies to many other parts of the world. So I think we can do more on diverse farting our trade. But again, that will take time. And to 2024, 76% of our trade was with the U.S., of our exports. Shannon, when you talk about the economy, it can sound large and above people's place in life until it impacts things that they go through every single day, including having a job, having a meaningful job, a job that will help pay the bills in many ways.

How do you see the level of employment in this country right now? Unemployment was at what, just above 7% in September? Yeah, I think I call them kitchen table issues, right? So things that you're talking about around the kitchen table. And sometimes the economic talk doesn't always translate there. With unemployment, I think it really is something to watch sector specific, right? So there's going to be sectors of growth. And this has always been true.

But if we're thinking about the short time coming up in the next year and where we're forecasted to go, really thinking about industries where you could be impacted. And I think this is a 2026 with unemployment is going to be an industry sector specific game. So when you're sitting there at your kitchen table worrying about, what you're hearing in the news or what you're hearing on the radio and thinking, is that one of my sectors? How am I impacted by that? What does that mean for my income? Is my income potentially going to be disrupted? And if the answer is yes, okay, there's almost like those quizzes that we used to have in the 90s and magazines, okay, yes, then go here and no, you go here. And if the answer is

no, okay, well, how could this impact other parts of my life? So or the other people in my life. And if you're a young person is really hard, I think they're being impacted. And if you're looking for jobs and you're looking for that meaningful employment being very strategic about where you're how you're going to school, where you're going to apply, all that kind of stuff. I do think that there's going to be jobs. And I think that we're going to have, you know, I don't think we're going to have skyrocketing unemployment in the next year, according to my crystal ball. But I do think that sectors could be hit harder than others, which is the name in the game right now. And so being careful about that. Viking committed to exploring the world in comfort, journey through the

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Watch the PWHL for free on CBCJM. Pedro, what sectors are you keeping an eye on when it comes to employment? We haven't talked about AI. There are companies that are using artificial intelligence to try to reduce costs and perhaps have fewer workers. Shannon mentioned young people graduating and not finding a job that they thought might be out there. And so what sectors are you keeping an eye on when it comes to employment levels? Yeah, I mean, there's an awful lot going on right now and just

alluded to a couple of things. But I would say, first of all, I'm in Ottawa here. So obviously where the public service is one where we're seeing cuts that are coming to bear from the announcements in the budget. That's a concern for the region here. When we look more broadly, those tariff hit sectors, they are seeing, you know, look at aluminum exports. They're down to half the value of they were, and we're seeing shutdowns in specific manufacturing industries related with those tariffs. Again, the overall tariff picture isn't as bad as we initially thought, but for those specific sectors, we are seeing the pain there. When we go to the AI piece, this is really interesting because if we take employment over the last number of years outside

of the public sector, in other words, outside of public administration, health, education, where has the growth been? It's been in professional, scientific, technical services, These are things like engineering, accounting, et cetera. And that's been a very, very strong piece of Canada's economy, employment growth, and our comparative advantage in that area. The challenge now is how is AI going to disrupt and affect some of those sectors? And I think we're seeing just the beginning of what might happen in terms of reducing employment demand in those segments.

So a lot going on. I think there will be a lot of disruptions. And I think the key for the future is retrain. and be, you know, flexible in retraining, re-skilling for the workforce that's changing. Shannon, I mentioned AI, and there was dramatic music that came out of your mouth. Tell me why. I think this is, on the personal finance front, this is what I hear, my clients are the most afraid of this. The web, AI, taking their jobs.

And structural unemployment. Yeah, and that will I have to reskill this kind of thing? Do I need to hold more in my emergency account? What happens if there's a bubble bursting? How does that impact my portfolio? all of those questions. So that to me is where I have a lot of the, that's where a lot of the uncertainty in the personal finance front I find the conversation happening. As far as, which I completely agree with the being flexible, re-skilling and really paying attention to

what sectors are growing, which ones are potentially more volatile going forward, and making yourself able to pivot within those on the personal finance front. Number two, one of the things, and this is for across the board, I think when we're facing uncertain times, your best sort of defense or your best offense is a good defense. And that comes down to diversification. And we can take that across the board. So number one, are you diversified in your skill set? Or are you able to pivot? Number two, are you? This is hard to do. So I say this and I know people are going to eye roll. But are there ways that you can look at your household and say, like, can I diversify revenue streams here? So if me and my partner are both in this one sector specific thing, we're

very exposed. Is there something else that we could do? Like what? Like just that that comes down to the re-skilling piece, right? Or is there even thinking, and I think even having people start to think about their income as a resource, which is like something that you do when you sort of take a step back from your day-to-day life and say, are we really exposed here to one specific sector that could be more volatile than others? And I think, is there any way that we could diversify that over the next few years who would want to do it how do we do that or even doing that for yourself if you're in a single income home so diversifying that and then obviously in your investment portfolio as well so again for me the answer for 2026 is you know if there's volatility

diversification across all the across the board for yourself is how to protect yourself one of the big concerns and it's this kitchen table concerns that uh shannon was talking about pedro is housing what are you seeing when it comes to the housing market going into 2026 well it's interesting i i i'm I mean, I think certainly what we've seen over the last two years is a lot of money being poured into the housing sector, a lot of effort at building new homes. And in fact, what's happened is a supply constrained sector. In other words, we don't have the skill set and the workforce to be able to build all that housing. And so we saw this plummeting productivity decline in residential construction, specifically home residential. So, you know, I think so that's something to do with that too, right?

I'm sorry? Interest rates would have something to do with that as well, right? Well, interest rates were actually coming down through that period. I would argue that when we look at, you know, essentially mortgage rates, they really didn't come down as much, especially as most households favor these kind of five-year terms. So I think there's still challenges here on the financing costs, even going forward as a lot of renewals. Shannon mentioned this earlier, but a lot of renewals are still occurring in 26, 27. So challenges there. And right now, I think what's happening with housing markets is,

essentially the demographics are not favoring more home construction. And we've seen now an oversupply, especially in specific segments, condos and apartments in our key markets, Toronto, Vancouver, and some others. And that is actually causing a slump in housing prices, which in some ways is addressing perhaps some of that affordability challenge we've been talking about. Do you think that will get more people into the market? There have been a number of forecasts suggesting that the markets could soften housing market could soften further early into this year.

Will that allow somebody who has been priced out to be able to get into the market, do you think? Well, I think it comes down to a number of things. One is essentially if prices are slumping, people will take a wait and see attitude before they jump in. And so I think there's part of that actually causing this, you know, a continued decline in the market. But the demographics certainly aren't favorable right now. In fact, the population growth was negative in the last quarter. that's a, you know, a complete change from what we saw in 23, 24 when population growth has had almost tripled from what was normal.

So we are, and this is because of the immigration policy that the federal government has put in place. So, you know, I don't think that we're going to see, you know, a lot of housing activity. And when you look at mortgage rates, again, you know, even as the central bank has lowered short-term rates, when we look at bond yields and longer-term rates, and those rates that households and businesses essentially are faced with, those haven't dropped nearly as much. So I think there's still some challenges here with affordability. Shadda, do you want to talk about housing?

Maybe even from the rental perspective. I think it's interesting, and Hitchell mentioned immigration policy. The immigration policy, particularly around international students, has impacted the rental market in many major cities, including Toronto, Vancouver, Halifax as well. Yeah, and I think this is one of those double-edged sword pieces where if you have a buyer's market or you have a slump in housing, you have people who might be able to or who are like really debating buying and that maybe that hope comes back for someone who might be a first-time home buyer. And also with rents, rent skyrocketed in some of the major urban centers. And this has been a huge source of pain for people because so much more of your after-tax income is going to rent. So it's all coming down to that supply and demand piece.

If we have less demand, then prices will come down. I don't, I'm going to say this carefully. There is an affordability crisis of housing. So as much as we may not see the same spurring on of housing activity on the grand scheme because of all those things that we're talking about, I do think that somebody who might be trying to save and get into the market or trying to get a rental space that they can afford, Um, this, if prices come down, that is helpful. That is helpful for those people. And I think that

I have a lot of conversations with first time home buyers who I think are looking at this buyer's market saying, oh, I can, I can breathe. It's not, it's not doubling in price every year. Whereas, you know, a few years ago, it was what's the point of trying? I'm never going to be able to do this. So I do feel like it's those, that slump has actually provided a little bit of hope. Um, and the condo market specifically is really coming down. And that has been an opportunity as well. I've also seen a lot of baby boomers downsizing into condos that they thought would, what's the point of downsizing? Because I can't buy anything. And now the condos have been actually more affordable than before. So we're out of time. One of the things that drives people crazy about

larger economic kind of movements is it feels like it's out of their control. They have no control in this. So what is just very briefly one word of advice that you would give people when to come to how to think about the year ahead. Shannon? Diversify everything. So don't put all your eggs in any basket, whether it's from your income stream, whether it's your investment portfolio, really thinking outside the box about how your house runs like a little micro economy. Pedro, briefly, one word of advice to people who feel like this is all out of their control and they're just being tossed around in this economic sea. Well, I would just say again, I think President Trump needs us.

Perhaps he's not showing that, but he needs trade with Canada. So hope is the word I would say, hope that we get a trade deal. It's good to talk to you both about this. Thank you very much. Thank you. Thank you very much. Pedro Antunas is Chief Economist at the Conference Board of Canada. Shannon Lee Simmons is a financial planner and founder of the new school of finance. It is a new year.

How are you feeling going into 2026? You can let us know. Email us the current at cbc.ca.ca. For more CBC podcasts, go to cbc.ca.ca slash podcasts.