Is Canada entering
a new recession?

Recessions have long been considered political landmines for governments and banking institutions alike

By Simon Kronenfeld

October 20, 2022

Recessions, just like periods of economic growth, are part of the economic cycle – still, with rising inflation and continual Bank of Canada prime rate raises, talks of recession have only increased. So, the question is, is Canada entering a new recession? For experts such as Simon Kronenfeld, the answer to this question is not simple.

A growth recession means that the economy will continue to grow, but will not be a strong enough economy to provide jobs for all the new people entering the labour force. With weakened job growth, unemployment may sneak up a couple of percentage points over a short-term period.

Although a growth recession is not ideal, it is better than a full recession. A full recession would see Canadian Gross Domestic Product (GDP) dropping around 3% and unemployment around the country also rising above 3%. This kind of recession has not been seen since 2008, when GDP dropped four to five percent over several consecutive quarters and unemployment was well over three percent.

A full recession would see Canadian GDP dropping around 3% and unemployment around the country also rising above 3%.

Although not many financial experts think Canada is due for a full recession, there is undoubtedly still a risk. However, there is a possibility that Canada will enjoy what is called a soft landing.

A soft landing occurs when there is a gradual and relatively painless slowdown of the economy which can then be corrected in future quarters. This term has been used regularly, and depending on inflation and a few other factors, Canada’s economy could certainly be due for such a soft landing. However, it will inevitably come down to businesses being able to find labour and prices dropping over time.

Only time will tell if Canada does enter into a recession. As of yet, there have not been strict anti-recession moves made by the federal government, and with commodity, travel, and hospitality industries bouncing back, this could certainly be good news.

‘As of yet, there have not been strict anti-recession moves made by the federal government, and with commodity, travel, and hospitality industries bouncing back, this could certainly be good news.’

However, it must be noted that as Canada is uniquely connected to the manufacturing and commodities markets, their successes or failures will be the sword on which the country could die. The good news is that as of this year, both of these markets seem primed for success as long as the labour supply can keep up with demand.

When it comes to preparing for a potential recession, Simion Kronenfeld is someone who has the experience and expertise needed to build sustainable wealth that can handle recessions, growth, and even soft landings.