Former Bank of Canada Governor Warns of Possible Recession

Former Bank of Canada governor Stephen Poloz has expressed serious concerns regarding the economic outlook for both Canada and the United States. In an interview with CTV’s Power Play on August 29, 2023, Poloz indicated that both economies are “sliding in the direction” of a potential recession, primarily driven by tariffs, geopolitical tensions, and widespread economic uncertainty.

Poloz described the current economic trajectory as “not a positive one,” noting that Canada’s labour market is already showing signs of distress. The country’s unemployment rate rose to 7.1 percent in August, with the economy losing 66,000 jobs during the month—the highest level of job loss since May 2016, excluding the pandemic period. Youth unemployment has also surged to 14.5 percent, which is double the national average. Poloz labeled this trend “quite worrying,” suggesting that the rise of artificial intelligence could be impacting entry-level job opportunities.

He stated, “We may be beginning to see the first concrete evidence that AI is having a wider impact on labour markets. It’s going to happen at that entry level. That’s where we’re going to see it first.”

Despite the troubling indicators, Poloz highlighted a silver lining in the form of steady consumer spending. He pointed out that retail sales have remained buoyant, as Canadians are opting for domestic vacations and purchasing local products. “Retail sales have stayed pretty buoyant, and I think none of us could have estimated that, but it’s the one positive in there, at least from a macro standpoint,” he remarked.

While the economic situation in the United States has not deteriorated to the same extent as in Canada, Poloz noted that there are signs of an impending downturn. He mentioned that both the housing and labour markets are struggling, although consumption spending has so far held steady. However, he cautioned that this could soon change.

“We all dreamed that perhaps that would cause the administration to maybe shift the ground a little bit, but I’m less convinced of that now,” Poloz said. He emphasized the need for businesses to prepare for the evolving economic landscape. “As businesses here, we need to get ready for this new structure or new world that is facing us,” he concluded.

For full details, the complete interview with Stephen Poloz is available on CTV Power Play.