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Posthaste: Careful, there's another force out there working against Canada's economy

·4 min read

Good Morning!

A quickly cooling housing market, high household debt and the aggressive rate-hiking of the Bank of Canada have all raised the spectre of recession in recent months.

But Capital Economics says there’s another force that threatens to lower Canada’s growth and asks the question: “Will Canadians retire themselves into a recession?”

July’s employment numbers were a bit of “head scratcher” for economists recently when the economy shed 30,600 jobs instead of gaining 15,000 as expected. The employment drop followed a loss of 43,200 jobs in June, but the jobless rate stayed at the historically low 4.9% because the labour force had shrunk.

The surprise drop was partly because retirements surged to a record high, said Capital.

Retirements have been rising for years because of aging baby boomers, but the recent spike appears to have been because people had delayed retirement during the pandemic, where labour force participation for Canadians aged 55 to 64 rose well above pre-pandemic norms.

The economists at National Bank of Canada said 70% of the job losses in July were from workers aged 55 and over, with Statistics Canada reporting that a record 300,000 Canadians retired in the past year. “Unforced retirements, not layoffs, seem to be the main cause of the reduction,” said National.

While Capital economists don’t think retirements will rise much further, it also doesn’t think they will ease much from the current rate of 25,000 a month because the share of the population over 55 continues to rise.

Nor is there relief on the horizon from the younger generations. The participation rate of Canadians aged 25 to 54 surged to a record high during the pandemic but has since started to decline. According to UN projections, without immigration, the number of people aged 18 to 54 will drop by 100,000 or 0.5% every year.

Canada then will be reliant on immigration for labour force growth, said Capital economist Stephen Brown. But even that may fall short.

“Future waves should be more beneficial for the labour force but, if history is any guide, the government’s annual target of 450,000 new arrivals will still boost the labour force by only 26,000 per month, which would only marginally offset the likely number of retirees,” he wrote.

Capital now sees its employment growth forecasts of 0.6% in 2023 and 1.2% in 2024 at risk. The economy might get a boost if the hours worked per person and output per hour improved but with both of these declining lately that shouldn’t be counted on, said Brown.

“All this raises the downside risks to GDP, particularly if retirements increase any further,” he said.



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Ballard Power Systems Inc., the Vancouver-based maker of hydrogen fuel cells for use in trucks, trains and ships, got a boost on Friday when the U.S. Inflation Reduction Act was passed. The bill includes tax credits that could finally create a supply of clean hydrogen — a critical missing ingredient if companies such as Ballard hope to participate in the energy transition, writes the Financial Post’s Gabriel Friedman. As the illustration shows North America has a ways to go in developing hydrogen infrastructure.



  • Mary Ng, minister of international trade, export promotion, small business and economic development; and Francois-Philippe Champagne, minister of innovation, science and economic development, will meet with Tatiana Clouthier, Mexico secretary of economy, for the first Canada-Mexico High Level Economic Dialogue virtual event

  • Premier Jason Kenney will share details about the Government of Alberta’s new talent recruitment campaign that will target Toronto and Vancouver

  • The Association of Municipalities of Ontario’s 2022 AMO conference

  • Benoit Charette, Quebec minister of the environment and the fight against climate change, will make several announcements about the environmental requirements the government is proposing to impose on Glencore’s Horne smelter

  • Bank of Canada releases Senior Loan Officer Survey

  • Today’s Data: Canadian existing home sales, manufacturing sales and wholesale trade






Another sign of Alberta’s economic strength came recently when the province’s unemployment rate fell slightly below the national average to 4.8%. BMO senior economist Robert Kavcic gives four reasons for a relatively strong outlook. First, Alberta relies heavily on oil and right now that is a blessing, driving up income and government revenues. Second, people are moving to the province. Three, the housing market is unique, coming into the pandemic boom with attractive valuations and avoiding the excesses of other provinces like Ontario.

“All told, the swing in the jobless rate highlights what we believe to be prolonged outperformance by Alberta, barring another collapse in oil,” wrote Kavcic.


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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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