Former Bank of Canada governor warns both Canada and the United States headed towards a recession

Former Bank of Canada governor Stephen Poloz on tariffs, economic risks, and what can help get growth back on track.

Former Bank of Canada governor Stephen Poloz is warning both Canada and the United States are headed towards a recession amid a backdrop of tariffs, geopolitical tensions and economic uncertainty.

In an interview with CTV’s Power Play with Vassy Kapelos on Tuesday, Poloz said the economic trajectory for both Canada and the United States is “not a positive one.”

“What we’ve got is two economies, actually, that are sliding, let’s say, not in recession, probably, but sliding in that direction,” he said.

The slowdown is visible in the labour market numbers, Poloz said. Canada’s unemployment rate jumped to 7.1 per cent in August as the economy shed 66,000 jobs for the month — its highest level since May 2016, excluding the pandemic period.

Youth unemployment has risen to 14.5 per cent, double the national rate, which Poloz called “quite worrying,” suggesting artificial intelligence may be having an influence.

“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,” he said.

Though Poloz said “fundamentally, the backbone of the economy is weakening,” he noted one bright light is consumption numbers, which have held steady due to Canadians vacationing domestically and buying Canadian 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 said.

While the United States has not felt the level of economic turmoil Canada has, Poloz said there are signs of an economic downturn, with housing and labour markets doing poorly. Consumption spending is holding up for now, he pointed out, but Poloz warned that would be the next to fall.

“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,” he said. “As businesses here, we need to get ready for this new structure or new world that is facing us.”

You can watch CTV Power Play’s full interview with former Bank of Canada governor Stephen Poloz at the top of this article.