Canada’s Economic Balancing Act: Avoiding Recession Isn’t the Same as Thriving

As Canada teeters on the edge of a recession, a new report from the OECD paints a sobering picture of our economy’s near future. While we may narrowly sidestep the technical definition of a recession — two consecutive quarters of contraction — it’s a thin victory at best. Avoiding recession by a fraction of a percent doesn’t mean Canadians will be spared from the real-world consequences of a slowing economy, stagnant wages, and rising unemployment.

The OECD’s latest economic survey lays bare the challenges: falling per capita GDP, deteriorating housing affordability, sluggish productivity in the business sector, and insufficient progress on adapting to climate change. And hovering over all of this is the continued fallout from the U.S. trade war — a major headwind that shows no sign of letting up.

In fact, the numbers tell a clear story. Canada’s economic growth for 2025 is forecast to hover at a meagre 1%, with the second quarter tipped into contraction and no real growth expected through the third and fourth quarters. That’s dangerously close to recession territory. Meanwhile, unemployment, already creeping up to 6.9% in April, is expected to rise to 7.1% this year and 7.3% by 2026. For many Canadians, especially those in trade-exposed industries, the job market will feel a lot worse than what national figures suggest.

But here’s the kicker: these struggles aren’t entirely new. The OECD rightly points out that Canada’s economic vulnerabilities go deeper than trade tensions with our southern neighbor. For too long, we’ve failed to address structural issues holding back our economy — especially productivity and interprovincial trade barriers. Our businesses aren’t investing enough in innovation, and we’ve allowed internal red tape between provinces to stifle the kind of growth that could help cushion the blow of international shocks.

The report makes a compelling case for finally tackling these issues. Removing interprovincial trade barriers could unlock new opportunities across the country, allowing us to become less dependent on U.S. markets. It’s a solution that not only makes economic sense, but one that Prime Minister Mark Carney has already hinted at through his “One Canadian Economy” initiative. Appointing Dominic LeBlanc to lead negotiations with provinces is a start — but it can’t be just another political gesture. We need real progress, not platitudes.

Then there’s the issue of per capita GDP, which reveals how little economic growth is translating into better living standards. While Canada may have bounced back quickly from the pandemic in terms of total GDP, individual Canadians aren’t necessarily feeling it. The influx of population post-pandemic helped grow the labor force, but the investment in productivity didn’t keep up. In other words, more people are working, but they’re producing less value per person. That’s a red flag, not just for our economy, but for our social cohesion.

The OECD also calls attention to the lower productivity of recent immigrants, particularly non-permanent residents in low-skilled jobs. This is a sensitive topic, but one that deserves honest discussion. If we want immigration to continue being an economic engine, we need to ensure newcomers are matched with opportunities that tap into their full potential — not just low-wage work with limited upward mobility.

All of this points to a crucial reality: narrowly dodging a recession is not a sign of economic health. If anything, it’s a warning that we’re running out of road. If Canada wants to emerge from this period stronger, we can’t afford to simply react to external shocks. We need to take this moment to fix what’s broken at home.

Let’s use this brush with recession as a wake-up call. Because “not quite a recession” still means real pain for too many Canadians. And that’s not good enough.