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Canada’s economy is slowing.

With higher borrowing costs and slowing credit growth inflicting serious pain on Canada’s spectacularly indebted private sector, the economy appears poised for a hard landing.

The direction of travel for residential investment is clearly down: after an early-2023 dead-cat bounce, prices and activity levels are subsiding across the country, and developers are moving to the sidelines. Energy prices are well off peak levels, and business confidence has fallen to post-pandemic lows. Per capita household consumption is falling as higher debt carrying costs eat into overall spending levels.

Perhaps most critically, the labour market is weakening, with vacancies down about a quarter from last year’s highs, and population growth outpacing demand for new workers. The three-month moving average level of unemployment is now 0.7 percentage points above its 12-month low – in the period since comparable modern data has been collected, the country has never avoided recession when this has happened.

Change in 3-Month Average Canadian Unemployment Rate Relative to Trough over Prior 12 Months, % Points

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