‘Big Job Losses Are Coming to Canada,’ Says TD Bank’s Chief Economist

Fears of a recession in Canada are rising, with more economists now saying that the country may already be entering one. TD Bank’s (TSE:TD) chief economist, Beata Caranci, says that President Trump’s tariff war has hurt business and consumer confidence in both the U.S. and Canada. But in Canada, the drop in sentiment is worse than what was seen during the pandemic. Indeed, over 20% of Canadians are worried about losing their jobs, and the CFIB barometer shows a steep drop in business confidence. However, Caranci notes that unlike the U.S., where the economy is still holding up despite low sentiment, Canada is seeing a strong link between fear and actual economic weakness.

In just two months, Canadian companies have cut 75,000 jobs, with half of those coming from manufacturing. Even worse, TD expects another 100,000 jobs could be lost by the third quarter, which would push the unemployment rate to 7.2%, or 1% higher than the bank’s earlier forecast. TD has also cut its GDP forecast and now predicts that the economy will shrink in the second and third quarters of this year. Other economists agree, with a Bloomberg survey showing an expected 1% annualized GDP decline in Q2 and 0.1% in Q3.

Despite the recession risks, Prime Minister Mark Carney’s government has decided to delay its budget until the fall but is moving ahead with a tax cut that will cost $5.6 billion per year, although it would only save average earners about $32. Unsurprisingly, Caranci argues that this won’t boost spending during uncertain times and says that the money would be better spent on targeted measures like green renovation tax credits or a temporary GST holiday. Without stronger action now, she warns that Canada could be firmly in a recession by September and make job losses even harder to reverse.

Is XIU a Good Stock to Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on the iShares S&P/TSX 60 Index ETF (TSE:XIU) stock based on 50 Buys, 10 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average XIU price target of C$43.11 per share implies 9.4% upside potential.

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