RBC economists say Canada’s economy could fall into a recession as early as the first quarter of next year, but they expect unemployment to be “less severe” than previous downturns.
In a new report, the economists say the downturn won’t hit households and businesses equally.
They say lower−income Canadians will likely be hit the hardest, as purchasing power falls and debt−servicing costs rise.
They say higher prices and interest rates will shave $3,000 off the average household’s purchasing power.
The manufacturing sector will likely be among the first sectors to pull back, while service sectors like travel and hospitality could prove more resilient.
The report says the jobless rate, which currently sits at 5.2 per cent, will near seven per cent.
Meantime, a KPMG survey has found Canada’s small and medium−sized businesses are banking on strong growth in the next three years, even as a possible economic downturn remains top of mind in the near term.
The survey of 503 small and medium−sized businesses says 83 per cent are feeling optimistic about their growth over the next few years, with 82 per cent saying they feel confident about their industry.
The survey says 61 per cent of small and medium−sized businesses have taken pre−emptive measures to mitigate what they see as short−term recessionary risks, from a short−term freeze on hiring to hitting the pause button on digital transformation plans.
The survey also says 77 per cent of small and medium−sized businesses intend to increase their headcount in the next three years to drive their growth plans, with 20 per cent expecting a hiring increase of at least 11 per cent in this period.
However, 56 per cent of small and medium−sized businesses agree it is difficult to recruit the talent of the future needed to transform their business, making hiring a top challenge over the next few years.
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