recent deliberations<\/a> by the Bank of Canada\u2019s governing council, the CUSMA review was labelled a \u201csignificant risk\u201d to the Canadian economic outlook.<\/p>\nPolicymakers discussed both a worst-case scenario involving the dissolution of CUSMA and higher tariffs as well as a scenario where CUSMA negotiations are resolved and provide some stability for North American trade policy.<\/p>\n
No matter what the result, the uncertainty about CUSMA will continue to be a drag on business investment in Canada in 2026 until the negotiations are finished.<\/p>\n
One major question going into 2026 is whether an AI bubble in the stock market will prove to be a threat to global financial market stability.<\/p>\n
Mark Zandi, chief economist at Moody\u2019s Analytics, said there is a lot to be optimistic about when it comes to AI\u2019s impact on the broader U.S. economy, but he remains concerned about the level of debt taken on by big tech\u00a0companies.<\/p>\n
\u201cThere are the massive (over)investments being made in data centres and other AI infrastructure,\u201d he said in a post on X in early December. \u201cThere is the seemingly incestuous financial relationships between the big AI companies. And then there is the substantial increase in leverage at these companies.\u201d<\/p>\n
Zandi said bond issuance for the 10 largest AI companies will record US$120 billion this year, which dwarfs the amount of borrowing that was done during the dot-com bubble.<\/p>\n
\u201cIf they do fall short of investors\u2019 expectations and their stock prices suffer, their debts could quickly become a problem,\u201d he said in a post on X on Dec. 7. \u201cBorrowing by AI companies should be on the radar screen as a mounting potential threat to the financial system and broader economy.\u201d<\/p>\n
The Bank of Canada also outlined this problem in its last monetary policy report. As the U.S. economy has become heavily dependent on demand and investment in AI, policymakers warned that a significant reassessment of the potential of those investments could mean a sharp correction in the stock market.<\/p>\n
\u201cA correction could hurt consumer confidence in the United States and in many other countries, including in Canada,\u201d the report said. \u201cThis, in turn, could lead to a widespread economic downturn.\u201d<\/p>\n
There is no market turmoil yet, but there are signs that some of the overly optimistic AI trade is unwinding.<\/p>\n
Shares for Oracle Corp. were trading at US$197.99 as of Dec. 29, down from a high of US$328.33 in September, amid lower quarterly earnings than expected due to significant spending on data centres.<\/p>\n
Canada\u2019s job market was resilient in 2025 despite all the tariff uncertainty, with the jobless rate falling from its peak of 7.1 per cent in September to 6.5 per cent in November. The country added 181,000 jobs during that time period.<\/p>\n
However, economists say there is reason to be skeptical about the headline unemployment rate and there are signs of an increasingly weak job market.<\/p>\n
They say the R8 unemployment rate, which is Statistics Canada\u2019s broadest measure of labour underutilization and includes discouraged workers, those waiting for recall\/new jobs and involuntary part-timers, continues to hover near nine per cent. This is the highest it\u2019s been since September 2008, which was during the height of the global financial crisis.\u00a0<\/p>\n
The Bank of Canada has said the job market in trade-sensitive sectors remains weak and economy-wide hiring intentions continue to be subdued.<\/p>\n
\u201cJust in general, the trade situation is a looming risk for the Canadian economy, and that definitely filters into the labour market,\u201d Brendon Bernard, a senior economist at Indeed Canada, said. \u201cThe risks are more of a drag on growth in the longer term.\u201d<\/p>\n
He said the trade impact on the labour market could be less of an acute shock currently, but something that creeps into it over time.<\/p>\n
Job vacancies have continued to decline and the rate at which workers are switching jobs has also slowed in recent years. The introduction of AI is also having an impact on job growth, particularly for entry-level positions, which will be something to watch in 2026.<\/p>\n
\u201cWe are in a potentially new technological era where these higher-paying entry-level positions are the most vulnerable to AI automation,\u201d Bernard said. \u201cWe have seen the share of folks in their 20s working in those jobs slip a little bit in the past year.\u201d<\/p>\n
\u2022 Email: jgowling@postmedia.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The economy faces several headwinds in 2026. (Credit: Justin Tang) The Canadian economy faced a number of headwinds…\n","protected":false},"author":3,"featured_media":478661,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[2440,64,2147,60739,216816,70366,79,13790,12857,2437,216815,67,132,68],"class_list":{"0":"post-478660","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bank-of-canada","9":"tag-business","10":"tag-canada","11":"tag-canadian-economy","12":"tag-canadian-exporters","13":"tag-cusma","14":"tag-economy","15":"tag-international-trade","16":"tag-job-market","17":"tag-stock-market","18":"tag-trade-pact","19":"tag-united-states","20":"tag-unitedstates","21":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115805301265781436","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/478660","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=478660"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/478660\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/478661"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=478660"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=478660"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=478660"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}