‘Business investment should recover gradually’
After falling into a technical recession last week, things are about to look up for the Canadian economy, according to a report.
“GDP growth is expected to strengthen over 2026 and 2027, reaching 1.2% and 1.7% respectively, as the economy recovers from the 2025 trade‑related slowdown triggered by higher US tariffs,” the Organisation for Economic Co-operation and Development (OECD) said.
“Household consumption and government spending on defence and infrastructure will continue to underpin growth, while business investment should recover gradually.”
The 2026 projection aligns with the Bank of Canada's own full-year forecast of 1.2% growth, issued in its April 29 monetary policy statement, as HRD previously reported.
Meanwhile, economic growth has moderated in response to higher tariffs. According to OECD, real GDP contracted by 0.2% in the fourth quarter of 2025 following a 0.6% increase in the third quarter.
“The decline was driven primarily by a sharp rundown in inventories, while private consumption, government investment and net exports contributed positively to activity. Business investment showed a small increase after several quarters of decline,” according to the report.
Technical recession in context
The forecast follows confirmation that Canada had entered its first technical recession since 2020. Statistics Canada said real GDP contracted at an annualized rate of 0.1% in the first quarter of 2026, following a revised one per cent decline in the fourth quarter of 2025 — two consecutive quarters of negative growth, the most common definition of a technical recession, Global News noted.
The contraction was small. On a quarter-over-quarter basis, Global News reported, growth was essentially unchanged, with declines concentrated in October and March and flat or positive readings in the months between them.
For HR teams, the recession label matters less than the labour-market weakness beneath it. Full-time employment fell by 111,000 between January and April 2026, the unemployment rate reached 6.9% in April — a six-month high — and youth unemployment hit 14.3%. The private sector shed roughly 112,000 jobs over the same period, alongside about 8,700 public sector positions.
Labour market and outlook
The job losses have stemmed from weak hiring rather than mass layoffs. RBC senior economist Claire Fan characterized the environment as "low hire, low fire," with permanent layoffs declining even as job creation stalled, which means HR's central task in 2026 is justifying new hires amid employer caution rather than managing terminations.
The hardest-hit sectors have been government, finance and insurance, and education, while manufacturing and export-dependent industries face the sharpest pressure from ongoing U.S. trade uncertainty.
The OECD expects conditions to ease over time. Canada's status as a net energy exporter is expected to support export growth, while inflation should ease back toward the Bank of Canada's two per cent target, Global News reported. The OECD said monetary policy is "expected to stay unchanged in the near term," and Prime Minister Mark Carney acknowledged "some weakness" in the economy after the data landed.
