Deloitte forecasts short-lived recession in 2023, but says job losses shouldn’t be severe

Deloitte is calling for a recession by the end of next year, but says Canada's labour shortage and pandemic savings could cushion the blow for households.

A tight labour market and elevated savings during the pandemic will cushion the impact of a recession on Canadians, says a new report from Deloitte.

Deloitte’s most recent economic outlook report forecasts Canada will enter a short-lived recession by the end of the year.

The report says while rising interest rates will cause a significant economic slowdown, the accumulation of inventories will push the economy into a technical recession.

However, because the job market has been so tight, Deloitte chief economist Craig Alexander said unemployment might not rise as much as it typically would during a recession.

For Canadians, that’s what will matter most, he said.

“Nobody eats GDP. From a point of view of Canadians, what really matters is what happens to their jobs and their income,” Alexander said.

According to Deloitte’s forecast, the unemployment rate will tick up to six per cent in the third quarter of next year before falling again.

Canada’s unemployment rate was 5.4 per cent in August, up from a record-low of 4.9 per cent.