Host: Back in February 2025, Tiff Macklem, governor of the Bank of Canada, was set to give a speech. It was supposed to be about monetary policy, but then things changed dramatically.

While the new tariffs have not yet taken effect, the uncertainty around US trade policy is already affecting our economy. And if the United States starts a protracted trade war, the consequences could be severe. That was almost a year ago. So what kind of consequences have we seen, and what's the overall state of the Canadian economy? Then we take a look at the factors driving Canada's high youth unemployment rate, which hit 13.3% in December. Why is it so hard to find a job right now? And what can be done to bring that number back down? And finally, this is our first week taping in our beautiful new studio. We take you behind the scenes to show you how it all came together and the people who made it happen. This is The Rundown.

Even people whose job is making predictions would probably have had a hard time predicting the events of 2025. We had trade wars, changing global alliances, political uncertainty, all things that have major effects on the health of a country's economy. I wanted to know how Canada's economy is dealing with all this and what could lie ahead. So I sat down for a talk with Dawn Desjardins, chief economist at Deloitte Canada. Dawn, thank you so much for having us. Are you doing?

I'm good. How are you?

I'm doing well. I want to start with a chart of Canadian economic growth. Over the past year, GDP contracted 1.8% in the second quarter, then bounced back. It was up 2.6% in quarter three. That's the last period for which we have data. But the forecast are positive for Q4 and right through the year. Can you tell us what are the main drivers of this? We'll call them modest expansion.

Well, in the near term, I think it's more a question of what's not really driving us, and that will be the consumer. The demographics for Canada have changed significantly over the last couple of years. And so when we think about what's happening in 2026, we're going to see an economy which isn't getting that talk, if you will, from that population growth. And so we think that in the near term anyway, it's probably going to be a situation where you have weak consumption activity, housing market activity. It's a bit mixed depending where you live. And so that two on net will be a bit of a positive. But again, not super quick. I think one of the big issues that we're confronting as we go through, at least the first part of our forecast, is what's happening on the business front. I mean, businesses are extraordinarily uncertain, and it makes sense because of what's happening in the global economy. So we haven't seen any business investment. And that's certainly played out in 2025. And we think in the early part of 2026, that's still going to be the case.

All right. With that being said, as you mentioned, net overall, we expect in 2026 a growth rate of 1.5%. Is that an optimistic number or pessimistic one, considering the challenges that you sort of laid out?

Well, I think when we look at that number, it doesn't look all that hot for the year. But I think we're looking at it as a year in two halves, meaning first half probably going to be feeling sluggish and soft. But as we round out 2026, we think there's lots of reasons to believe we're going to see stronger activity. First of all, interest rates we believe will remain low at 2.25%. That's much lower than the 5% of where we saw in mid 2024. So that will be good. And it's going to help consumers and it's going to help consumers, because we still have a lot of mortgages that are going to refinance this year. In 2021, when people took those mortgages, the rates were really low. Now it's not as low, but it certainly is a lot lower than what we saw when we had those high interest rates. So that's going to provide some relief. And remember, we've had lots of employment growth over the past few years. We've had lots of wage growth. So that's going to help those consumers navigate through this period.

The other and I hope this isn't a hopeful prediction, but we do have the Kuzma review excuse me in July. And there what we're consuming. And again this is a pretty big assumption for our forecast is that we will retain our access to the US market basically tariff free. Now it doesn't necessarily imply that lumber, steel, and aluminium finished autos may not see a lot of change there. So we baked that in. Not a lot of change. That means that those parts of the economy will remain pretty weak. But the other parts of the economy where we can actually export to the United States tariff free, and that can be up to 90, 95% of our exports. Those are really going to be areas where conceivably we might even have an advantage, because they're lower rate than other countries.

In 2025, we saw a number of headlines with the federal government in regards to spending a lot of spending, a lot of infrastructure. How much of the growth in 2025 and 2026 is a result of the additional spending by the federal government?

Yeah, 2025, some of it because we did see a significant increase in the defence side, mainly through wages and salaries. So that did give a bit of a lift. And as we go through the course of this year, you know, we're going to continue to see some spending now. Is it going to be an enormous lift. Probably not because all of these are big ticket items and it takes a while for that money to flow through. But having said that, on the margin definitely going to be the case. We think that the the investment side of government spending, not so much the consumption side, because we know there's going to be a lot of cuts to government workforce, for example. So we say that we will get a lift in 2026 from the government investment side. The other thing I guess I'd say is we're going to have a lot of other changes in policy that we think will be helpful for businesses who are looking to invest.

Like what?

Well, we're going to see and I mean, again, this is what our assumptions are elimination or at least a reduction in inter-provincial trade barriers. So that opens up for a lot of companies across the country, which is really quite amazing. We also think we're going to see some reduction in some of the regulation. You know, when we look at companies who are starting to invest, they're looking at big delays, lots of regulations, lots of red tape. Well, to the extent that we have a commitment from governments that they will reduce this, we think that's going to alleviate some pressure from the business side as well. So while it's not direct government spending per se, the alleviation of some of these, these real impediments, I think that's going to be good for the business side.

Staying on the spending side, the federal financial support is contributing to a federal deficit of $78 billion this year. There's a lot of risk that some would say economic risk that come with government spending this much money. When we talk about a year of lots of uncertainty, do you take that that notion that this is risky?

Not really. And the reason is because when we look at things like this, debt service costs as a percentage of our revenues. So nationally, you know, we have debt and we have deficits which are adding to that debt. But we also have rates that are lower. And so when we think about, okay, how much does it cost taxpayers to actually finance to pay the interest on that debt. So right now it's about $0.10 on a dollar of revenue. Now why does that sound okay. Because in the mid '90s that was $0.38. So you know we have done a lot of the hard work fiscally in the past. Now we're looking at an investment in our future. And so that's why I would say yeah those numbers are big. And they sound a bit scary given the current environment. But I do think that we need to do these things. We need to invest in our infrastructure. We need to help companies in terms of, you know, being able to put their money to work and feel that they are going to get a return on those investment. That's not going to take them decades.

Okay. I'm going to go back a little bit in time, not as far as you have, but the government has embarked on big spending twice recently. Pandemic don't have to look far. And now when we talk about our trade relationship with the US, in the case of the pandemic, though, inflation rose. Tell me why you do not expect that to be the case as the government embarks on higher spending this time around.

What were they spending on? Well, they were having to spend on supporting people. And we also had a situation where we had, you know, as we came out of the pandemic, we had huge demand, but we had no workers. And so companies had to pay up. So we saw wages rise significantly and as a result, that fuelled an increase in prices. So that is the type of spending it was. Now when we look to what's happening in the future, these are investment dollars and none of this is going to happen quickly. That is one of the things, you know, if we think about building a pipeline, building a port, that isn't going to happen very quickly. So it's a gradual increase in spending. So it's spending in a different way. I guess the other thing to think about is our supply chains and their so far we haven't seen a significant spike in cost, which, you know, Canadian companies are going to have to pass on to consumers. A lot of that again, reflects this idea that we are getting, you know, our goods to the US. So when we're importing them, we're not necessarily seeing that high, higher cost on our supply chains.

I want to talk again about interest rates a little bit. You don't think it's going to move at all from 2.25 for the rest of the year, but these are important, as you mentioned, and laid out for a lot of people with housing market, people who are looking to enter into the market, people who are looking at renewing. But as you know, the market is softening in Canada. When we talk about housing, what are the main factors that are pressuring house prices right now across the country?

In terms of.

Towers, a bunch of condo towers. And those were a lot of investors were putting money in there. And we haven't seen that that flow continue. So we have seen a softening. Additionally, when we think about overall conditions in the housing market, a lot of affordability issues came up, right. We had seen prices move so significantly, especially during the pandemic, and so affordability pressures built up. Now, are they in a situation now where things are much more affordable? Well, perhaps in some markets, sure, but not in all markets. And so yes, we've got price corrections that have happened. We have lower interest rates. Those are, you know, good for affordability. But at this stage we also have that uncertainty quotient. And so consumers are like we're really nervous. You look at consumer confidence metrics. They're you know they're nervous. So are they going to really put a lot of money down to buy a home at this stage. Not necessarily.

Don't think this will persist. I mean, I think when we're looking at our forecast and looking at events that could change consumer and business confidence, it really is. I think we're heading into that period, that inflection point where we're going to have some more clarity on this relationship. It could be, you know, optimistic thinking, but and I don't think the agreement necessarily going to look exactly the same. But in the main, it is going to be that we will have access to our largest trading partner. And that will allay a lot of these concerns that both businesses and consumers have.

Let's talk jobs. At this moment of our conversation right now, we don't, unfortunately, have the Canadian job data for December, but we know that from September to November, Canada added just under 200, 180,000 jobs. What kind of jobs are these? Help us understand the demographics here.

Well, generally, I mean, we have seen some improvement in those industries that were very badly hit now, temporary, I think, but nonetheless, it did show. But they're at much lower levels. So in the manufacturing sector, for example, jobs tend to be created on the services side of the equation. But as we look going forward, what we're hearing from companies is that they're not looking to cut their workforce because a few things. One is that they know the demographics aren't going to be working for them, so we won't be having as many people come into the labour force. But at the same time, they're not looking to necessarily add. And that's what I think is keeping a consumers a little off balance. So when we're looking at the labour market, it does seem to be soft. We look at the vacancy rate. So how many jobs are out there for unemployed workers. That's come down considerably. As you may recall, during the post pandemic, millions of jobs that were out there, that's no longer the case. So the labour market does show some signs of being soft because businesses are nervous. And so they're not really investing in getting new workers. Now, if we are correct in our assumption about how businesses are going to be feeling as we even as we exit 2026, that suggests to us that we will start to see some employment gains, but we're probably going to have to sit tight with this soft labour market at least until mid-year.

When we talked about some of these big projects. You know, we talk about pipelines, we talk about you need skilled labour for that. We have a bit of a shortage in this country. Is that playing? Is that a concern at all?

Oh it is. We did a analysis recently saying, okay, what if everything goes according to plan. We have more houses built. We have all these projects get underway. What does that mean? What's what do we need to execute on that? And what we determined is that we probably need half a million more skilled workers. And so that's a challenge. And so with all of these big government programs, we agree that this is all necessary to put us into a stronger growth trajectory. But we have to consider that there is risk on the execution side. We need to get these workers into Canada. Do we have to tap underutilised groups in the economy? Sure, that could work. But we also have to consider that we may have to see immigration rise.

Time as well, that it takes time to train a skilled trades workers. Yeah. Compare to other provinces in terms of expected employment rates in 2026?

Well, Ontario, unfortunately, is sort of in the eye of the storm. You know, we're the manufacturing hub. So we are seeing a lot of pressure. And as I said, we haven't made any big assumptions about removal or at least reduction in the tariffs on the auto side as well as steel and aluminium. So that does suggest that Ontario is going to be continuing to lag. And when we look at where, you know, where do we send our exports south of the border. So yes, there's some things that are going to be business as usual, but others are going to continue to lag. Now, I guess the big fear, and this isn't something that we've seen so far, is that it ripples out into the services side of the economy. You know, when you see certain communities losing a lot of workers, what does that look like in terms of any kind of services they may be using? Now? We haven't seen that evidence of that yet. So it is something, though, that we have to be mindful of and keep on the risk side of the equation. But Ontario overall, I would say, you know, we're looking for more modest growth than the national average as we go through 2026.

All right. Let's talk about the money that is or isn't in our pockets. You point out that consumer spending contracted in quarter three of 2025, which is rare outside of a recession. Does that mean that personal saving rates is up? And or is it that people are simply tapped out?

We had seen huge savings, of course, during the pandemic, and they've come down and they have come down again. I think when we're looking at what people are spending on, you know, they're having to make these higher payments in terms of their mortgages. So that's certainly taking some of it away. We're probably not going to see as rapid wage growth as we move forward. So again, it means that people are going to be able to, we believe, service their mortgages because again that gap is come down. So that's good. And we're not looking for big job losses. So again that's good. But at the same time you know when you do have more going towards paying for your mortgage, for example, that does suggest that the savings rates are not necessarily going to rise significantly. Doesn't mean we're going to zero by any stretch, but it does suggest that it's not going to see the lofty levels we had been seeing.

I want to talk Canadian dollar. I feel like we don't talk about it that much these days, because it's been hanging around at a point that I think a lot of Canadians would love to see a bit higher. What do you expect the Canadian dollar to be at the end of 2026?

Well, our forecast right now is for about 74.5 cents. So that's $0.02 firmer than where we are today. And it reflects a view that we keep the Bank of Canada rate steady. Whereas in the US the Federal Reserve does actually lower their policy rate. I mean, the US economy has been extraordinarily resilient. It's amazing how well they've done lots of investment, of course, in artificial intelligence and technology. And that really has bolstered the US economy. But what we're seeing right now, I think, is evidence that the labour market in the US is softening a bit. We're seeing measures of confidence from the consumer side certainly soften. I mean, the US economy is a little bit different in terms of the consumer, because you see lots of spending from the very wealthy component and lots of people who aren't really that affluent, really having a difficult time with their spending. So when the fed looks at these things and they're not seeing inflation in the US is kind of steady, it's higher than they want, but it's kind of steady. So I think from the Fed's perspective they're now looking at the labour market. It's going it's a little soft. And when we know that a large portion of the population aren't doing as well as the people who are have lots of big investment portfolios, for example, that probably means they're going to need to address that through lower interest rates. Now, that doesn't mean they're going to move a lot, I don't think, in 2026, but it will be sufficient that it'll kind of bend that curve in favour of the Canadian dollar.

Talked about AI. Talk to me about what we see for AI in Canada. Here lots of we have an AI minister federally. There's lots of investment there. What can we see from that?

Well, the one thing about AI in Canada is when you look at sort of the adoption rates by Canadian businesses, it has it's doubled. It's gone from 6 to 12, which is good. And Statistics Canada did a survey asking Canadian businesses. And that number I think is supposed to go up to 17, 18%. So that's good over the next 12 months. So that means that, you know, we can see more adoption and then how that translates into productivity gains in the delivery of goods and services. It's you know, it'll be interesting. We do believe that this will generate. Well, it's more how exactly is it going to play out. What's it going to mean. We don't necessarily mean think that we're going to see huge job losses. And we're not seeing that yet in the data either, really, because it's a tool to augment workers ability to produce goods and services. You know, one thing that I find always, like in such an interesting statistic is looking at how much a US company invests per worker and compare that to a Canadian company. And here the numbers are really staggering. For each dollar, the US company invests tools giving to their workers $0.52 here in Canada. So to the extent that Canadian businesses are going to invest in AI are going, I think that's going to be a good productivity lift because we need to provide our workers with the best tools and the best technology we can.

One last quick question for you, because I don't think we ask Chief Economist, is that this that often? What are you looking forward to in 2026?

What am I looking forward to? You know what, I'm looking forward to that moment where we are seeing optimism, because we're all a little bit tired of hearing, oh, it's uncertain. And oh my goodness, I don't know what's going on. I do think that we are sort of at that point where lots of things are happening. They're happening, but the blocks are building. We just need to get to that level where we can start to see. So I think for me, and I'll be watching this keenly, is just seeing that turn in terms of business sentiment.

Don, we're going to leave it there. Thank you so much. Really appreciate it. Thank you.

If you know someone aged 15 to 24 or are somewhat between 15 and 24, you probably know the job market is pretty grim. Why is it so hard for young people to get hired in this country right now? Unravels a deep Dixit breaks down the causes and effects of Canada's high youth unemployment rate.

It drives me nuts when I see young, healthy people and they'll call me up saying I can't find a job. I can assure you, if you look hard enough, you'll find a job.

That's easier said than done, because it's hard to find work in a sluggish economy. And if you're one of those young people between 15 and 24 struggling to land a job, you're far from alone. Over the last year, the youth unemployment rate has stayed above 10%. That's nearly double the unemployment rate of every other age group in the country. And this isn't just a short term problem beyond needing to afford to live, not finding work at the start of your career can have long lasting effects. You're more likely to miss out on building skills, growing professional networks, and moving up early in your career.

You got this, bro. Move up.

And even when young people do find work in a depressed economy, it's often at a lower salary. Research shows entering the workforce during periods like this can reduce annual earnings up to 9%, losses that can take as long as a decade to recover. So how do we end up with such high youth unemployment? It's the result of several overlapping pressures. Economic uncertainty and trade tensions have made businesses slower to hire, and when jobs are available, young workers are often competing with more experienced employees who may have lost theirs. At the same time, the number of entry level positions has declined, a shift that many economists linked to automation and AI. High immigration levels over the past several years have also increased competition for those entry level jobs, even as immigration continues to support overall economic growth. We've seen youth unemployment reach similar levels before. During the pandemic, after the 2009 financial crisis, and in the mid '90s, all periods of economic recession. Even though Canada isn't technically in one right now. So how do we get out of this? Some of it depends on policy, and that process has already started. The federal government has reduced immigration targets. The Bank of Canada has lowered interest rates, and domestic spending has picked up in sectors like travel, restaurants and live entertainment industries, where young people often find work. But these measures take time. It's not going to happen overnight. In the meantime, young people are being asked to navigate a weak job market and absorb the long term consequences of an economy they didn't create.

I love our new couch, our new floor, and our new floor to ceiling bookcase. I appreciate so much about this new studio, including the people who put it together. Here's a look at what it took to build this beautiful space.

Sir. All right, so you probably noticed we are in a different setting. We've changed studios a couple of times. This is the location for our cold open. So every episode we start off here right in my office. We've got our books, we've got our camera operator there, Ricardo. And we introduce our topics and our headlines for the day. And we're still filming in a boardroom upstairs as our main studio. But we're hoping in the next couple of weeks that our studio on the main floor will be done and that will be our new home.

And then this guy goes on top and then. So we should have two of these. My name is Kathleen Black and I'm the senior set prop and wardrobe designer at TVO. And I'm the production designer on The Rundown. So I started designing sets. As in theatre, this is very different. Usually when you think of broadcast, you think big, shiny, new set. And in this case, I sort of thought about our host Jeyan and thought if we were in Jeyan's living room, what would it look like? And that started to pique my imagination of what the tone of the set would be within our studio. We needed to make room for The Rundown as well as a podcast space. Because we have a lot of video podcasts. We of course have Big, if True, which is another one of our broadcast shows, and then we also have a green screen in our studio, which is where kids and TVO learn often shoots. So we had to have a way to sort of mask that when we don't want to see it. Some of the key features are acoustic panelling. We didn't want to apologise that we're a studio, so we actually used them as a design feature. We have a big, beautiful bookshelf, a bit of a window feature and a single monitor which will look like a piece of art most times, and then you're going back and forth with the producers as well as your lighting designer and your construction team. I love going to the shelf because things are getting done. It is busy. There's sawdust flying, and it means that set pieces are coming to life.

I'm Polly-Jean Vernon, I'm the construction coordinator here at TV Ontario.

Yes, protected. You know what I mean? And then when and then. And we'll put it together here. We're on a very tight deadline, so we're working off-site while other people make the studio ready. We're doing lots of things at once. It's a lot and we're ready. We're up for it.

So when you go in there, everybody is working. Everyone has a task to do and they're often very different tasks. There's a paint team, there's carpentry teams. This is what we're doing. There's view of The Rundown set here, window curtain here and these beautiful studio doors. Shoutout our designer Kathleen Black. She is amazing.

So it's sort of like you're doing a renovation in your house and you're going from blank walls to something with personality and set design is finding what that personality is. We want our show to reflect you and what you care about. What issues would you like us to cover? What makes you tune in? Let us know! Feedback or leave us a comment on YouTube. Until then, we'll see you tomorrow.

Coming up on The Rundown.

When you have a trauma event, especially when it's a repetitive trauma event, especially when it's from people who are close to you caretakers, parents, and so on. It creates what I call a cascade event. You've ignited a whole set of biological events that cascade, causing an off trajectory development of your brain. Your brain is literally different at age 25 when compared to someone who's 25 who didn't have trauma. And we can trace it back to the effect of the abnormal stress response created by the trauma that saved you in the short term. You see stress, stress responses, Eric. They save us in the near term. They get us past the stressor, but they leave a bit of sort of friendly fire, so to speak.

That's tomorrow on The Rundown.