Bank of Canada warns Canada’s economy is at a crossroads — why tariffs, AI and slower growth will reshape jobs and affordability

“This is not a temporary cyclical fluctuation,” Macklem said (1). “These are deep structural changes that are transforming the economic landscape.”

While much of the speech focused on macroeconomic forces, its implications for everyday Canadians are significant — and in some cases, uncomfortable.

Key takeaways for Canadians

• Canada’s economy is changing in ways that won’t reverse. U.S. protectionism, artificial intelligence and slower population growth are permanent shifts — not a short-term slowdown.
• Economic growth will be modest for years, not months. The Bank of Canada expects GDP growth of about 1.25% through 2027 as the economy restructures.
• Inflation may stay near 2%, but affordability pressures will linger. Tariffs and trade disruptions are raising costs even as weak demand keeps headline inflation in check.
• Job risks will be uneven, not widespread. Workers in export-heavy sectors and entry-level roles face more pressure, while overall unemployment may stay relatively stable.
• AI is already affecting hiring — especially for young workers. Early evidence shows fewer entry-level jobs in occupations exposed to automation.
• Interest rates can’t fix structural problems. Monetary policy can smooth the transition, but it can’t restore lost trade efficiency or protect specific industries.
• Households and workers will need to adapt. Skill development, financial flexibility and realistic expectations about growth will matter more in this new economic phase.

Bank of Canada perspective: What isn’t obvious at first glance

Macklem’s presentation to the Economic Club of Canada focused on the current and potential impact of these macroeconomic shifts — changes that will have real and measurable effects on the budgets of Canadians.

No widespread job losses doesn’t mean job security

The Bank expects steady but slow economic expansion with average GDP growth of about 1.25% over the next two years. It’s an economic pace that Governor Macklem described as “soft.” Yet unemployment is not expected to surge. Why? In part because population and labour-force growth have slowed sharply.

“With little growth in the labour force, we are not expecting the unemployment rate to trend higher,” Macklem said (2).

This doesn’t mean Canadians shouldn’t expect job losses. Macklem pointed out that job conditions will diverge sharply by sector. For instance, workers in industries tied closely to U.S. exports — including manufacturing, transportation, energy and forestry — are already seeing weaker employment, while domestically oriented sectors remain more stable.

Impact on households: Economic pain will be concentrated, not evenly shared.

Inflation may stay near 2%, but affordability pressures won’t disappear

The Bank continues to project inflation near its 2% target, even as tariffs and supply-chain reconfiguration push costs higher.

As Macklem explained: Tariffs are “raising costs and reducing efficiency,” but weak demand is offsetting some of that pressure.

For Canadians, this explains a frustrating reality: inflation can look “under control” on paper while essentials still feel expensive. Structural changes lower the economy’s productive capacity — meaning slower income growth even when prices stabilize.

Impact on households: The cost of living will remain high with little to no reprieve in the near future.

AI is already reshaping entry-level work — especially for young Canadians

While AI’s productivity boost may take years to materialize, the labour-market effects are emerging now.

“It’s getting more difficult to find a job in occupations with a larger proportion of tasks that can be performed by AI,” Macklem said, citing early evidence of falling job-finding rates in AI-exposed roles (3).

Macklem also pointed out what BoC analysts have flagged:

• A decline in entry-level job vacancies
• Elevated long-term youth unemployment
• Growing demand for workers with AI-specific skills

For students and new graduates, this means traditional career on-ramps may be narrower — even if overall employment looks stable.

Impact on households: More competition for entry-level jobs, making it harder for younger generations to gain work experience.

Canada’s trade pivot will take years, not months

Canadian businesses are importing less from the United States and exporting slightly more to overseas markets, but the transition is slow and incomplete.

“So far, the increase is largely limited to existing clients — businesses have not found many new clients just yet,” Macklem said.

With the Canada–U.S.–Mexico Agreement (CUSMA) under review this year, trade uncertainty is expected to persist — weighing on investment and long-term planning for both businesses and workers.

Impact on households: With uncertainty in the macro economy, businesses are unlikely to invest in growth and this limits wage increases and job growth.

Tiff Macklem’s warning: There are no quick fixes

At its core, Macklem’s message was a warning against expecting quick fixes.