That uncertainty-induced hiring pause — largely a product of unclear US trade policy — has potentially long-term negative impacts on the Canadian economy in Dewan’s view. For one, he notes that this underemployed cohort of 15 to 24 year old’s could be missing out on incredibly valuable work experience in their formative years, resulting in poorer career performance in later years and limited ability to grow in the job market. Dewan notes, too, that the average duration of unemployment has risen from around 18 weeks to 22 weeks, a troubling rise that could see more job seekers discouraged.
Dewan ties some of the more worrying news on unemployment to other troubling metrics like a rise in credit card utilization among Canadians. He also highlights significant layoffs in a number of industries, especially in Ontario colleges where thousands have lost their work as a result in steep declines in the number of international students. He expects young people may also see their tuition costs increase as these institutions look to offset lost international student revenue.
A resolution to the uncertain state of affairs currently plaguing Canada’s labour market may rest on what happens in early August when a deadline for a US/Canada trade deal is hit. Clarity around tariffs and the return of USMCA trade negotiations should, in Dewan’s view, offer more guidance for businesses as to whether they can start hiring again. Sectoral tariffs on key exports to the US like aluminium and softwood lumber could also prove instructive, especially if the US pulls back on those tariffs to bring down the price of key imports. On the whole, Dewan expects more of a resolution to come “fairly soon.”
The Canadian Federal government has also striven to encourage growth and employment through initiatives like the dismantling of interprovincial trade barriers and the easier approval of large-scale projects. While Dewan expects those initiatives will have a positive impact on the economy, he notes that we will likely not see that in data until 2026.
Despite these significant economic overhangs, Dewan remains constructive on Canadian assets. Given Canadian equities’ tilt towards utilities, energy, and financials and those sectors’ value characteristics, Dewan sees greater room for performance relative to the US markets’ skew to growth. Even though those US growth names have been most closely associated with the rise of AI, Dewan argues that if this technology is really as transformative as many have claimed we should see AI driving value for companies in almost all industries, rather than in the concentrated tech sector. Moreover, markets tend to see through the valley and Dewan expects that better medium and longer-term outlooks should continue to drive Canadian asset performance in the future.
