This week FP Video looks at what it takes to keep the pumps flowing at a local gas station in Alberta during a global energy crisis , whether the fortunes of Canada’s pipeline industry are at a turning point and why American citizens are flocking to Canadian real estate websites. Plus an economist fills us in on a possible labour crunch on the horizon as retirement numbers soar .

Running a gas station during an energy crisis

It might sound surprising, but this is not a good time for gas stations. When prices are high, it’s tougher to make a profit. So, how are they managing? Watch as FP Videos take you behind the counter at Gas King, a local station in Lethbridge, Alta., where fuel prices shape what people spend and how often they shop. Find out how this independent outfit keeps on truckin’.

Canada’s pipeline industry at a turning point?

Canada’s pipeline industry may be entering a new phase after years of delays and cancellations. South Bow’s proposed Prairie Connector line to the U.S., upgrades to Enbridge’s Mainline and possible Trans Mountain upgrades could add room for rising oil production. But industry insiders say timing will determine whether Canada avoids another pipeline crunch.

Americans’ interest in Canadian real estate is spiking

Phil Soper, president and chief executive at Royal LePage, talks to Financial Post’s Larysa Harapyn about why more Americans are scanning Canadian real estate sites during Donald Trump’s second term and how the real estate market is shaping up going into the summer.

Labour crunch looms for Canada

Nathan Janzen, assistant chief economist for Royal Bank of Canada, talks about the headwinds to come for the labour market as record numbers of Canadians retire.

• How 1.5 billion barrels of oil went up in smoke: FP Video explains
• Keystone XL pipeline rises from the grave and other oilpatch news

Canada’s jobless rate fell to 6.6 per cent in May as 88,000 positions were added into the economy, the first significant employment gain since November 2025, according to Statistics Canada’s labour force survey data released Friday.

Here’s what economists had to say about the latest data and what it means for the Bank of Canada’s future interest rate decisions.

‘Ends recession debate’: CPA Canada

The latest jobs numbers just about ends the recession debate, said Chartered Professional Accountants of Canada’s chief economist, David-Alexandre Brassard. The May report significantly beat expectations, bringing employment close to flat for 2026. The scale of job creation, particularly in full-time roles, points to improving economic conditions rather than a downturn, he said.

“This is a blockbuster report that seemingly wipes away recession fears and points to a rebound in the second quarter following two quarters of contraction,” said Brassard, noting that the gains were broad-based, driven by sectors outside the public sector and industries impacted by tariffs.

He said the report also shows easing wage pressure, as a surge of new jobs helps slow wage growth caused by earlier labour market tightness.

“That resilience comes as Canada looks ahead to the renewal of CUSMA,” he says. “We’re in a stronger position heading into these discussions, which is extremely important given ongoing global trade pressures.”

‘BoC to stay on sidelines next week’: TD Economics

TD Economics director and senior economist Andrew Hencic said the unemployment rate tumbling in May handily beat consensus expectations for a 10,000 gain, as employment gains outpaced labour supply. The labour force was little changed at 3,800, leaving the participation rate unchanged at 65 per cent.

“No bones about it, this is a solid report,” said Hencic. “However, this basically brings employment back to where it was in January, with an unemployment rate 0.1 percentage points higher.”

He said there continues to be a lot of noise in the Canadian economic data, including the “disappointing” surprise contraction in first quarter GDP. But with April’s flash GDP estimate signalling a 0.4 per cent monthly gain and now May’s labour force report, he continues to expect a second quarter bounce-back in activity.

He added that the economy is nonetheless operating below capacity, providing a disinflationary offset to the energy price shock. With this backdrop he expects the Bank of Canada to stay on the sidelines next week and keep its policy rate at 2.25 per cent.

‘Difficult to have much confidence’: Desjardins

Royce Mendes, Desjardins Economics managing director and head of macro strategy, was a bit more cautious. He said the labour market showed signs of life in May with a strong rebound in job creation, which largely reverses the losses observed earlier in the year and the level of employment now just shy of its December 2025 peak.

Yields across the Government of Canada curve are rising, led by the short end where traders are now pricing in between one and two rate hikes for the remainder of this year, he added.

“That said, given the volatility in the Labour Force Survey, it’s difficult to have much confidence in the signalling power of today’s reading,” said Mendes. “We continue to see downside risks for the Canadian economy both from fundamental weakness and trade negotiations.”

‘Welcome upside surprise but cautiously optimistic’: RBC Economics

Royal Bank of Canada assistant chief economist Nathan Janzen said May’s larger-than-expected increase in employment and drop in the unemployment rate is a welcome upside surprise, after the concerns around an unexpectedly soft GDP report for Q1 last week.

Still, the jump in employment in May was just the second increase in the last five months, he said, which still left the employment count slightly down year-to-date in 2026. He argued that a sharp slowing in population growth is distorting the historical comparison of employment growth, as around 26,000 workers retired per month over the last year, and caps on temporary resident arrivals are reducing the supply of workers available from abroad.

“Looking ahead, the economic growth backdrop still faces headwinds,” Jensen said, pointing to the trade uncertainty ahead of negotiations to extend CUSMA and higher energy prices cutting into household purchasing power. “But we remain cautiously optimistic that per-person economic growth and labour market conditions will continue to gradually improve this year, with the unemployment rate edging broadly lower,” he said.

‘The economy isn’t booming, but it isn’t falling apart, either’: BMO

Bank of Montreal’s managing director for Canadian rates and macro strategist, Benjamin Reitzes, said the employment surge in May should silence the recession crowd, with the economy hanging in there despite the headwinds from trade and energy prices.

“Just when you think Canada is crumbling amid a string of negative data points, things reverse,” Reitzes said. “We’ve seen this story a few times in the past year. The economy isn’t booming, but it isn’t falling apart, either.”

The May jobs data is “an unambiguously strong report… Canada continues to hold in,” he said, and it should somewhat ease Bank of Canada worries about the economy after the negative GDP print. Still, he said the back-to-back negative GDPs, lower oil and tame core CPI point to a less hawkish (Bank of Canada decision) next week than in April…though the shift will be less material than if the May report was weak.

‘Strength increases chance of rate hikes: Capital Economics

Capital Economics senior North American economist Ariane Curtis said the strength evident in Canada’s labour market increases the chance of rate hikes this year. She said the strong rebound in employment and the fall in the unemployment rate will provide some relief to the Bank of Canada that the economy is not in or on the verge of recession.

“While wage growth slowed, the strength in the labour market presents a risk to the view that the Bank of Canada will keep rates on hold this year,” she said.

‘Labour market watchers can breathe a sigh of relief’: Indeed Canada

Indeed Canada’s senior economist Brendon Bernard said May’s strong numbers are a good reminder of how a brewing trend in the labour force survey can reverse with just one data release. The slide in full-time job growth that started in February has reversed, and the 0.3-point drop in the unemployment rate almost brings it back to where it started the year.

However, this isn’t particularly good news, he said, as the challenges facing Canadian job seekers persist. The weak momentum that began the year was probably overstated, in part because the fourth quarter of 2025 was surprisingly strong, and now, he says, we’re back to baseline.

“Labour market watchers can breathe a sigh of relief. The employment situation showed a nice rebound in May, reversing a weak start to the year,” said Bernard. He noted that job postings on Indeed have been fairly steady over the past year, which suggests stable conditions in the broader labour market.

• Canada's unemployment rate drops to 6.6% as economy gains 88,000 jobs
• Matthew Lau: Keep out of Tim Hortons' hiring choices

‘Not the backdrop to even consider raising rates’: Rosenberg Research

David Watt of Rosenberg Research & Associates Inc. said that beyond the optimistic headlines, the economy is barely scraping by.

He said that most of the increase in full-time jobs came in the youth category, which jumped by 98,700 — a very rare occurence, and notable given the many stories about the employment challenges facing young Canadian workers. Watt doesn’t think those challenges are gone, and, given the saw-tooth pattern of data from the May report, expects the June jobs numbers might tell a different story.

“This is not the backdrop for a central bank to even consider raising rates,” he said. “Instead, it suggests keeping open the option that they might need to ease.”

Watt added that he thinks the sell-off in the two-year bond that lifted its yield to 2.90 per cent will be unwound as folks take a closer look at the report.

• Email: dpaglinawan@postmedia.com

Canada’s unemployment rate fell to 6.6 per cent in May and the economy added 88,000 jobs , the first significant employment gain since November 2025.

The increase was driven by an addition of 154,000 full-time positions, according to data published by Statistics Canada on Friday. Part-time work declined, recording a loss of 66,000 positions.

The increase followed a net decline of 112,000 jobs over the first four months of the year, including a loss of 18,000 jobs in April that had nudged the unemployment rate up to 6.9 per cent.

Job gains were led by the construction industry, which added 27,000 jobs, as well as information, culture and recreation sector, which added 19,000 jobs. Transportation and warehousing saw gains of 19,000 jobs, while the accommodation and food services industry added 17,000 jobs.

May’s numbers defied economists’ expectations for a modest improvement at best.

“This is far beyond expectations,” said Sal Guatieri, a senior economist and director at Bank of Montreal Capital Markets. “We were expecting a very modest rebound in employment after three months of job losses out of the past four months.”

Guatieri said that while May’s job gains didn’t fully offset the losses to begin the year, they did make a “good dent” in the decline.

“It suggests that Canadian businesses might be adjusting to the tariffs and the recent spike in fuel costs,” he said. “It’s just one month of data, but it does suggest, tentatively, that Canadian businesses are making that adjustment, and it certainly suggests that Canada’s economy has a little more momentum and vitality than was previously thought.”

Claire Fan, a senior economist at the Royal Bank of Canada, called the results “a good surprise” but warned against reading too much into a single month’s data, noting that a slowdown in population growth may have distorted May’s numbers because it lowers the “breakeven employment” rate — the pace of job creation needed to prevent unemployment from rising. A RBC article in January said that, when taking into account that population growth is at a standstill and the aging population, Canada’s breakeven rate is slightly negative.

That said, she noted that the three-month average unemployment rate has been trending lower since the August and September 2025 peak, signs that the labour market is starting to stabilize.

The broad nature of the job growth was another positive sign. A lot of job growth over the past year has been driven by the health-care sector, and five industries outside of that sector posted higher job growth numbers in May.

“Again, we need to wait for June’s data to really confirm whether this is something that’s going to persist throughout the rest of the summer or the year, or if this is just some volatility in the data,” Fan noted.

She said RBC expect the unemployment rate to come down to around 6.3 per cent by the end of the year.

Both economists said the data will dampen concerns about a full-blown recession in Canada.

The C.D. Howe Institute’s Business Cycle Council, the authority on recessions in Canada, declared earlier Friday that it’s still too early to tell whether the economy is in a full-blown recession. Canada’s economic activity did not show pervasive decline and first-quarter decline was “of very low amplitude” compared to other recessions.

“We are seeing an upturn in activity now, as we saw with the May jobs report, and flash estimates for April’s GDP numbers did show a nice pop in economic activity. Our view is Canada will avoid a recession and will start to gain some momentum as the year progresses. We probably won’t see stronger activity, though, until the turn of the year, and then into next year,” Guatieri said.

• Ottawa's budget watchdog predicts Bank of Canada will hike interest rate to 2.75% in 2027
• Canada's business productivity falls for second straight quarter

The higher-than-expected unemployment numbers may not be enough to pull the Bank of Canada off the sidelines, however.

Andrew Grantham, executive director and senior economist at CIBC Capital Markets, said in an emailed note to clients that employment is still down year-to-date because of weakness earlier in the year and May’s unemployment rate is still higher than the recent low observed in January (6.5 per cent), which can still put downward pressure on inflation.

“Because of that we still think that the Bank of Canada will stay on hold this year, and further evidence of tightening within the labour market and an acceleration in core inflation would be needed for us to change that view,” the note read.

• Email: ptran@postmedia.com

Lululemon Athletica Inc. ’s share price slumped further on Friday after the company cut its outlook on “spikes” of negative public attention and product releases that fell short of expectations.

On a Thursday call with analysts, Lululemon interim co-chief executive and chief financial officer Meghan Frank said the company “faced a few headwinds and a moderating sales trend” toward the end of the first quarter, which ended May 3.

“First, we experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top line performance,” Frank said. “And second, not all of our product launches have met our expectations.

The Vancouver-based retailer recently settled a five-month proxy fight with its founder Chip Wilson , who left the company in 2015 and has frequently criticized the brand’s management, strategic direction and lack of product innovation for a decade after leaving the company. He launched a public campaign at the end of December to reshape its board of directors.

The two sides announced a cooperation agreement on May 27 that will see two of Wilson’s nominees join the board after Lululemon’s annual meeting in June. Wilson, who is no longer directly involved with the retailer but owns an 8.7 per cent stake, agreed not to publicly disparage Lululemon for 18 months.

Lululemon previously reported it spent US$5 million on expenses related to the proxy contest in 2025 and expected to incur more one-time costs this year.

“We are pleased that some of the recent distractions have been removed, and we remain sharply focused on returning the business to a position of strength in North America,” Frank said on the call with analysts.

Lululemon’s share price has shed more than 60 per cent of its value over the last year as the company weathered several other headwinds, including U.S. tariffs and the end of the de minimis duty-free shipping loophole; the departure of former CEO Calvin McDonald and slowing sales in North America.

Several product missteps and growing competition in the athleisure space added to its struggles. Frank said the company is continuing to work on shortening its product development timeline to respond to customer trends and restock best-selling styles faster.

On Thursday, the company reported first-quarter net revenue increased four per cent year over year to US$2.5 billion, coming in above analysts’ forecasts of US$2.4 billion.

Net income for the quarter was US$195 million, down from US$314 million a year ago. Diluted earnings per share were US$1.69, down from US$2.60 per share last year and just above analysts’ expectations of US$1.67 per share.

Based on the underperforming product launches and negative media commentary reducing customer traffic, Frank said second-quarter net revenue is expected to decline two per cent to three per cent to between US$2.45 billion to $2.475 billion.

Lululemon also downgraded its guidance for fiscal 2026 and said it now expects net revenue to decline between zero and one per cent to between US$11 billion and $11.15 billion.

Previously, the company forecasted full-year net revenue to grow two per cent to four per cent, in the range of US$11.35 billion and US$11.5 billion.

Net revenue in the Americas declined three per cent in the first quarter to US$1.6 billion. In North America, where Lululemon generates most of its sales, net revenue was down three per cent in Canada and four per cent in the United States.

Net revenue climbed 30 per cent to US$478 million in mainland China, which accounts for 19 per cent of Lululemon’s sales and is one of the retailer’s most important drivers of growth. Net revenue in the rest of the world was up 13 per cent to US$372 million.

Comparable sales, a key growth metric that includes net revenue from online sales and established stores that have been open for at least 12 months, increased one per cent.

Frank and chief commercial officer André Maestrini will soon wrap up their stint as interim co-chief executives. Lululemon’s incoming CEO, former Nike Inc. executive Heidi O’Neill , will start her new job in September during the company’s third quarter.

“André and I both spent time with Heidi,” Frank said. “It is clear to me she has a true passion for the Lululemon brand, a deep understanding of product excellence, extensive experience driving growth and transformation at scale, and will be a strong leader for our organization.”

The company’s stock fell more than 13 per cent in pre-market trading on Friday.

• Lululemon reaches agreement with founder Chip Wilson, ending proxy war
• Can incoming CEO Heidi O’Neill breathe new life into Lululemon brand?

• Email: jswitzer@postmedia.com

Trimming development fees would make dozens of housing projects across the country more economically viable in a time when Canada looks to seriously boost construction, says the nation’s housing agency.

Development charges, which municipalities levy on housing developers to pay for the new infrastructure such as roads, water and transit needed for these projects, are especially popular in Ontario and British Columbia and can vary greatly.

For example, a two-bedroom apartment in Ottawa commands development charges of $39,600 while Markham takes $121,500, according to data from Canada Mortgage and Housing Corp. (CMHC).

Given that the average new build was 55 units in Ottawa in 2024 and 246 units in Markham, a developer could be on the hook for $2.2 million and $29.9 million, respectively, in upfront fees for a build.

As a result, developers face a real hurdle in getting their projects off the ground.

But cutting the charges in half would boost the number of viable projects by about five per cent in Toronto and Vancouver, according to CMHC. An all-out cut would boost that figure to about 10 per cent.

“Reducing development charges can improve housing project viability, especially in communities where they are highest, but meaningful gains in supply require substantial reductions and they are only one part of the solution,” Mathieu Laberge, CMHC’s chief economist, said in a release .

“Improving affordability will require a broader approach, including improved land-use regulation and increased scale and innovation to boost productivity in the construction industry.”

On top of stalling projects, development charges also hurt housing affordability.

CMHC said development charges are passed down to homebuyers and that the price increases are often larger than the development fees themselves. The higher prices on new builds can also drive up prices for existing homes on the market.

High development charges, however, can be a bit of a double-edged sword since they can drive down prices of vacant land and help alleviate property taxes.

CMHC estimates Canada needs to double its annual housing starts to between 430,000 and 480,000 new units by 2035 to meet demand.

As of April, Canada was on pace for 256,777 housing starts in 2026.

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Professional stock pickers are having a hard time gaining an edge as Big Tech strengthens its grip on the stock market.

Only about 20 per cent of stock pickers have outperfromed the S&P 500 this year, according to Strategas Securities, which marks the worst performance since 2021.

IPO debuts of SpaceX, Anthropic PBC and OpenAI are expected to magnify the concentration at the top.

The S&P 500 is up 16 per cent this quarter.

Read more here.

• Today’s Data: Canada and U.S. employment reports for May

• Canada’s new AI plan commits billions for AI adoption, new jobs and skills training
• Garry Marr: The revenge of the defined contribution pension plan
  
• When it comes to the U.S., the first negotiation is not the one that matters most
• Why adding adult children as joint owners can create more problems than it solves

Opening a joint account with adult children may seem like a simple way to avoid probate fees or the delays of inheritance pay outs, but there are risks.

Ida Khajadourian of Richardson Wealth explains how joint ownership, often intended as a simple estate-planning shortcut, can create serious tax, legal, and family consequences if not structured properly.

Read more here.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Ben Cousins with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

• Is the World Cup really a boon for the economy?
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Competition authorities in the United Kingdom are imposing new conduct requirements on Alphabet Inc. ’s Google that will allow publishers to keep their content from being used to power the tech giant’s artificial intelligence features.

In what the U.K.’s Competition and Markets Authority called a world first, publishers will be able to prevent their content from being used in Google’s AI features in search, such as AI Overviews, which quickly compiles information from various sources to boil down a complex topic into a couple of paragraphs.

In addition, Google will be required to ensure that any content used in AI‑generated search results is properly attributed to the publisher using clear links, something the competition authority said will also boost consumer trust.

Moreover, under the new conduct requirements, publishers will be able to opt out of allowing their content to be used for the “fine-tuning” of Google’s AI models.

“This provides publishers with confidence that they will have control over the full range of AI use-cases of their content,” the CMA said, adding that the new conduct requirements will put publishers in a stronger position to negotiate content deals directly with Google.

A Canadian media association hailed the new measures as a blueprint for other jurisdictions including Canada.

“This is a globally significant announcement,” said Paul Deegan, chief executive of News Media Canada, which represents hundreds of print and digital titles across the country including those owned by Financial Post parent company Postmedia Network Canada Corp.

“The U.K. has shown the world the way. Without a realistic opt out, publishers in Canada and around the world have been held for ransom by Google,” Deegan said.

A Google spokesperson responded to a request for comment about the U.K. competition authority’s new conduct requirements by sending a blog post published by the search giant on Wednesday.

In it, the company said it is actively listening to feedback from publishers and engaging with regulators such as the U.K.’s Competition and Markets Authority.

“Today, we’re beginning to test a new control that lets website owners manage how their links and content appear in generative AI Search features,” the post said, noting that the company plans to roll out new control features globally after testing them with a subset of website owners in the U.K.

“Sites that opt out will not receive traffic or impressions from our generative AI features,” the tech giant said, adding that this control will not be used as a ranking signal for search results outside of these generative AI Search features.

Deegan said the pledge to eventually offer opt-out controls to publishers around the world isn’t enough.

“We want the (Canadian) Competition Bureau to align with the CMA’s position to ensure Canadian publishers can effectively opt out from Google AI Overviews as well,” he said.

“Since Google launched AI Overviews in Canada in 2024, publishers have been harmed, and we need an immediate remedy. This should not take months to roll out, and there is no reason why this cannot be done in Canada concurrent (with) the U.K.”

Deegan said that rather than being forced to opt out, publishers should be given the option to opt in to AI training and other AI uses, putting control over content in the hands of publishers that own the copyright-protected content rather than Google, whose machines merely scrape and summarize it.

Anna Maiorino, a spokesperson for the Competition Bureau, said the Canadian agency is aware of the U.K.’s new conduct requirements for Google and follows the work of international counterparts closely, even though they operate under different legal regimes.

“I would emphasize that the Bureau does not develop laws or regulations on any market, sector or industry,” she said.

News Media Canada has been pressing the federal government to direct the Competition Bureau to conduct a market study into one of Google’s primary search tools, Googlebot, which Deegan contends makes it difficult for publishers to opt out of the AI components of Google’s platform.

“(It’s) a co-mingled bot for both traditional search and AI,” he said. “Essentially, if you block their AI crawler, you become undiscoverable on the web … essentially throwing yourself off the internet.”

A Google spokesperson said publishers are able to use a separate control called Google-Extended to opt out of having their content used for AI training.

“Google-Extended does not impact a site’s inclusion in Google Search nor is it used as a ranking signal in Google Search,” the spokesperson said.

Through federal government efforts, Canadian publishers have managed to get some compensation from Google as they struggle to reach audiences and generate revenue alongside global tech firms dominant in online search and advertising.

Under the federal Online News Act, passed in 2023, $100 million now flows to Canadian news businesses annually from Google, which Deegan said is working well. However, he noted that these funds aren’t coming in the form of content licensing agreements, which would see the tech firms pay directly for use of copyrighted material.

Obtaining compensation of any kind has been much more difficult when it comes to social media powerhouse Meta Platforms Inc. (formerly Facebook). In 2023, rather than comply with the incoming online news legislation, Meta withdrew the ability to share news in Canada on its Facebook and Instagram platforms.

In addition to government efforts, the Competition Bureau has been taking steps to deal with the online dominance of major international tech firms.

In November 2024, the Bureau took legal action against Google for alleged anti-competitive conduct in online web advertising in Canada, accusing the company of abusing its dominant position in advertising technology and the ad auction process by, among other things, taking negative margins in certain circumstances to disadvantage rivals and dictating the terms on which publishers could transact with rival ad tech tools.

In setting out its case, the Competition Bureau said it is seeking remedies including forcing Google to pay a penalty and sell two of its ad tech tools. The competition authority also wants to see the company prohibited from continuing to engage in anti-competitive practices. However, it will be up to the Competition Tribunal to determine whether there is merit to the case and whether any remedies are needed.

Similar cases are playing out in other jurisdictions, including in the United States, where Google lost a couple of key anti-trust cases involving online search and advertising.

• Canada’s new AI plan commits billions for AI adoption, new jobs and skills training
• Federal government confirms it has access to Anthropic's Mythos to test for critical software vulnerabilities

• Email: bshecter@nationalpost.com

Ottawa’s budget watchdog’s new economic outlook projects the Bank of Canada will hold its key interest rate steady through 2026 before gradually raising it to 2.75 per cent by the end of next year.

The Office of the Parliamentary Budget Officer ‘s report published Thursday said it expects the central bank to hold fire through 2026 as the economy continues to operate “below its productive capacity” and inflation stays elevated due to higher energy prices.

As supply disruptions from the Iran war ease and inflation returns to the two per cent target, the bank will gradually raise interest rates from 2.25 per cent to 2.5 per cent by mid-2027 and 2.75 per cent by the end of the year, said the PBO.

However, if energy prices remain high for a sustained period of time, the Bank of Canada may take a “tighter monetary policy stance” to manage inflationary pressures , the outlook said. Bank governor Tiff Macklem made similar comments before a parliamentary committee in April.

“The economic outlook has weakened somewhat compared to our September projection due to enduring trade frictions and higher uncertainty,” Thursday’s economic outlook read.

“We expect growth to remain subdued through 2026, before gradually recovering as net exports begin to rebound from depressed levels.

“Persistent uncertainty is expected to continue weighing on business investment and household spending, and slower population growth is reducing potential output growth in the short term.”

The PBO report comes the week before the Bank of Canada is set to announce its latest decision on its interest rate. Soaring oil prices and the uncertainty surrounding U.S. tariffs were top of mind for the central bank’s governing council in April, with some members concerned about the impact on the economy.

Despite this, economists expect the central bank to hold its key overnight rate at 2.25 per cent on June 10 for the fifth time in a row.

“At this point, it’s too early to respond to the weakness in the economy with a rate cut, but the economy also doesn’t require any monetary tightening right now,” said Royce Mendes, head of macro strategy for Desjardins Group.

Economists, however, are split on whether and when the bank will hike interest rates next year.

CIBC’s most recent forecast expects the Bank of Canada to hold the interest rate through 2026 and most of 2027 before raising it to 2.75 per cent by September 2027.

Desjardins Group economists predicts the first rate hike will come earlier, in the first quarter of 2027, and then rise to 2.75 per cent. Mendes said the economy should “return to full health” as Canadian and U.S. officials eventually strike a deal on the Canada-U.S.-Mexico Agreement (CUSMA) and the fiscal stimulus embedded in Budget 2025 starts to hit the economy.

Mendes also forecast modest population growth next year, which will help drive economic growth.

“For all of those reasons, we see the economy returning to full health, and the central bank can then normalize interest rates to 2.75 per cent,” he said in an interview.

“We think that will happen in the second and third quarter of 2027, and that gets the central bank to a neutral interest rate, where you’re not stimulating the economy and you’re not restraining the economy.”

Both Bank of Montreal and Toronto Dominion Bank expect the interest rate to remain at 2.25 per cent through 2026 and 2027.

BMO economists Michael Gregory and Jennifer Lee said the weak economy and labour market should act as “inflation pressure sponges,” while there is still significant uncertainty ahead in trade negotiations with the United States.

“We reckon the Bank’s current hold is going to last a long while,” they wrote.

• Is a technical recession enough to spur the Bank of Canada to cut interest rates?
• 'Low-hire, low-fire' job market complicates Bank of Canada's interest rate path

Mendes also said that CUSMA negotiations and geopolitical tensions remain volatile, and the economic outlook could change drastically if oil prices don’t come down and both countries don’t strike a trade deal.

“If oil prices rise even higher and stay higher for a long time, that’s an upside risk to the inflation outlook, and that’ll matter for setting interest rates. On the downside, the biggest threat to the economy right now is CUSMA, especially if trade talks deteriorate and a suitable conclusion isn’t made,” he said.

• Email: ptran@postmedia.com

I have spent most of my professional life between Washington and Silicon Valley. On paper, they are very different places. One is populated by policymakers, diplomats and trade negotiators. The other by founders, engineers and investors. Yet both share an unusual characteristic: They have an extraordinary ability to shape the future. Today, Washington and Silicon Valley are closer than they ever have been.

The lesson I took from both places is that influence rarely begins with facts. It begins with ideas. The most powerful people and institutions believe they can create their own reality, their own future. Facts are footnotes to them. In a sense, the future creates the facts, not the other way around.

That observation feels increasingly relevant as Canada prepares for another round of negotiations on the Canada-United-States-Mexico Agreement ( CUSMA ). Much of the debate will focus on trade balances, tariff schedules, market access provisions and existing economic relationships. Those details matter, but they are not where influence originates. Too often, Canada starts with today’s realities and attempts to derive a vision from them. The more successful approach is the reverse: begin with a vision of a future so valuable that others want to help build it, establish yourself as one of its authors and then make yourself indispensable to its execution.

Canadians have a long history of doing this. Canada’s founding entrepreneur, Pierre-Esprit Radisson, in many ways pioneered it. He did not persuade the English Crown to support what would become the Hudson’s Bay Company by presenting an analysis of the fur trade. He offered something far more valuable: a vision of a new route, a new geography and a new commercial future. The facts supported the proposal, but the idea created the opportunity. What he created was the continent’s first multinational corporation.

But winning the idea is only the first phase. The purpose of a negotiation is not to secure a perfect agreement; it is to create enough time and space to become stronger before the next one. Too often, countries treat agreements as destinations when they are really staging grounds. The most successful nations understand that every negotiation is part of a longer cycle in which periods of stability are used to build capabilities, attract investment, develop industries and accumulate leverage.

That is where execution matters. Once a strategic vision has been established, it must be translated into thousands of practical actions: companies investing, universities training talent, governments building infrastructure, entrepreneurs creating new ventures and capital flowing into sectors that matter. Over time, what begins as an idea becomes an ecosystem, and ecosystems create leverage.

This is why Canada’s choice when it comes to the U.S. is not really between dependence and separation. Dependence is increasingly uncomfortable, while separation is unrealistic and would come at enormous cost. The more promising path is deeper integration combined with greater leverage: integrating where Canada can create unique value while simultaneously building capabilities that make us increasingly indispensable over time.

Critical minerals , energy, artificial intelligence , Arctic infrastructure, defence technology, advanced manufacturing and space systems are not simply economic opportunities. They are opportunities to help define North America’s future. And the strongest negotiating position is not one in which your partner is forced to work with you, but one in which they cannot realistically achieve their ambitions without you.

If Canada spends the next decade building capabilities that matter, investing in entrepreneurs solving problems that matter and creating industries of the future, the balance of power at the next negotiating table will look different than it does today. Perhaps only slightly. But history is often shaped by slight shifts accumulated over long periods of time.

The countries that rise are not the ones that win every negotiation. They are the ones that use each negotiation to become stronger before the next.

Eliot Pence is a member of the Advisory Council for Canada-U.S. Economic Relations and the founder and chief executive of Dominion Dynamics Inc.

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One of the economy’s most persistent challenges reared its head again as rising labour costs outpaced growth at the start of 2026 and Canadian business productivity fell for the second straight quarter.

Statistics Canada said Wednesday a “mild contraction” in the pace of output reduced labour productivity in the business sector by 0.5 per cent in the first quarter, following a 0.3 per cent decrease in the fourth quarter of 2025.

The first-quarter decline was led by a contraction in goods-producing businesses, where productivity fell 1.7 per cent. The agriculture, forestry, fishing and hunting sector was the main contributor with a 3.5 per cent decline. Productivity also declined 1.3 per cent in the construction industry and 0.3 per cent in manufacturing.

Service-producing industries managed a modest 0.3 per cent increase. The strongest gains in productivity came from information and cultural industries (1.6 per cent), transportation and warehousing (1.2 per cent) and retail trade (one per cent).

“Overall, productivity decreased in 10 of the 16 main industry sectors in the first quarter,” the agency said.

Productivity, which measures the amount of economic output produced per hour worked, is widely viewed as a key measure of economic prosperity. Canada has struggled with weak productivity growth for decades and lags many peer countries, including the United States.

In a note, Desjardins economist LJ Valencia said real GDP in the Canadian business sector has fallen three times in the last five quarters as the ongoing trade tensions with Canada’s neighbour and largest trading partner continues to weigh on the economy.

“Looking ahead, our analysis suggests that the federal government’s immigration policies are expected to further slow population growth,” he said. “Still, uncertainty surrounding the trade war will shape the near-term trajectory of Canadian business investment and productivity, with the outcome of this year’s Canada–United States–Mexico Agreement (CUSMA) joint review being pivotal.”

As productivity dipped, overall hours worked rose 0.4 per cent, reflecting a 0.1 per cent rise in the number of jobs. Average hours worked also increased 0.3 per cent.

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Meanwhile, labour costs continued to rise for the fourth quarter in a row. Hourly compensation went up 0.9 per cent, pushing unit labour costs (ULCs) up 1.4 per cent. According to Statistics Canada, ULCs measure the amount businesses pay in wages and benefits to produce one unit of real output.

“The acceleration of ULC growth in the beginning of 2026 is a worrying sign, as elevated costs continue to undermine Canada’s competitive position and continues to exacerbate challenges for businesses across the country,” said Valencia.

• Email: jswitzer@postmedia.com

The United States is proposing a new 10-per-cent tariff on Canada and other trading partners in an attempt to rebuild a tariff regime that was struck down by the U.S. Supreme Court earlier this year, but economists say it won’t significantly change Canada’s economic outlook because most exports will still be exempted.

In a press release late Tuesday, the U.S. Trade Representative’s Office (USTR) said it is proposing tariffs between 10 to 12.5 per cent on 60 countries it claims are failing to prevent the import of products made with forced labour.

Canada was identified as one of six countries or regions that “have failed to effectively enforce a forced labor import prohibition,” which would subject it to 10 per cent tariffs. The other five on the list are Mexico, Ecuador, the European Union, Indonesia and Pakistan.

However, a report from the U.S. Federal Register said products that are compliant with the Canada-U.S.-Mexico Agreement ( CUSMA ) will not be subject to the tariffs. This reflects the same exemptions Canadian and Mexican products had enjoyed during the earlier tariff regime.

The tariffs also don’t come into effect right away, and could change following a public comment and review period.

Prime Minister Mark Carney said Wednesday morning that the tariffs will not have an impact on the “vast, vast, vast majority of Canadian trade,” and promised to propose legislation to tighten regulations around products using forced labour in the country’s supply chains before the House of Commons rises for its summer break.

“We support the overall objective (of eliminating forced labour),” Carney told reporters.

The USTR’s announcement came hours after the Organisation for Economic Co-operation and Development forecast moderate growth for Canada. According to an outlook released Wednesday, growth in gross domestic product is expected to reach 1.2 per cent in 2026 and 1.7 per cent in 2027 as the economy “recovers from the 2025 trade‑related slowdown triggered by higher U.S. tariffs” and business investments gradually recover.

The OECD’s outlook is similar to the Bank of Canada’s April forecast, when officials projected economic growth to accelerate from 1.2 per cent in 2026 to 1.6 per cent in 2027.

Both predated Statistics Canada’s first-quarter GDP data published last Friday, which showed the economy had experienced two quarters of negative real annualized growth, the technical definition of recession.

“Their forecast is a bit dated and high,” said Nathan Janzen, assistant chief economist at the Royal Bank of Canada. “If you incorporate the first-quarter GDP data, it will probably be (lower).”

Janzen concurred that Tuesday’s tariff announcement will not affect that economic outlook due to the exemptions, but said that doesn’t diminish the economic uncertainty facing the country.

“I don’t think this changes anything in terms of the Canadian trade backdrop.… It’ll still be a headwind for business investment in Canada, but I think that’s just status quo at this point. It’s not something that can be avoided,” he said.

TD economist Rishi Sondhi said the announcement signals that U.S. tariffs are here to stay, but he doesn’t expect it to be a shock to the economy.

“The U.S. previously said that it would rebuild its tariff structure,” he noted.

“This particular announcement wouldn’t change Canada’s economic outlook going forward, but Canada’s economy is still underperforming and a big part of that can be traced to the uncertainty associated with the trade situation with the U.S.

“That uncertainty makes it more difficult for businesses to invest, makes it more difficult for Canadian firms to ship their goods and makes Canadian exports less competitive when they’re exported to the U.S.”

Overall, both economists forecast a small increase in business investment by the end of the year.

The central bank’s first-quarter Business Outlook Survey also suggested that business investment and hiring intentions have improved since the end of last year, reflecting improving domestic demand and a lessening of the uncertainty.

“Some of the (first-quarter) data on actual business spending and spending plans has actually looked a little bit better, and that was at a time when the trade backdrop was as uncertain as today,” Janzen said.

Sondhi warned, however, that the growth will not be significant.

“Our current forecast has some very modest growth investments in machinery equipment and structures. We’re not forecasting large scale recovery,” he said.

“Business investment could see some mild pickup from low levels moving forward, but this doesn’t signal that there will be a lot of strength in that area.”

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• Email: ptran@postmedia.com