rennie landscape

CHANGE OF TRAVEL PLANS

The travel habits of Canadians have undergone a dramatic shift in a short period of time. As the new US administration implemented a series of import tariffs, one of the ways Canadians responded was by reducing travel to the US. While that has an impact on the tourism industry down south, its effects are also being felt at home.

Through the first seven months of 2025, Canadians have reduced their trips to the US by 27% compared to last year. Although we've also increased our trips to all other countries by 7%, the net result is nearly 4.5 million fewer trips having been made by Canadians travelling outside Canada so far this year. (That’s 5 million fewer trips to the US and 500,000 more trips to other countries). While we're unable to capture the amount of domestic travel Canadians have done in-lieu, spending less time abroad and more time at home could lead to more domestic spending. This is one factor in why retail sales have been robust this year—+5% in the first six months of the year nationally—even as the labour market has faltered.

International travel to Canada has also fallen, though by less than Canadians' reduction of foreign travel. International overnight visitors to Canada are down 5% year-to-date, which is around 650,000 fewer trips. These changing travel dynamics, should they continue, will serve to reduce Canada’s trade deficit in services and boost domestic demand.

RECESSED LABOUR MARKET

It’s no secret that Canada’s labour market has been performing poorly the past few years, as the Bank of Canada ratcheted up interest rates in the face of once-in-a-generation inflation. The most straightforward reflection of this is the national unemployment rate, which rose from an all-time low of 4.8% in July 2022 to its current level of 7.1% as of August 2025. That represents the highest it’s been, outside of the pandemic (this will be a theme throughout the economy section of this report), since April 2016. If the unemployment rate is rising, it stands to reason that the number of unemployed people in the labour force is as well. But as we can see from the chart, unemployment has not only been rising of late, it stands out historically.

Looking at six-month periods ending in August and February, the past six months have brought the ninth biggest increase in unemployment since 1977. The only periods that saw greater unemployment surges were past recessions, as well as February to August 2024. During this latter period, Canada's population grew at a rapid pace, and job growth failed to keep up. To wit, last year's February-to-August employment rose by 135,000 and unemployment by 191,000 whereas this year saw unemployment grow by 122,000 and employment fell by 40,000 as population growth has slowed in 2025.

In the end, it's entirely possible that we are, in fact, currently in the midst of a recession. We will explore this later. Regardless of whether or not we are indeed in a recession, the current labour market weakness points to a soft economy overall, which will weigh on housing demand going forward and points to the need for lower interest rates in the near-term.

NO ENTRY (-LEVEL POSITION)

Youth unemployment has been gaining media attention, with the unemployment rate for 15 to 24 year olds having been rising for the past two years. In July of this year, it reached its highest level (outside of the pandemic) since September 2010, at 14.6% (it dipped marginally in August, to 14.5%). Unemployment for Canada’s youngest workers has also been increasing alongside the overall unemployment rate since 2023. What’s more, youth labour force participation has fallen substantially, from 65.2% in August 2023 to 62.9% in August 2025.

Looking at the employment rate, which describes the proportion of people who are working. For core-aged Canadians (ages 25 to 54), the employment rate has fallen since the spring of 2023: going from 84.9% to 82.7% in most recently. For those aged 15 to 24, however, it has fallen much more sharply: from 59.6% to 53.8% over the same period. This has resulted in the gap between the two age groups' employment rates growing to its largest level ever (outside of the pandemic) at 29.7% in July. Lack of employment opportunity will weigh on the ability of young Canadians to form households, where almost 1 in 5 of 20 to 24 year olds are currently heads of their own households. Fewer jobs means fewer young people moving out of their parents' homes, and less housing demand.

I CAN EXPLAIN!

For all of its shortcomings, gross domestic product (or GDP), which measures the total value of all goods and services produced within Canada over a specified period of time, does shed light on the size of our economy and, alongside this, reveals when we're in recession. Over the past couple of years GDP growth has been pretty sluggish, and has exhibited some noteworthy volatility, to boot.

In Q1 of this year, the US threatened sweeping tariffs on imports from a huge swathe of countries across the globe. In anticipation of these tariffs, US firms rushed to increase their imports ahead of the tariffs coming into force. Unsurprisingly, this was then followed by a steep dropoff in imports in Q2, as inventories swelled. For Canada, this stockpiling occurred as domestic demand shrunk in Q1, with tariff-frontrunning boosting Canadian exports and helping lift overall GDP growth to 0.5%. In Q2 the situation flipped, with exports falling 7.5%, pulling GDP growth negative—even as domestic demand rebounded. With some tariffs still in place, business investment remains sluggish, and job losses were observed in both July and August. As such, it's quite plausible that GDP growth will again be negative in Q3, meaning Canada's currently in a recession.

table of contents

Explore other regional editions

Each rennie landscape edition offers localized insights into housing and economic trends. Browse the latest reports and previous editions below.