Governor of the Bank of Canada Tiff Macklem at the 2022 European Central Bank Forum on Central Banking.
Canada is entering a period of economic change that won’t fade with the next interest-rate decision or budget cycle.
In a major speech delivered in Toronto this week, Tiff Macklem, governor of the Bank of Canada, warned that the country is navigating deep structural shifts — from U.S. protectionism to artificial intelligence (AI) and slowing population growth — that will permanently reshape growth, 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.
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.
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.
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.
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.
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.
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.
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At its core, Macklem’s message was a warning against expecting quick fixes.
Structural change, he said (4), is “the transition between one steady state and the next — between Canada’s old economy and the new one taking shape.”
Monetary policy can help smooth that transition, but it cannot:
Undo the efficiency losses caused by tariffs
Force businesses to adopt AI
Reverse demographic trends
Protect specific sectors or occupations
“Monetary policy can’t change the destination,” Macklem said. “But it can help smooth the journey.”
Impact on households: Don’t expect a sudden change in budgetary constraints due to rate reductions or wage increases. Instead, focus on what you can control: where you spend your money.
While many forces are beyond individual control, the Bank’s analysis illustrates that Canadian households can take action to help themselves.
With productivity gains years away and population growth slowing, wage growth may remain modest. Conservative budgeting and emergency savings matter more in a low-growth economy, so focus on where to cut costs and build savings.
Workers in trade-exposed sectors should assume ongoing volatility. Diversifying skills — particularly digital and AI-adjacent ones — can improve resilience.
Lower rates can support demand, but they cannot restore lost economic efficiency. Housing, groceries and services may remain costly even if inflation stays near target.
AI is already reshaping entry-level work. Education and training decisions that emphasize adaptability, technical literacy and problem-solving may offer better long-term returns.
Macklem stressed that governments — not central banks — are central to how Canada navigates this shift, through infrastructure, skills training and internal trade reform.
“How Canadian households, businesses and governments respond to these structural breaks will determine our future prosperity,” he said (5).
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Bank of Canada (1, 2, 3, 5); Bank of Canada (4)
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