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Posthaste: Canada is in the grips of a 'Me-cession' — and it's especially bad in Alberta Back to video

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Canada just went through one of the most punishing bouts of interest rate hikes in history, and when you think about it, it’s quite remarkable we haven’t fallen into recession — at least not yet, anyway.

That doesn’t mean we got off scot-free and one economist recently coined a phrase for the particular malaise Canadians are suffering — “Me-cession.”

“Collectively, we are spending more and pushing economic activity higher but, individually, we are restricting purchases and behaving as if we are in a recession,” said Charles St-Arnaud, chief economist at Alberta Central, in his report.

Why that is happening has been well-documented — record population growth. Because there are more of us spending and consuming, the country’s gross domestic product continues to grow, even while GDP per person declines.

Take away that population boom and Canada’s economy would have slipped into recession last year, shrinking 1.6 per cent in the third quarter of 2023 and 1.5 per cent in the fourth, St-Arnaud’s team estimates. (A recession is technically two straight quarters of contraction.)

The ‘Me-cession’ is happening across the country but no where is it more acute than in Alberta, said St-Arnaud.

The province that has experienced the highest population growth in the country, has also suffered the biggest decline in spending per person.

St-Arnaud says this is because Alberta’s wages and income have failed to keep up with the rest of Canada in recent years and Albertans are among the most indebted households.

“However, stronger population growth in Alberta compared to the rest of the country and the tailwind from high oil prices means that economic growth in the province outperforms the rest of the country,” said St-Arnaud.

So while it’s boom times for Alberta’s economy, relatively speaking, residents aren’t feeling it.

“If you look at the individual person and household, they’re actually not doing great,” Alicia Planincic, an economist at the Business Council of Alberta, told the Calgary Herald earlier this year.

As the “Me-cession” continues in Canada, the economy is expected to remain sluggish this year and next even as interest rates come down, said St-Arnaud.

Mortgage renewals at higher rates over the next few years will be a drag on the economy, but are unlikely to turn into a crisis, he said, mainly because of the resilient labour market.

Unemployment has climbed this year, but so far there have not been significant layoffs.

“All this supports our view that the Canadian economy is on the path to a soft landing. However, with the health of the labour market behind the economy’s resilience, any deterioration in the labour market should be monitored closely,” he said.

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Good news for the third of Canadians who rent their home. Rents might still be rising in this country, but they are rising at a slower pace, data out yesterday said.

A report from Rentals.ca and Urbanation said asking rents for all residential properties climbed 5.9 per cent in July, year over year — the slowest rate of growth in two and a half years.

Markets do vary, of course.  Rents shot up more than 18 per cent in Halifax and prairie cities also saw double-digit increases.

Vancouver and Toronto renters though are getting relief, with rents down 7 per cent in the western city and 5 per cent in the GTA.

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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.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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