The Canadian economy is facing challenges stemming from the current trade war with the United States, and younger Canadians in particular are experiencing severe financial strain, according to the latest study.
Combined with consistent signs of a weakening youth labour market, some experts say young Canadians may be in an economic recession of their own.
“It’s hard to argue that (Canadian) youth are not in some kind of ‘youth-cession,’ given what is happening to the jobs that are most often hiring them in retail and in hospitality — they (the jobs) ain’t there,” says economist Armine Yalnizyan, who is also an Atkinson Fellow on the Future of Workers.
“Some of the basics of life are getting more expensive at a time when wage growth is slowing. That’s a real problem for a lot of people. Young people are really getting hit on the head with the trends that are taking place right now.”
Accounting firm and insolvency trustee MNP released its latest Consumer Debt Index, which collected responses from a variety of Canadians in June on issues like affordability and the cost of living, financial planning, as well as the amount of debt they are taking on.
The study, which is conducted every three months, found younger adults and lower-income households felt the most strained and “stalled” when it came to their financial goals.
Nearly half (45 per cent) of respondents aged 18-34 said they felt anxious or stressed about their financial situation, and a third (33 per cent) of those younger Canadians polled said they felt like their lives were on hold because of their finances. Plus, 37 per cent of Canadians polled aged 18-34 said they felt stuck living paycheque to paycheque.
Younger Canadians are also the least likely to be able to set money aside for important life goals, according to MNP.
“Those making careful choices and delaying major decisions may be struggling to get ahead amid the current uncertainty around costs and income,” says president Grant Bazian at MNP.
“For many vulnerable households, particularly younger adults and lower-income Canadians, it may feel like they’re constantly putting out financial fires.”
The most recent Statistics Canada report on the labour market showed youth unemployment sitting at 14.2 per cent, up from 10.8 per cent before the pandemic in 2019. For students focused on seasonal summer work, the unemployment rate was 17.4 percent in June, compared to 15.8 per cent in 2024.
Although many young Canadians are putting off long-term financial goals to make ends meet, it still may not be enough to get by.
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“The pure scale of people struggling is really an alarm bell because it’s not going to get easier as the tariffs really kick in and inflation continues to rise,” says economist Armine Yalnizyan, who is also a Fellow on the Future of Workers at the Atkinson Foundation.
“The tariff uncertainty means that fewer people are hiring, more people are laying off, and unemployment rates for young people are very elevated compared to previous years.”
The MNP study shows the average Canadian household is ending each month with more money left over than before, but this is not consistent with each demographic.
Based on the findings in the study, households with higher incomes and less or no debt at all are better able to reduce their spending amid economic uncertainty and set aside funds in case of future financial burdens.
This as the trade war and United States President Donald Trump’s tariffs has most economists predicting Canada’s economy will take a hit in the form of higher prices and potential job losses.
The MNP report shows one third (33 per cent) of all Canadians are increasing savings or “building emergency funds,” and two in five (41 per cent of) respondents said they are reducing their non-essential spending.
In doing so, MNP reports Canadians on average had $916 left at the end of the month, which is $49 more than the last report and the second-highest recorded amount since 2017. Although this is seemingly a good sign, it was mainly older and middle- to higher-income households which were able to do so compared to younger and lower-income Canadians.
For instance, Canadians aged 55 and older were saving on average $84 more every month in the three-month period leading up to June than the previous report, and those households earning between $60,000 and $100,000 reporting an increase of $260 each month.
When it comes to savings goals, one third of respondents (33 per cent) aged 18-34 said they were putting those aims on hold compared to less than a quarter (23 per cent) of all Canadians polled.
This means that because of the reported day-to-day affordability struggles of so many younger and lower-income Canadians, they may not be as able to save for their long-term financial goals.
“We are looking at ‘scarring’ for millions of young people who will not be able to launch their lives — forget about their careers,” says Yalnizyan.
“This is just a generalized failure to launch if you cannot get a foot in the door for self-sufficiency through the labour market.”
Experts say the trade war is one of the reasons the labour market has weakened as businesses slow or pause hiring, and even lay people off to reduce costs.
“This whole thing is unfolding because of the uncertainty unleashed by the tariff threats. We could be making every job a good job at this moment if it wasn’t for those factors,” says Yalnizyan.
“We had all the fixings for one of the best economies in the world until January.”
Although Prime Minister on a new trade deal, Yalnizyan said public policy will also be crucial to help support the Canadian labour market and improve affordability — especially for young people.
“It’s really time for the public sector to step up to the plate and make sure all the money that we are spending, which is our taxpayer money, is actually including a factor that brings along the next generation in not only training, but in jobs in construction, infrastructure and in healthcare,” says Yalnizyan.
“There are crises in all of these elements that could actually be incredible sources of jobs for young people, but you have to design public policy to do exactly that — not just leave it to the markets.”
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