Trump seized on Canada's 'technical recession' to make another 51st state jab. Here's what the term means

U.S. Chairwoman Donald ruff wasted small clip in taking a crack at the news that Canada had dipped into a technical recession, linking to a Bloomberg News article in a social media post on Monday with the commentary: "51st state!"

Trump's latest jab about taking ownership of Canada is perhaps a suggestion that the country would be faring much better economically under U.S. Leadership.

But Canada's quarterly decline in gross domestic product (GDP) has also been seized upon by Conservative Leader Pierre Poilievre, who used it to criticize the Liberal government of Prime Minister Mark Carney over its economic stewardship.

On Friday, Statistics Canada released some economic data showing that Canada's real gross domestic product (GDP) contracted in the first quarter of this year on an annualized basis by 0.1 per cent. That came after a contraction of one per cent in the fourth quarter of 2025.

Two consecutive quarters of contraction in economic growth has been termed to be a technical recession.

Yet even that designation could change.

Statistics Canada goes through several rounds of revisions to their data. The data released last Friday are preliminary numbers, which could be adjusted in the future where it's determined no actual GDP decline occurred.

The Business Cycle Council of the Toronto-based C.D. Howe Institute think-tank is used as sort of an unofficial arbiter to make the determination whether or not Canada is in a recession.

But Steven Ambler, a panel member of the Business Cycle Council, said the panel does not accept the recent Statistics Canada GDP data as criterion for declaring a recession.

"I myself think that the adjective technical is used in a lot of cases just to make it sound somehow both more official and in some ways more scary," said Ambler, a fellow-in-residence with the C.D. Howe Institute.

Instead, the council uses a "three P" measurement to determine whether the economy is in recession by looking into whether the decline in aggregate economic activity is pronounced, persistent and pervasive.

Ambler said a pronounced decline would be something closer to a one per cent decline over two quarters.

He noted that past recessions declared by the Council included a 5.3 per cent decline in 1981-82, 3.4 per cent in 1992, 4.4 per cent in 2008-09 during the financial crisis and a 12.7 per cent at the beginning of the pandemic.

"[That] was actually the most severe and shortest recession in Canadian economic history," he said.

The second "P," persistent, looks at the time frame of the GDP decline, but a one-quarter decline would meet the strict minimum, Ambler said, adding that the council would look at other quarters.

What is going on with the Canadian economy?

For example, the most recent data shows that in the third quarter of 2025, annualized GDP went up 2.6 per cent.

To determine the pervasiveness of a potential recession, the council uses what they call a diffusion index to look at how many industries are in expansion and in decline, Ambler said.

In April, the last time a calculation was made using that index, it found that there were more industries in expansion than industries in decline, Ambler said.

"So that doesn't give you the idea that there's a pervasive decline."

Ambler said some are using the latest data to reinforce a narrative that things are really bad. Yet, a case can be made by using other numbers that the Canadian economy is not doing particularly well even if not in a declared recession, he said.

For example, Canada's unemployment ‌rate rose to a six-month high of 6.9 per cent in April, while youth unemployment is at 14.3 per cent. Meanwhile, business investment and residential construction has declined.

Typically the economy is growing every quarter, so the technical recession does signal that there's a weakness in the economy, according to Walid Hejazi, a professor of economic analysis and policy at the University of Toronto's Rotman School of Management.

The economy is not doing what it's supposed to do, which is grow by two to three per cent per year, he said.

Canada slips into a technical recession. Should you be worried?

While he stressed that the technical recession is "just a mild contraction" and Canadians shouldn't have to brace for anything like mass layoffs, Hejazi still said "it's a wake-up call to everyone that the economy is weak because it's not growing."

He said that some people will have to adjust their strategies when it comes to jobs, with some redoubling their efforts because they realize that there's a lot more competition for jobs than they may have realized.

As well, the people who do have jobs may now be worried about losing their jobs because they see that the economy is pretty weak.

"People need to think about how to make their position in their employment recession-proof or more recession-proof than it was before," he said.

Hejazi also suggested that Canadians could be psychologically impacted by just hearing the term technical recession without a lot of knowledge of what it means.

"So that scares people," he said. "Everybody becomes pessimistic and the economy slows," he said. "[It's] self-fulfilling."

Senior Reporter

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