Following Covid-19, the decline in the Canadian economy was much more pronounced than in the United States, but the faster recovery in the labour market suggests a stronger recovery. Employment in Canada is now 7.0% below its February 2020 peak. These job losses, however, do not fully reflect the economic damage to the labour market.

The strong recovery in retail and housing sales suggests that household consumption has returned to normal more quickly than expected, but there is no room for complacency either. Canadian households in difficulty have benefited from deferrals or postponements of debt payments for a few months.

The Canadian government now faces a dilemma. On the one hand, it cannot indefinitely accumulate deficits of such magnitude – CAD 343.2 billion, the largest in the country’s history – and wants to avoid preventing a return to work through an aid policy that is sometimes considered too generous. On the other hand, the economy is barely recovering from an unprecedented shock and remains dependent on some support to continue its recovery. One fact is certain: the period of withdrawal from these fiscal stimulus measures will be perilous.