CIBC Follows BoC In Looking At Canada's Labor Market To Analyze if Economic Weakness Reflects Structural Or Cyclical Shifts

09:49 AM EST, 02/24/2026 (MT Newswires) -- Governor Tiff Macklem's recent speech suggests the Bank of Canada is sticking to a script in insisting the recent weak economic growth is largely a reflection of structural shifts in the Canadian economy linked to United States tariffs and demographic change, says CIBC.

Policymakers are concerned that mis-diagnosing economic weakness as cyclical rather than structural, and changing monetary policy accordingly reflect that, would spur inflationary pressure, CIBC adds.

To help diagnose what is structural and what is cyclical, Macklem's speech noted the labor market could offer important clues. If trends in variables such as unemployment, employment and vacancies were "unusually different" across sectors, occupations or demographics, then that could be a signpost of structural change, notes CIBC.

CIBC says it's clear that the Canadian economy is going through an important period of adjustment, and that tariffs imposed by U.S. President Donald Trump and the rollout of Artificial Intelligence pose threats to labor market dynamics. The bank adds it's also true that these structural changes will likely build over time, with the full impact unlikely to be visible for quite some time.

However, CIBC says at the moment there seems to be only minimal evidence that these changes are resulting in greater than normal variance within labor market indicators. That suggests that the current weakness in Canadian economic growth shouldn't be fully chalked up to supply shifts, and that there's still underlying cyclical weakness, it adds.

If that persists, CIBC says Canada's central bank may be forced into further interest rate cuts, although for now, it continues to forecast no change in the overnight rate through 2026.

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