Economic Overview - The U.S. economy is not currently in a recession, but recent data indicates it may be closer to one than previously thought [2] - Economic data is often released with a lag, making it difficult to identify the onset of a recession until it has been ongoing for several months [1] Job Market Analysis - The January jobs report indicated the addition of 130,000 jobs, which was double the economists' expectations, and a decline in the unemployment rate to 4.3% [3] - However, the majority of job gains were in healthcare and social assistance, sectors heavily reliant on government funding [3] - Revisions by the U.S. Labor Department revealed that only 181,000 jobs were added in 2025, significantly lower than the initial estimate of 584,000 [4] - In 2024, the economy added nearly 1.46 million jobs, but the slowdown in job growth is concerning for consumer spending, which is a key driver of the economy [4] Consumer Debt and Delinquencies - Consumer delinquencies have reached a decade high, with households falling behind on loans such as mortgages and credit cards [5] - Household debt reached $18.8 trillion in Q4 2025, with non-housing debt accounting for nearly $5.2 trillion [5] - Aggregate delinquencies increased to 4.8% of all outstanding debt, the highest level since 2017, indicating a potential risk in the consumer credit market [6] - Delinquencies are particularly concentrated in lower-income areas and regions with declining home prices, reflecting a K-shaped economic recovery where higher-income households are prospering while lower-income households are struggling [6]

Core Insights - The Canadian credit market experienced mixed outcomes in Q1 2025, with growth driven by increased borrowing from young Canadians and newcomers, while subprime consumers faced rising delinquency rates [1][2][3] Group 1: Credit Market Growth - Total outstanding credit debt in Canada reached $2.5 trillion in Q1 2025, reflecting a 4.7% year-over-year growth [2] - Gen Z consumers contributed significantly to this growth, with their outstanding balances increasing by 30.6% year-over-year, accounting for $12 billion or 10.3% of total new balance growth [3] - New Canadians added $2.6 billion in new credit balances, marking a 6.3% increase year-over-year [3] Group 2: Consumer Behavior and Risk Tiers - Non-mortgage debt grew by 2.4%, with below prime average consumer balances increasing by 4.4%, and subprime consumers seeing the highest increase at 6.3% [5] - The average non-mortgage balances per consumer varied across risk tiers, with subprime consumers averaging $23,638, reflecting a 6.3% year-over-year increase [6] - Serious delinquency rates for consumers 60 days or more delinquent rose by 11 basis points year-over-year to 2.71% in Q1 2025, influenced by the influx of new-to-credit consumers [15] Group 3: Regional Disparities - There are significant regional differences in delinquency trends, with Alberta experiencing the highest delinquency rates due to economic volatility, while Quebec had the lowest [17][18] - Average debt per borrower varied by province, with P.E.I. and Newfoundland having the highest average debt levels, which may increase vulnerability to financial strain [9] Group 4: Economic Conditions and Consumer Credit Index - The Canada Consumer Credit Index dropped to 100.3, down almost 6 points from the previous year, indicating muted credit demand amid economic uncertainty [12] - Economic conditions have led to a widening financial divide among credit consumers, with some benefiting from improved inflation and interest rates while others continue to face challenges [14]