On July 22, 2023, Statistics Canada released a report stating that inflation dropped to 2.8% in June 2023, a significant decrease from the peak of 8.1% experienced last summer (Mallees, 2023). Canada's inflation goal is one to three per cent. The Finance Minister, Chrystia Freeland, stated that our country currently has the lowest inflation rate among the G7 nations. Although inflation has decreased, it is still probable that the Bank of Canada will continue to increase interest rates rather than decrease them in the near future. The central bank recently raised its key interest rate by a quarter percentage point, resulting in a key rate of five per cent. The bank appears cautious in its approach, aiming to address inflationary pressures and maintain economic stability. Market analysts project further interest rate hikes as Canada's economy improves. Borrowers may face higher costs, while investors may find fixed-income securities more appealing amidst these changes.
Although Canada's GDP has been increasing, its standard of living is falling behind that of other G7 nations. Although Canada's GDP has been growing, its standard of living is falling behind that of other G7 nations (Ercolao, 2023). The deterioration of the standard of living intensified amidst and following the oil price shock of 2014-2015 and has persistently dwindled throughout the pandemic. Regrettably, there is no indication of any improvement in the foreseeable future. Canada's per-capita GDP is lower due to productivity issues rather than population growth. Currently, Alberta, Saskatchewan, and Newfoundland & Labrador have the highest per-capita GDP levels, but there are indications that this may change. Only British Columbia and PEI have returned to their 2019 levels post-pandemic.
Despite AI technology showing great potential for productivity gains, specific industries may be slow to adopt or may choose not to adopt the technology altogether. Nonetheless, generative AI is estimated to add substantial value, ranging from $2.6 trillion to $4.4 trillion to the global economy across various use cases (Chui, et al., 2023). The current capabilities of generative AI and other technologies have the potential to automate a significant portion of work activities, which currently occupy 60 to 70 per cent of employees' time. The potential power of automation is mainly due to generative AI's increased ability to understand natural language, which is crucial for work activities representing 25% of total work time. The integration of generative AI can significantly boost labour productivity across various sectors. However, this transition will necessitate investments to support workers as they shift work activities or transition to new jobs.
Concerns about AI-powered technologies taking over human jobs have heightened since ChatGPT’s launch last year (Kiderlin, 2023). While experts acknowledge that AI will impact employment and partially automate them, they also emphasize that technological advancements typically create new roles. More than 20% of firms believe that AI will add jobs rather than replace them. The extent to which workers should be worried about AI's impact remains uncertain. Moreover, other factors might contribute to future job displacement besides AI growth. The "Report on Jobs 2023" by the World Economic Forum reveals other macroeconomic trends that could cause job displacement. Slower economic growth ranks as the most common factor, with the global economy projected to grow at a slower rate of 2.1% for 2023 compared to 3.1% last year, as predicted by the World Bank. Other factors contributing to job loss include:
Financial Tip of the Month:
With the volatility in the market, it's wise to focus on reducing high-interest debt. Take some time to assess your outstanding debts, such as credit card balances and personal loans.
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Chui, Michael, et al. “The Economic Potential of Generative AI: The Next Productivity Frontier.” McKinsey & Company, 14 June 2023, www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-ai-the-next-productivity-frontier#key-insights.
Ercolao, Marc. “Mind the Gap: Canada Is Falling behind the Standard-of-Living Curve.” Mind the Gap: Canada Is Falling Behind the Standard-of-Living Curve, 13 June 2023, economics.td.com/ca-falling-behind-standard-of-living-curve.
Kiderlin, Sophie. “Here Are the Biggest Reasons Jobs Could Disappear - and A.I. Isn’t One of Them.” CNBC, 20 July 2023, https://www.cnbc.com/2023/07/20/the-biggest-reasons-jobs-could-disappear-ai-isnt-one-of-them.html
Mallees, Nojoud Al. “Inflation Has Fallen, but the Bank of Canada Hasn’t Backed off Rate Hikes. Here’s Why.” CTV News, 23 July 2023, www.ctvnews.ca/business/inflation-has-fallen-but-the-bank-of-canada-hasn-t-backed-off-rate-hikes-here-s-why-1.6490781.