Canada's labor market adjusts slowly, which has historically cushioned it during downturns, but this stabilizing feature may become a vulnerability, said TD.
Artificial Intelligence (AI) adoption alone is unlikely to immediately threaten workers, writes the bank in a note to clients. Digital technology will change how work is performed, but employees will continue to play a key role in an AI-empowered world.
Where Canada is in the business cycle matters, stated TD. Recessions tend to catalyze strategic change inside firms.
When weak demand intersects with rapid cost-saving technological adoption, employers are more likely to redesign workflows and positions, increasing the risk that jobs lost in a downturn don't return in their prior form, added the bank.
When technology permanently displaces roles, policies should prioritize faster worker transitions through flexible, affordable retraining and human-centric skill development, rather than job retention, which risks higher long-term unemployment and worsened productivity scarring.
Canada's long-standing ability to cushion labor market shocks may be less resilient in an environment where businesses are forced to make hard choices to survive, noted TD. AI adoption alone may not pose an immediate risk to the Canadian workforce, but when cost-saving technologies like AI collide with a downturn, firms may permanently change how work is done.
As economic stress forces firms to make hard choices, some job losses may not reverse.
Canadians are well educated and can face this challenge head-on and there is an opportunity for some workers to benefit from the moment. Policy needs to be precise to support reskilling dislocated workers and minimize outflows from the job market. The stakes are high and acting early will help to limit long-term labor market damage, according to the bank.