Despite some concerns about the overall health of the economy, an associate partner at Ernst and Young’s consulting arm said a recession has not yet occurred, despite some volatility. 

Speaking at the Collison tech conference in Toronto Tuesday, Manos Xenos, an associate partner at EY-Parthenon, said that his group takes a contrarian view whereby current economic circumstances are not a downturn, “at least not yet.” 

“For us to call something a recession in the technical terms, you need to have a three Ds,” he said.

For this criteria to be met, Xenos said you need to have “quite a deep recession,” diffusion across multiple sectors as well as duration. 

Xenos said that has not occurred across multiple quarters, despite layoffs that have occurred in the tech sector, which he said have “been quite substantial.” However, he said he is not seeing layoffs occurring in the typical way horizontal staff cuts occur.


Additionally, he said executives are largely “not willing to part” with existing talent. 

“These are all very targeted layoffs that we're seeing and unemployment is still quite persistently low in terms of historical records,” Xenos said. 

On the supply side of the economy, Xenos said shortages persist due to an “overhang” from COVID-19 that is still driving demand. 

‘“While we're seeing pockets of shakiness in the economy, we're still not calling it, from our world, a recession,” Xenos said.

Meanwhile, the economy is experiencing tightening credit conditions, which is resulting in lengthier due diligence processes, according to Xenos. 

Amid higher high-interest rates, Canada’s banking regulator increased its capital requirements for the nation’s major lenders. Earlier this month the Office of the Superintendent of Financial Institutions (OSFI) brought its domestic stability buffer to 3.5 per cent of risk-weighted assets. 

“One of the things that we are personally worried about, I guess is more on the availability of capital from the financial institutions. And we're seeing OSFI come out pretty strong with reserve requirements for the banks,” Xenos said. 

PRIVATE MARKETS

Devon MacMurray, the vice-president of mergers and acquisitions at Ernst and Young, said during the conference Tuesday that there is a disconnect between the way private and public markets are reacting to the current economic circumstances. 

Currently, there is a “bit of a correction,” MacMurray said, but “people don’t think it’s necessarily going to last super long.” 

The private market, he said, is still seeing “a good level of activity.”