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Canada's labour shortage will be a long-term challenge for the economy, new report finds – Canada NewsWire

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2 years ago

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  • Inflation and a tightening labour market threaten to spillover into 2023, despite recent economic progress.
  • Housing affordability will become more of an issue with rising interest rates and inflation threatening to put a lid on the construction industry for the foreseeable future.
  • Despite challenges, Canadian businesses have an opportunity to benefit from the United States’ Inflation Reduction Act and climate change commitments.
  • Prairie provinces have played a key role in supporting the economy due to growing global demand for energy and rare metals.

TORONTO, Oct. 3, 2022 /CNW/ – RSM Canada (“RSM”), a leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its third 2022 edition of ‘The Real Economy, Canada‘ – a quarterly report that provides Canadian businesses with analysis and insights on the country’s complex economic conditions.

As governments and industries around the world grapple with inflation, rising costs and a breadth of other economic hurdles, the latest edition of The Real Economy, Canada examines how Canada’s economy is faring at the moment, and what key issues and opportunities businesses need to be aware of in the coming months.

Key findings in this quarter’s report include:

Recession talk is pre-mature, though economic headwinds are having an impact.

  • The Canadian economy has bounced back strong from pandemic lockdowns, as pent-up consumer demand and government support have fueled GDP growth in every quarter since the third quarter of 2021.
  • However, inflation and a rising unemployment rate, combined with persistent labour and housing shortages present elevated risk that Canada could enter a recession early next year.
  • Inflation will take a while to slow despite potential summer peak, as the war in Ukraine grinds on and the labour market remains tight.
  • Businesses should expect the Bank of Canada to continue raising rates for the rest of the year rather than easing them prematurely. 

Canada will need to accelerate its immigration goals to address long-term labour and productivity problems.

  • Declining labour force participation rates, an aging population and declining fertility rates mean that Canada must rely on immigration – rather than natural growth – to replenish the labour pool.
  • Canadian policymakers are aiming to bring in more than 400,000 immigrants per year between 2022 and 2024 following the growth immigration has spurred in the millennial and Gen-Z workforce.
  • Immigrants are also shown to increase productivity rates, something Canada cannot afford to ignore as labour productivity in Canada might fall to last among countries in the Organisation for Economic Co-operation and Development in just a decade. 
  • However, Canada must streamline the accreditation process if it wishes for skilled immigrants to fill the labour gaps that are most glaring, such as in the health care industry.

Higher interest rates have cooled Canada’s housing market, but demand remains high.

  • The construction industry has been hit hard by rising interest rates and the resulting slowdown now threatens to make Canada’s housing shortage more acute. 
  • Rising rates, combined with inflation, threaten to put a lid on housing construction for the foreseeable future, potentially further worsening the housing affordability crisis in Canada.
  • While most industries gained jobs, the construction industry lost over 23,000 in April and June, despite the red-hot labour market.
  • However, the Canada Mortgage and Housing Corporation’s new mortgage loan insurance program is giving developers access to mortgages with more favourable financial terms, which incentivizes them to build more affordable housing and energy efficient housing projects.

Canada will stand to benefit from the United States’ Inflation Reduction Act and green energy transition.

  • This legislative and financial commitment by Canada’s closest trading partner provides Canadian companies with some certainty as to where they can hang their hats from an economic development perspective.
  • Canada’s mining and manufacturing sectors will be well-positioned to benefit as they provide the products and minerals necessary to facilitate the clean energy transition, particularly when it comes to electric vehicle development.
  • Though Canada’s climate change strategy has been fairly robust, the IRA and the resulting opportunities will help provide a clearer picture of how to economically build and scale clean energy industries.

Canada’s industrial sector is reaping the benefits of strong global demand.

  • The Prairie provinces have been leading the economy because of growing global demand for energy and rare metals.
  • Canadian industrial production grew over five per cent year-over-year in the second quarter, well above the pre-pandemic level, and is expected to end the year on a high note.
  • However, industrial production may diminish in subsequent months as global markets anticipate a recession and consumer demand slows.

“Despite a robust recovery from the lockdowns of the COVID-19 pandemic, Canadian economic growth will continue slowing down due to persistent inflation and an historically tight labour market,” says Tu Nguyen, economist and ESG director with RSM Canada. “But the real long-term challenge will be the labour shortage, with declining worker participation hitting the health care, hospitality and food services industries particularly hard.”

Nguyen continues: “There’s also a fundamental shift in the demographic of Canada’s labour force, causing policymakers to explore ambitious immigration goals to address the labour gap. But government, industry associations and organizations will actually need to go further and streamline the accreditation process so that workers educated abroad can fill much-needed roles in Canada. Only then can Canada hope to have more meaningful growth in labour supply and productivity.”

For more information on RSM Canada’s ‘The Real Economy: Canada‘, or to download the report, please visit their webpage.

About RSM Canada

RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.

RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. RSM Alberta LLP is a limited liability partnership and independent legal entity that provides public accounting services. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit rsmcanada.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.

SOURCE RSM Canada

For further information: Media contact: Stephen Colle, FleishmanHillard HighRoad, 416-939-6649, [email protected]

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

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September 16, 2024

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OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

This report by The Canadian Press was first published Sept. 16, 2024.

The Canadian Press. All rights reserved.

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

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September 16, 2024

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OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

This report by The Canadian Press was first published Sept. 16, 2024.

The Canadian Press. All rights reserved.

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S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

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3 days ago

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September 13, 2024

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TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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