A report released by the Royal Bank of Canada on Wednesday suggests that not all industry sectors will come out of the COVID-19 pandemic equally and, according to RBC senior vice president John Stackhouse, the same could be said about the regions.
The RBC Economics report, Navigating 2021, suggests that the COVID-19 pandemic is helping to transform the Canadian economy. Just as some industry sectors are moving into a fast-moving period of growth and innovation, there are other parts of the economy built on a “legacy model” may not have the same experience.
In an interview, Stackhouse told me he expects places with a significant tech-oriented economy, such as in Halifax, should come out of the pandemic fairly well. However, the oil and gas sector should have a more difficult time and that doesn’t bode well for the economy of Newfoundland and Labrador, which he described as “challenging.”
The tourism sector, which is very important to the Atlantic Canadian economy, will take a while to make a comeback, according to the report. Much of how the tourism industry performs will depend on the roll out of the COVID-19 vaccine, and whether it is able to rebuild the confidence of potential tourists.
“Navigating 2021 will require Canadians to continue to build that decentralized future and rebuild some of the centralized model that remains a powerful driver of innovation, efficiency and diversity,” RBC states in the report.
Reopening of the economy and an unleashing of pent-up demand won’t be enough to bring GDP back to its pre-pandemic state in the coming year, according to the bank. The hardest-hit sectors will only pick up in a sustainable way after the virus’s full risk has faded, the bank said in a news release.
“The scar tissue of permanent business closures may delay a full recovery until at least 2022,” RBC predicts.
The structural damage, through long-term unemployment and delayed investments, could impede any economic rebound, it states in the report.
“Until public safety and economic confidence are established, large-scale fiscal and monetary stimulus will continue to be needed. Fiscal programs in particular are expected to focus on the pandemic’s lasting damage to displaced workers, small businesses and sectors that rely on the large-scale gathering of people.”
The pandemic has helped to entrench online shopping and those who have been working from home have learned to adjust to the new way of doing their jobs and may encourage people to move away from the big cities to friendly environments like the Maritimes and still be able to do their work remotely.
“The 2020s is starting to look like a new era of decentralization, built on the backs of digital platforms. The convenience is extraordinary. So too may be the consequences,” Stackhouse was quoted in a news release.
People who are able to seize on the redistribution of economic activity will thrive, while others who will need new skills in order to find new employment will continue to need new kinds of government support, according to the report.
Canadians at the bottom end of the wage scale, many of them women earning less than $800 a week, have experienced a significant portion of the job cuts. Higher earners, one the other hand, have seen their employment opportunities improve during the downturn, it said in the report.
“Some of those who have lost their jobs will opt to go back to school or retrain, but those who could benefit most from upskilling have historically been the least likely to do so. Without a strategy to get lower-wage workers back on the job, the uneven damage of the recession could turn into an uneven recovery,” Stackhouse said in the release.
The federal government will be carrying a heavy debt burden in 2021, which will be slightly mitigated by low interest rates, Stackhouse told me. But the low rates will not last forever and the key will be how government goes about address its debt.
He said the government supports were necessary to keep the economy functioning during the pandemic but it was interesting to note that as governments were helping to subsidize individuals adversely affected by the economic upset created by the pandemic, at the same time Canadians were socking away money in their savings.
To help the economy to recover from the pandemic, Stackhouse said, government will need to encourage Canadians to spend some of their savings, perhaps through tax holidays or events like that to keep money moving, creating economic growth.
But he warned the recovery from the pandemic will be a grind.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
