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
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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]
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
