PSAC workers and supporters picket outside the Canada Revenue Agency office in Sudbury, Ont. on April 19.Gino Donato/The Canadian Press
There’s no question the strike of Canadian public servants is big. At 155,000 workers across 27 federal departments and agencies, it’s one of the biggest strikes in Canadian history.
But is it so big it can throw the Canadian economy off course?
The short answer is, yes.
The longer answer is it depends on how long the strike lasts. And that “off course” won’t necessarily be far, or for long. But this is definitely large enough to make a serious short-term dent in the overall economy. And the dispute could point to some more troublesome longer-term implications.
The 155,000 workers represent about 0.7 per cent of the Canadian labour force; if you consider that about 47,000 of those employees are deemed essential, and therefore remain on the job, the remaining 108,000 who are off the job make up about 0.5 per cent of the labour force.
It doesn’t sound like all that much. But it’s a lot when you consider how much the economy – measured by gross domestic product – grows in a month.
“In a reasonably good month, the economy would only grow 0.3 per cent or so,” noted Canadian Imperial Bank of Commerce chief economist Avery Shenfeld in a research note Friday.
If you remove 0.5 per cent of government spending, service output and worker income, a strike that lasts, say, the better part of a month could easily wipe out an entire month’s GDP growth.
And that’s just considering the direct impact of having 0.5 per cent of workers not at work. The strike could, for example, reduce spending by the households of strikers, disrupt business activity because of the unavailability of government services and interrupt the processing of immigrants and foreign workers. Doug Porter, Bank of Montreal’s chief economist, figures that when you account for those sorts of spillover effects, the strike “could potentially clip GDP by 1 per cent, depending on how long the job action persists.”
The Bank of Canada recently forecast that GDP would increase by 1.4 per cent for all of 2023. Doing the arithmetic, a strike shaving 1 percentage point off GDP would wipe out almost all of the year’s growth.
Or would it? Mr. Shenfeld noted that a strike isn’t like a recession, where there’s a sustained, broadly-based slowdown in economic activity, often with some overarching cause that requires time to sort itself out. The forces of a slowdown in a strike reverse themselves as soon as the strike ends. Consumers and producers of goods and services make up for lost time. Growth bounces back to recover what it lost, and the economy is quickly back on course.
“The Bank of Canada will look past that dent to a month or a quarter,” he said.
But the nature of this strike raises some important longer-term questions about where we’re headed with labour unrest in this country, and that could have broader economic implications.
The steep wage demands (employees at the Canada Revenue Agency, for example, seek an increase of 22.5 per cent over three years) are an indication of just how badly wages have been eroded by inflation over the past two years, as well as the desire by workers to be compensated for what they have lost. We can assume the settlement will be something lower than those demands; nevertheless, this strike may well set a relatively high bar for other wage negotiations over the next year or two.
This strike might be just the tip of the iceberg. Mr. Porter noted that, historically, when the rate of inflation has risen, the rate of work stoppages has surged almost in lockstep.
“Workers understandably seek to catch up to the upside surprise in inflation, while employers rationally seek to hold the line on costs,” he wrote. “That fundamental clash of views can lead to strikes.”
If that historical trend repeats, then we may be in for a lot more labour unrest over the next year or two.
That could have a couple of important effects. First, it implies we could be headed for occasional periods of less-than-optimal output and consumption, as scattered strikes weigh on incomes and output to varying degrees, but generally create a drag on the economy.
Second, should increased work stoppages result in a general trend of higher wage settlements, that could put sustained pressure on inflation – considerably complicating the Bank of Canada’s task of returning to its 2-per-cent inflation target.
So, inflation begets wage demands and strikes, which begets more inflation, and a sputtering economy. If you lived through the 1970s, you’ve seen this movie before.
Not that this is the 1970s, or even close to it. The Bank of Canada has acted swiftly to put inflation back in its cage, and for the most part, it’s working. We have an economy that is operating at full capacity. And, frankly, unionized labour is nothing like it used to be; only 29 per cent of Canadian workers belonged to unions last year, down from 38 per cent in 1981.
Still, there will be a labour consequence to the inflationary spike of the past two years. The impact on the economy for the duration of this particular strike may be just the beginning.
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.
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