A pandemic-driven exodus of young families out of Canada’s largest cities has depleted a core age group of workers from the already tight labor market, which experts say risks accelerating wage inflation in certain industries.
Leading the rush out of Canada’s big cities were children under 10 and millennials, or young families, Reuters analysis of official data shows, many who moved to smaller cities or rural areas in search of more space to live and work.
The drive-until-you-qualify trend has shifted mid-career workers – a key segment of the labor force – out of big cities, making it difficult to find established talent in sectors where in-person work is essential or preferred.
“That’s a whole sort of cohort of workers missing,” said Mike Moffatt, an economist and senior director of the Smart Prosperity Institute. “You’ve got the sort of entry level people, but that middle, people in their 30s and 40s, they’re moving out.”
Intraprovincial migration data from the federal government released last month shows 64,000 people left Greater Toronto for smaller locales within their own province from 2020 to 2021, while Greater Montreal lost 40,000, a sharp acceleration of an existing trend. Vancouver lost 12,000 people.
The rush was sparked by young families. Toronto lost some 15,00 children under 10 from 2020 to 2021, along with 21,000 adults between 25 and 44, the data shows. At the same time populations surged in smaller cities past Toronto’s outer suburbs.
(Graphic: Millennials, young children flee Canada’s big cities – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS/lgvdwxgoapo/chart.png)
Driving the shift was home price and type. Half of Toronto’s home sales are condos and the average price is C$1.2 million ($946,074). In smaller cities outside Greater Toronto, a typical home is detached and costs under C$800,000.
Indeed, the race for space has led to faster price gains outside Toronto and its suburbs than within.
(Graphic: Pandemic home price gains, Toronto and exurbs – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS2/zdpxoagxmvx/chart.png)
Back in the big cities, the very tight labor market has forced employers to offer higher wages to lure workers. That is sparking rapid wage escalation, as companies compete for the skills they need. Recruiting firm Robert Half said 46% of companies are increasing starting salaries to attract talent.
“People are leaving (jobs) today, because they’re being offered large packages to go elsewhere. That’s how that war for talent is right now,” said Koula Vasilopoulos, district director for Robert Half Canada.
(Graphic: Most Canadian firms see upward pressure on wages – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS3/klvykmllbvg/chart.png)
The worry for the Bank of Canada is fast-rising wages could start driving inflation, which hit a 30-year high of 4.8% in December, something that it says has not happened yet.
“There could be this self-fulfilling cycle where we’ve had inflation running at a 30-year high now, so … employees start to ask for higher wages to compensate for that inflation,” said Stephen Tapp, chief economist at the Canadian Chamber of Commerce.
“That increases labor costs, that increases the cost of output and that further drives the inflation spiral.”
Many big city employers are offering fully remote or hybrid roles in order to tap into the talent that fled the big cities during the pandemic. Recent data from Statistics Canada found a quarter of Canadians now work exclusively from home.
“Canadian employers are deathly afraid to require people to come back to office jobs for fear they’re going to lose people all together,” said Dan Kelly, president of the Canadian Federation of Independent Business.
But remote does not work in the industries with the most critical shortages – warehousing, retail, manufacturing and education and healthcare. Filling those jobs, particularly as more people trade in tiny downtown condos for far-flung detached homes, remains an expensive challenge.
“It’s a whole spectrum of labor, from the barista right up to the hospital workers,” said Andy Yan, director of Simon Fraser University‘s City Program.
“It’s going to be a struggle, particularly for small businesses, but even big businesses. How do you get the talent if housing is so disproportionate to incomes,” he said.
(Reporting by Julie Gordon in Ottawa; Editing by Alistair Bell)
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.
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.
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.
