Propelled by sharp cuts in interest rates, so far it seems the housing market and the jobs it generates will continue to be a linchpin of the Canadian economy.
While many credible voices, including Evan Siddall at the Canada Mortgage and Housing Corporation, have warned we may be setting ourselves up for a fall, home sales and construction show few signs of slumping in Canada’s hottest markets.
Today’s latest data from the Canadian Real Estate Association will provide a clearer picture, but if housing persists throughout the current pandemic as prime job creator, it may be a special case.
Just as industries renew themselves through the process of creative destruction during economic downturns, research conducted long before the current crisis indicates that something similar happens in the employment sector. Most economists insist that while employment will bounce back after a sharp decline, the jobs that return will not be the same ones.
COVID-19-fighting advantage
There are already clear signs that stopping the spread of the coronavirus offers economic advantages. Last week, the United Kingdom’s collapse into the worst recession of any major industrial economy was traced directly back to its early failure to control the virus.
Even here in Canada, the success of some regions in getting the pandemic under control has paid dividends, as indicated by the latest unemployment numbers.
“Not surprisingly, the provinces that had initially been less hard-hit by the virus have opened more quickly and are now boasting the lowest jobless rates in the country,” observed Bank of Montreal chief economist Douglas Porter earlier this month.
Even in regions that are recovering first, a global decline in trade, in travel, in entertainment and some parts of retail mean jobs in many sectors have evaporated. And according to Jeff Larsen, executive director of Innovation, Creativity and Entrepreneurship at Nova Scotia’s Dalhousie University, many jobs that disappear will not be coming back.
Larsen cites research from a decade ago in the midst of the previous recession that demonstrated while economies create new jobs to replace the ones that go, they are not the same jobs. It is something governments, and many media observers, have trouble understanding.
Microsoft’s Bill Gates, in a parody of The Matrix during Comdex 2003, offered a choice of two pills, one pill represented the Microsoft ecosystem and the other represented Linux and open source software, which went on to fuel dozens of Silicon Valley startups. Research shows startups create most new jobs while most older firms ‘are net job destroyers.’
“Policy-makers tend to reflect common media stereotypes about job changes in the economy, which is to say a focus on the very large aggregate picture … or on news of very large layoffs by individual companies,” writes Tim Kane in his research results. “That attention is almost certainly misplaced.”
What the research shows is that private sector jobs that disappear are for the most part replaced by new jobs in entirely new industries, many of them small, created by new young companies. In fact, Kane shows, the vast majority of jobs are created by startups during their dynamic phase while all other firms “are net job destroyers.”
It can be hard to grasp, perhaps partly because we recall the big corporate names of the past. But when you think of individual companies such as General Motors superseded by Tesla, Eaton’s and The Bay outshone by Amazon and Shopify, IBM overwhelmed by Microsoft and Google, the trend becomes clearer.
And as with destruction of firms themselves, an economic shock such as the pandemic leads older firms and industries to find efficiencies by paring back on staff, while hungry startups desperately seek qualified staff.
Workforce transition can hurt
“I think it’s kind of accelerating trends that were already starting to happen,” said Larsen, a lawyer and finance specialist who earned his spurs helping to lead new green energy companies. He says some of the new jobless, but not all, will be able to move and adapt their skills to new growth sectors such as ecommerce.
“To the extent that there are [job] losses, I think that a lot of this is going to depend on the demographics and skills of those particular workers.”
Transforming the workforce is not always about transforming the workers. Older workers with outdated skills may be pushed into retirement. It is well-known that skilled people with good jobs in the shrinking oil sector often ended up in positions that paid less.
Instead, says Larsen, most workforce transition happens when young companies hire new workers with new sets of skills. And those new workers spend money that generates traditional jobs in retail and housing.
Shopify, which listed on Toronto and New York markets five years ago, is now Canada’s largest company and still hiring. (Chris Wattie/Reuters)
‘Their growth is exponential’
Larsen is the regional lead for Creative Destruction Lab, the non-profit begun at the University of Toronto with the intent of connecting aspiring, job-creating technology startups with experienced mentors and eventually, venture capital funding. The idea is to try to replicate the nurturing environment once exclusive to places like Silicon Valley. And he says it is working.
The Halifax-based health-care startup Tenera Care, for example, a company that started out in patient tracking, has seen a burst of new business due the coronavirus outbreak, as businesses from care facilities to the meat-packing industry look for ways to prevent disease spread.
“Their growth is exponential,” enthuses Larsen. “Their hiring is exponential.”
And Tenera is not alone. In just the Atlantic provinces, startups have been job creators even as other sectors decline. Swept that makes software to manage and schedule cleaning businesses is one example. While not yet at the explosive hiring phase, Halifax-based Salient Energy is creating heavy but long lasting and cheap batteries made of zinc for stationary electricity storage.
One of the largest venture capital funding in Canadian history, at half a billion dollars, went to financial crime fighting software company Verafin based in St. John’s, which at last count had about 500 employees. If you have the proper skills, you could get a job there right now.
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.
