The current labour shortage is just a hint of problems to come, with a lack of skilled tradespeople and digital workers imperiling infrastructure construction and the shift to a greener economy.Aaron Vincent Elkaim/The Canadian Press
The Ontario economy is sailing along smoothly, with the rebound from the pandemic recession well under way.
Two years after the dizzying economic whirlwind of the first lockdown, the jobs market is surging, and employers are now complaining of a shortage of workers. The province’s once-enormous budget deficit has contracted sharply, and revenues are growing quickly, in part propelled by the effects of inflation. And Ontario’s economy is growing at a pace not seen in more than two decades.
That relatively buoyant economic outlook was the backdrop of a provincial campaign that seemed largely to take prosperity for granted, with the three main parties competing on who could spend the most. Doug Ford and his Progressive Conservatives won that contest, securing a second majority government with an expanded number of seats.
There was little discussion of the long-term economic and fiscal undercurrents in Ontario that threaten that placid picture of prosperity. Economic growth will slow, interest rates are rising and an aging population will exert growing pressure on expenditures, with permanent budget deficits on the horizon within a decade.
“Surely, the No. 1 issue should be not how are we going to spend money or divide money, but how are we going to grow the economy,” Rocco Rossi, president and chief executive officer of the Ontario Chamber of Commerce, said in an interview.
Unfortunately, productivity was “not at all” a campaign issue, he says. “Whoever wins … needs to put it to the top of their agenda,” Mr. Rossi wrote in a follow-up message ahead of the vote.
The current labour shortage is just a hint of problems to come, with a lack of skilled tradespeople and digital workers imperiling infrastructure construction and the shift to a greener economy.
The economic expansion under way is set to cool by mid-decade, with growth in the province’s gross domestic product falling by half in 2025 compared with this year. Bank of Nova Scotia senior economist Marc Desormeaux forecasts a “solid but moderating” expansion as the Ontario economy reverts to more typical growth rates.
The current revenue windfall that has given the government billions of extra dollars to spend will disappear. In addition, the province’s projection of a shrinking deficit depends on highly ambitious assumptions that would keep the growth of education and health spending well below the rate of inflation and population growth.
Mr. Rossi sees a host of structural problems that threaten Ontario’s economy in the near future, and that the re-elected Progressive Conservatives will need to move to address. The labour shortage is the most apparent. The nearly 400,000 vacant positions represent lost productivity and tax revenue, he says, with immigration backlogs making that problem much worse.
In a similar vein, he sees the reliability of Ontario’s energy grid as a major economic vulnerability later in the decade, as the Pickering nuclear plant is decommissioned and greater electrification of the province’s vehicle fleet pushes up demand. And lastly, Mr. Rossi says the province needs to focus on reducing its debt load so that it has the fiscal flexibility to cope with a pandemic-like crisis down the road.
The Financial Accountability Office of Ontario, a provincial legislative watchdog, has also flagged a number of other long-term economic risks: the impact of climate change, income inequality and changes in the labour market, including the gig economy.
As with most elections, the Ontario campaign centred around jobs, with the various parties touting their plans for boosting employment, even amid a historical labour crunch. Robert Asselin, senior vice-president of policy at the Business Council of Canada, sees that emphasis as misguided. “Think about the future. Think about increasing productivity, not just jobs,” he advises.
That will require a focus on capturing the value of Canadian intellectual property and encouraging private-sector investment in research and development, he says.
Ribbon cuttings for new assembly operations make for good politics. But Mr. Asselin says such jobs, though undoubtedly good news for new hires, aren’t the key to a higher-wage economy. “Let’s be honest,” he says. “That’s not where productivity gains will happen.”
Instead, the provincial government needs to focus its efforts on sectors where Ontario has a comparative advantage: agriculture, biotech, advanced manufacturing and clean technology.
He adds that a key part of that effort will be focusing education curriculums on science, technology, engineering and math (STEM).
Elizabeth Dhuey, associate professor of economics at the University of Toronto, agrees that Ontario suffers from a lack of STEM skills, but says that is part of a broader skills gap in the province. “I think what we’re seeing is a skills mismatch,” says Prof. Dhuey.
There are geographic imbalances, a lack of STEM workers and a chronic deficit of skilled tradespeople. Prof. Dhuey says there are some fairly obvious solutions at hand, including discounted or even free tuition for skilled-trades programs. But she says she heard “essentially nothing” during the campaign on reforming Ontario’s education system.
One of the biggest mismatches: Growing job vacancies exist alongside a sharp rise in the ranks of the long-term unemployed.
Retraining efforts to shunt the chronically unemployed into the green economy have a spotty track record at best; it’s hard to turn “miners into coders,” Prof. Dhuey says. There’s a much bigger economic payoff from focusing much earlier in life, by boosting basic literacy, math and problem-solving skills for children in the school system. The focus should be “almost entirely” on those future workers, she says.
Besides curriculum changes, that would require reversing what Prof. Dhuey sees as a short-sighted scaling back of Ontario’s education budget.
But any such move to increase education spending will inevitably collide with the province’s short-term goal of returning to a balanced budget by fiscal 2027-28. Benjamin Dachis, associate vice-president of public affairs at the C.D. Howe Institute, says that plan is already unrealistic, in part because it is based on ambitious assumptions that sharply limit growth in education and health spending.
Health care spending, for instance, is projected to rise just 0.9 per cent in fiscal 2024-25, far below the rate of population growth and inflation. There are substantial increases to the education budget in the next two years, but after that, increases are much smaller: 2.6 per cent in fiscal 2025 and 1.9 per cent in fiscal 2028, the year in which the budget is projected to be balanced.
Those projections aren’t realistic, unless the province is aiming to impose a wage freeze on the province’s teachers, says Mr. Dachis, who was director of policy, budget and fiscal planning for the premier’s office in the first year of the Ford government.
He calls for “hard action” to rein in spending. That could seem a startling message, given the forecast from the province’s last budget of a gentle glide toward eliminating the deficit. “Things are looking rosy right now in terms of economic growth, revenue is growing like gangbusters,” Mr. Dachis acknowledges.
But within the new term of the re-elected Progressive Conservatives, Ontario’s debt costs will start to eat up an ever greater share of the revenue. That will signal the start of a long-term deterioration in the province’s finances, unless action is taken to reduce the growth of debt, and to increase the growth of the economy. By mid-century, the FAO says, the province is headed for deficits that will rival the monster shortfalls of the pandemic – but will be permanent.
“There are enormous headwinds where all signs are pointing towards a fiscally unsustainable system,” Mr. Dachis says.
Queen’s Park reporter Jeff Gray examines the outcome of the Ontario election that saw both the NDP and Liberal leaders resign, and Doug Ford re-elected premier amid very low voter turnout.
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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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