A report by the Conference Board of Canada suggests a two-week rail strike would result in a $3 billion loss in nominal GDP this year in Canada.
The loss would be felt by both households, with a $1.3 billion loss in labour income, and businesses, with a $1.25 billion loss in corporate profits, said the Conference Board.
With Canadian National and Canadian Pacific Kansas City having served a strike notice that could go into effect at noon on August 22, Canada is poised to have widespread economic impacts if it goes through. The Conference Board of Canada has modeled what the potential impacts of a two-week stoppage would be on Canada’s overall economy.
Key insights include:
- Mining, agriculture, manufacturing take the brunt of the hit among goods producing industries, while wholesale trade and transportation suffer the bigger losses among service producers
- Canada’s trucking industry is already struggling with congestion and a shortage of drivers, making it difficult for Canadian importers and exporters to find alternate transportation if rail stoppages occur
Photo from CN website
Here is the full report:
A labour dispute is threatening to shut down much of Canada’s rail industry. Roughly 9,000 workers at Canadian National (CN) and Canadian Pacific Kansas City Ltd (CPKC) have served a strike notice that could come into effect at noon on Thursday August 22. Labour negotiations for these two companies usually occur in alternate years, so while we’ve had rail stoppages in the past, we have not experienced a situation where stoppages would occur for the two dominant industry players at the same time.
CN and CPKC dominate the rail industry in Canada. A stoppage would essentially halt an industry that accounts for 0.45 per cent of Canada’s GDP and employs about 0.25 per cent of the workforce. However, while the direct impact of rail stoppages may be small if limited in duration, the knock-on effects are the most concerning. Rail lines carry more than $1 billion worth of goods each day, according to the Railway Association of Canada, and more than half of the country’s exports travel by rail. These estimates guide our model-based impact analysis.
Rail Stoppages will have Widespread Impacts
Using the Conference Board’s detailed economic model, we quantify the potential impacts of a two-week rail strike on Canada’s economy. We produce the analysis under the following assumptions:
- Over a 2-week period, the rail strike will halt Canadian exports and imports of a wide range of products including agricultural, energy, mining, manufactured products and consumer goods.
- The halt to exports does not result in an equivalent loss to production, instead, production is put into inventory.
- In the weeks and months following the strike, trade recovers to levels above normal to help restore inventories to typical levels.
A two-week rail strike would result in a $3 billion loss in nominal GDP this year. The loss would be felt by both households, with a $1.3 billion loss in labour income, and businesses, with a $1.25 billion loss in corporate profits. Lower economic activity would also erode government revenues. Federal government revenues would fall $391 million while aggregate provincial and territorial government revenues would be eroded by $533 million.
The potential impacts are widespread across industries. Mining, agriculture, manufacturing take the brunt of the hit among goods producing industries, while wholesale trade and transportation suffer the bigger losses among service producers. The impact on transportation goes beyond rail since port traffic, trucking and other segments are highly dependent on rail. The impacts reflect an annual loss of roughly 15,000 jobs. Once the strike effects wane, employment would recover to normal levels, but the potential job impacts during the strike and in the weeks recovering would be substantial.
Alternate transportation options are limited. In anticipation of the strike, some Canadian and international companies have already stopped shipping through Canada, particularly for perishable goods. However, Canada’s trucking industry is already struggling with congestion and a shortage of drivers, making it difficult for Canadian importers and exporters to find alternate transportation if rail stoppages occur.
A two-week strike would reduce Canada’s GDP by 0.1 per cent this year. If the strike were to last twice as long, the negative economic repercussions would more than double, forcing Canadian exporters and other industry players into more substantial production cuts. A four-week strike could lower GDP by nearly $10 billion in 2024, and result in 49,000 job losses on average in the year. Our economic outlook for Canada in 2024 is weak, with much of the support for any positive growth relying heavily on trade.
Work stoppages are likely to be of limited duration. Last July, Canada faced a similar situation with work stoppages at most British Columbia ports. Although the impact on trade was less severe, there was significant pressure on the federal government to intervene. During the 2021 Montreal port strike, the government quickly passed back-to-work legislation soon after the stoppages began.
Trade obstacles are a reputational risk. The potential rail strike is making headlines in Canada and the United States, and any work stoppages will also affect companies south of the border. Impediments to trade have hindered our ability to compete within North America for new private investment. A prolonged strike could have lasting implications if it results in lower investment in machinery or structures here in Canada.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
About Us
Canada’s Podcast is the number one podcast in Canada for entrepreneurs and business owners. Established in 2016, the podcast network has interviewed over 600 Canadian entrepreneurs from coast-to-coast.
With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
The commitment to a grass roots approach has built a loyal audience on all our social channels and YouTube – 500,000+ lifetime YouTube views, 200,000 + audio downloads, 35,000 + average monthly social impressions, 10,000 + engaged social followers and 35,000 newsletter subscribers. Canada’s Podcast is proud to provide a local, national and international presence for Canadian entrepreneurs to build their brand and tell their story
