As we look ahead to 2023 and 2024 the headwinds facing the Canadian economy will likely be felt most strongly in provinces with high exposure to housing and household debt (Ontario, BC) and in those with very tight labour markets and little population growth (Quebec), according to a new report released Thursday by CIBC Economics.
“Of course commodity-producing areas of the country will likely fare better thanks to higher prices and the desire of developed countries to find non-Russian alternatives. However, unlike the pre-2014 period, this growth is not expected to come from large scale investments in the oil industry. Instead, the wealth being created by the resource sector is helping to fuel growth in other areas, and limiting the slowdown in housing demand,” said the report Provincial outlook: Where are the headwinds strongest?
“On the east coast, the gains made during the pandemic in attracting workers from other provinces, and the technology, business and other such jobs they had, doesn’t appear to be abating (or reversing) as quickly as we had previously expected. This will support overall growth within Atlantic Canada relative to what may have been expected pre-pandemic. However, with those newcomers also creating demand for housing and consumer-facing services, inflation in the region is also likely to remain firmer than what was typically seen prior to 2020.”
The report said the Canadian economy is facing plenty of headwinds at the moment. Rapidly rising interest rates are bringing a correction in the housing market, and are expected to restrain wider consumer spending ahead as well.
“Meanwhile, a slowing global economy and supply chain issues are impacting manufacturing, and services companies are struggling with limited labour availability. However, not all provinces will be impacted equally by these risks. Commodity-rich areas such as Saskatchewan and Alberta should see less of a slowing in consumer spending and housing due to the wealth being created within those economies, while Atlantic Canada appears to be holding onto gains in interprovincial migration linked to increased work-from-home capabilities and the diversification of their economies. That leaves areas of the country with the most indebted households, such as Ontario and BC, or the tightest labour markets, such as Quebec, to struggle the most for growth ahead,” said CIBC.
“Trends in international and interprovincial immigration are particularly important today because staffing shortages have been a defining feature of the pandemic recovery. While all provinces face tighter conditions than three years ago, the ratio of unemployed to vacancies ranges widely. By this measure, labour markets in the Atlantic provinces are not currently as tight as elsewhere in the country. However, that partially reflects the high proportion of seasonal jobs, which leads to a structurally higher number of unemployed for each vacancy. Quebec and BC both have fewer unemployed than job.
“As we look ahead, Atlantic provinces may see a tightening in labour market conditions if work-from-home staff moving to the region create demand without filling in-province vacancies. Wage inflation, which has already been high in the Maritimes over the past three years, could also remain elevated as local firms compete with out-of-province employers. This would work to further close the wage gap between the region and the rest of the country.”
(Mario Toneguzzi is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and only Canadian)
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