With its unemployment rate at a nine-year high and 134,600 jobs lost over the past year, the Ontario economy is clearly on its knees as it heads into the second half of 2009.
Approximately two out of every three jobs lost in Ontario were in the manufacturing sector, which has been hit hard by an unprecedented decline in sales of motor vehicles and parts.
Business, building and other support services (-52,200), education services (-24,500) and retail and wholesale trade (-11,300) have also seen significant
Housing demand in Ontario dropped sharply in fourth-quarter 2008 due to the combination of three factors: falling employment, slowing net migration and deteriorating consumer confidence
The weakness in housing demand continues, with prices of existing homes falling by 6.4% year over year and applications to build new residential dwellings down by 41% year over year in February.
Looking forward, the health of the Ontario economy and the timing of its eventual recovery will depend on how events unfold in the United States.
Ontario should begin to pick up steam in the third or fourth quarter of this year and gain momentum through 2010. This view is based on several assumptions:
1. That any bankruptcy by GM or Chysler is orderly and does not lead to massive layoffs;
2. That the U.S. economy continues its pattern of stabilization and begins a gradual recovery in the second half of the year;
3. That the monetary and fiscal stimulus on both sides of the border is effective.
In the meantime, both residential and non-residential construction in Ontario are likely to continue to contract, despite increases in infrastructure spending and a recent up-tick in sales of existing homes.
Data source: Statistics Canada/Chart and forecasts: Reed Construction Data â€“ CanaData.