Expect a mid-year growth pause in Ontario
John Clinkard
 |
Seed Newsvine |
Despite being hobbled by a 17% year-over-year increase in the value of the Canadian dollar versus the U.S. dollar and against the headwind of slower U.S. demand for its manufactured goods, Ontario has added almost 70,000 jobs since the beginning of this year. Moreover, in April, the province’s employment rate (the % of the working age population with a job) stood at 64%, an eighteen year high.
The noteworthy aspect of the province’s year-to-date pattern of employment is that the goods sector accounted for over one out of every four new jobs despite a 20,300 drop in manufacturing employment. Within goods production, the construction industry added new jobs (+38,800) in large part due to sustained growth of both residential and non-residential building. Among services industries, significant job growth occurred in health services (+26,100), managerial services (+23,200), professional, scientific and technical services (+17,400), public administration (+18,000) and accommodation and food services (+12,200).
Looking forward, consumer spending and residential construction in Ontario should continue to be supported by the recent strong (+120,200) pattern of full-time employment growth, solid (+4.9%) growth of hourly earnings, the effect of recent cuts to personal income taxes and the GST as well as by lower interest rates. Also, recent solid growth of office-based employment, combined with low commercial vacancy rates in the province, should sustain commercial building.
Despite the persistent positive impact of sustained growth of domestic demand, there is a growing risk that the effects of slower U.S. growth will exert increased drag on growth in Canada generally and more specifically on growth in Ontario which ships 40% of its output to the U.S. This slower pattern of growth in the second half of the year could be intensified by a slowdown in housing demand as well as by a mild inventory correction.
For 2008 as a whole, we expect Ontario to grow by +0.5% to +1.0% following an increase of +2.1% in 2007. Given the underlying strength of domestic demand in the economy, growth should accelerate to +2.0% in 2009.
