Canada’s economy is on its way to a modest recovery due to capital inflows and growth in consumption and housing investment and a stronger real estate market. At the same time, a more limited growth is expected due to a mix of global factors such as Europe’s future after Brexit and trade uncertainty at the international level.
Top Performing Sectors and Industries
The fastest growing sectors and industries in 2020 are expected to be transit, subway, and train car manufacturing, cannabis production, and telecommunications networking equipment manufacturing. The list of top performing sectors also includes foreign currency exchange services, and online auctions and e-commerce. These sectors are expected to experience the fastest growth of over 11 percent.
The transit, subway, and train car manufacturing sector has experienced ups and downs over the last couple of years. Volatility can be explained by lower commodity prices and cyclical purchases. In 2019, the sector saw an increase in revenues of 31 percent, and revenues are projected to increase by 12.2 percent in 2020. Companies in the sector offer repair services and produce new freight cars and trains, rebuilt trains, new passenger cars and trains, parts, and new locomotives. The telecommunications networking equipment manufacturing sector experienced steady growth over the past five years and is expected to expand further. Businesses operating in this sector manufacture products such as parts, base stations, switchboards, and telephone sets.
Economic growth is also fueled by a healthy real estate market, especially in cities such as Ottawa and Toronto. Toronto is one of the fastest growing cities in North America, one of the main reasons being immigration. While the residential market has shrunk after the introduction of the mortgage stress test, home prices and sales are expected to stabilize. Ottawa is also performing well and will experience economic growth in 2020. This can partly be explained by migration from other regions and a strong housing market.
The industrial real estate market is also vibrant as evident from the low vacancy rates across Canada, especially in the Greater Toronto Area and Vancouver. Rental rates have increased due to high demand. The office building sector is also a healthy market, especially for downtown properties. This can be explained by the fast growth of the technology sector and a healthy labour market. Rental housing is also in demand as more and more people choose to downsize, including millennials and baby boomers. Demand is also higher for condominiums than single-family units mainly due to affordability, downsizing, growing populations, and increasing urbanization. In the retail sector, there is less demand for power centres, regional malls, and outlet centres. One of the main reasons is the growth of e-commerce.
There is also demand for senior housing as more and more older people choose to move to senior communities with high-end amenities. Developers, however, face major challenges such as regulations and policies and high costs. In 2017, the FPT Seniors Forum Ministers published a report according to which the majority of seniors prefer to live in senior communities but face challenges such as availability and limited access for mobility aids. The report reveals that many senior homes lack safety features, lighting, railing, ramps, and steps.
Possibility of Recession
In December 2019, Express Employee Professionals conducted a survey interviewing some 585 human resource professionals, decision-makers, and businesses. Of them, 46 percent believe that Canada is unlikely to enter into recession during the next 2 years. Still, 20 percent of respondents foresee a recession in 2 years, 18 percent believe that recession will hit in 1 – 2 years, and 12 percent see it coming in 6 months to 1 year. While growth will remain modest, experts share the view that recession is not expected in 2020. The main factors that fuel growth are residential investment, a vibrant housing market, and a strong job market. The real estate market experienced a decline between 2018 and mid-2019 mainly due to higher interest rates, the impact of the mortgage stress test, and restrictive policies introduced in Ontario and British Columbia. In 2019, the slowdown was offset by the creation of over 360,000 jobs in 10 months. Some 78 percent of businesses owners interviewed by Express Employee Professionals shared that they found it hard to fill job vacancies. Indeed, the unemployment rate in Canada has fallen to historic lows. Wage growth is mainly the result of labour shortages.
According to experts, Canada is unlikely to enter into recession at a time when wages are on the rise and unemployment rates are low unless the U.S. is hit by recession. In 2020, the U.S. economy is expected to grow by 2 percent, driven mainly by rising wages and a healthy labour force. Investment will also boost growth as businesses benefit from tax policy changes.
Labour Market Outlook and Jobs
In August and September 2019, Canada’s economy created about 81,000 and 53,000 jobs, respectively. Employment levels remained steady in all provinces and territories and increased in Nova Scotia and Ontario. While the economy added some 400,000 jobs in 2019, Canada is likely to face a tight labour market because more people are about to leave the workforce (late boomers) than enter the labour market (school graduates). Experts predict that from 2026 on, some 100,000 workers will leave the workforce on an annual basis. Immigration will result in a growth rate of 0.7 percent, and the share of immigrant workers will increase from 24 percent to 30 percent by 2040.
Labour Shortages by Province
A number of positions are in demand in Canada, including licensed practical nurse, welders, industrial electricians, and software engineers. Demand for jobs varies from province to province, however. According to the Newfoundland and Labrador Labour Market Outlook 2020, some 3/4 of job vacancies will be in sectors such as healthcare, government services, education, and social science, and equipment, transportation, and trades. Other jobs in demand include administrative, finance, and business occupations and service and sales occupations. Positions that are expected to experience the fastest growth are in sectors such as management, service and sales, utilities, manufacturing and processing, and health. Alberta will also experience labour shortages by 2025, including positions such as transit and motor vehicle drivers, home support and childcare workers, and medical technicians and technologists. Experienced professionals will be in demand across industries such as healthcare, computer and information systems, and transportation and construction.
The aquaculture, horticulture, and agriculture sectors are also expected to experience labour shortages, including positions such as supervisors and operators. In British Columbia, demand for workers exceeds supply as well, especially in sectors such as administration, finance, and business, sales and service, and equipment operators, transport, and trades and related. Other industries that are expected to face labour shortages include government, community, social, and law services and education, management, and healthcare. The sectors with the largest number of job openings include administration, finance, and business (167,000) and service and sales (187,000). Educational counselors, teachers, nurses, and wholesale and retail managers are also in high demand. In addition to high skilled occupations, businesses are looking to hire kitchen helpers, food counter attendants, and cashiers.
Canadian companies are also looking to hire foreign workers and offer work permit visas. Production, manufacturing, packaging, harvesting, fruit picking, and agricultural businesses are offering jobs across Canada. Foreign workers are offered jobs such as delivery driver, packer and picker, and general farm laborer. Other positions include forklift operator, security guard, textile factory worker, and baby doll maker. The construction industry is also hiring workers such as plumbers, welders, painters, and electricians. The hospitality industry is looking to hire waiters and receptionists. Accountants are also in demand.
Financial Markets and the Banking Sector
According to Deloitte Canada, a number of factors have a negative impact on the banking sector, among which changing work patterns, climate change, changing demographic trends, and a significantly reduced banking capacity. This means that only financial institutions that have differentiated capabilities and capabilities of scale will stay competitive.
When it comes to financial markets, Canada’s equity has grown by 18.3 percent in 2019, following countries such as Australia, Taiwan, Germany, the U.S., and New Zealand. In 2020, experts predict slightly better returns for Canada compared to 2019. Financials, materials, and energy make for about 60 percent of key stock. In 2019, the top performing industries on the Toronto Stock Exchange included technology, financials, utilities, and airlines. Experts predict that in 2020, top performing sectors will include technology, airlines, financial services, and electrical equipment and utilities. Companies with the best performing stocks will include Enghouse Systems Limited, Cargojet Inc., Kinaxis Inc., and Equitable Group Inc.
Jon B. says
That’s what I think as well – no recession in Canada for the foreseeable future. The unemployment numbers are not bad (when in doubt look at Europe’s numbers) and the economy is doing reasonably well. Good times ahead!
Jon, I’m not really sure why are you so upbeat on the Canadian economy? I thik we are way overdue for a recession and I also don’t think it’s fair to compare North American economy to European ones either.
What makes you think that we are overdue for recession? I honestly think that the fact that we haven’t had one in a while, doesn’t mean we’ll get one soon…
Samantha, I think with all the issues created by the Chinese virus epidemic we will see a recession sooner than later. I hope it is only a recession and not something worse…
Just look at the stock markets this week – absolute panic! Is it time to backup the truck and buy some discounted American shares or even discounted Canadian divided shares like Enbridge which yields 6.5% as of last Friday?
Indeed the markets have taken a beating, but this doesn’t mean there’s not more to come. If I’m to buy something now I would buy max 20% of my desired position and then take a “wait and see” approach for a bit. If the markets fall more then I would buy some more.
This is just my opinion and is not a qualified financial advice, so do your own research and act accoedingly :).