NORTHERN ECONOMIST 2.0

Tuesday, 29 September 2026

Are We Over Reacting to July’s GDP Growth Rate?

Today’s release of July’s real GDP growth of close to zero by Statistics Canada has been interpreted as Canada’s economy stalling and a portent of ominous things to come as the trade dispute with the United States worsens. However, it is only one month’s result and needs to be put in some comparative perspective.

Figure 1 plots monthly real GDP growth since January of 2024 and compared to the previous three months July does look like a precipitous drop. However, if one goes back for several years, there have been other very low growth months (March 2024, August 2024, June 2025, March 2026) not to mention several months of outright decline (November 2024, February 2025, April 2025, May 2025, October 2025, January 2026). Indeed, over the entire 1997 to 2026 period, average monthly real GDP growth has only averaged 0.2 percent with the highest being June of 2020 at 5.8 percent and the lowest April 2020 at -10.4 percent – both during the initial phases of the pandemic.

Figure 2 provides another comparison. The real GDP growth rate for July of every year since 1997 is provided along with aggregate statistics for every July as well as for all the months the entire 1997 to 2026 period. At 0.02 percent, July 2026 is effectively zero but there was negative growth in the July of 1998 2001, 2007,2017 and 2023. Of these 30 Julys, July of 2026 is near the bottom, ranked at 24^th place. However, there have been six other July real GDP growth rates lower than July of 2026.

In other words, there is no point in overreacting to one month’s poor result after three months of consecutive growth. As Statistics Canada itself notes: “The goods-producing industries grouping was essentially unchanged in July as increases in construction and utilities were offset by declines in the other sectors comprising the aggregate. The services-producing industries aggregate was essentially flat, as increases across several sectors were offset by declines in retail trade and wholesale trade. Overall, 10 of 20 industrial sectors expanded in July.”

In general, summer in Canada is short and maybe more people than usual took time off and production slowed. Moreover, July of 2026 also saw wildfires peak in several parts of the country and this may also have been a factor especially when it comes to the service sector as more people remained indoors.

Wednesday, 23 September 2026

The Weakening of Canadian Per Capita GDP Growth

Lost in all the angst of our current trade dispute with the United States and the push to diversify Canada's export partners is the fact that despite what were very favourable market access terms via free trade arrangement with the United States and the subsequent growth in our exports, our real per capita GDP performance has been moribund. Our only saving grace has been that we entered the period of decline in per capita GDP growth rates marking the last fifty years from an exceedingly high base. Figure 1 plots IMF-WEO data on per capita GDP in constant prices ($2021) for Canada and a select number of important important countries and trade partners. As hard as it might be to believe, in 1980, once adjusted for purchasing power parity, real per capita GDP in Canada was higher than the United States and the E.U.

If one then moves forward, what is remarkable is our performance against these - albeit cherry picked - comparison countries. Most of them are either important trade partners for Canada or have the potential to become more important (especially in the case of the E.U. and the UK) in the wake of the current trade dispute with the United States. Our real per capita GDP is still high by world standards in that we are well above China, India, South Africa, Mexico and Brazil, not to mention New Zealand and Japan. However, the U.K. and the E.U. have nearly caught up with us. Australia and the United States surpassed us some time ago. Our real per capita GDP has grown but just about everyone else has grown faster.

Figure 2 presents the ranked implied annual growth rate of the real per capita GDP numbers in Figure 1 and also includes those for the World economy as a whole. China and South Korea are the prime examples of the Asian miracle with annual growth rates since 1980 at 7.6 and 4.8 percent respectively. This has allowed per capita income in China to double nearly every ten years which is an impressive performance even if they are still at an average per capita GDP that is half of Canada's. South Korea started from a higher base than China but also has had a stellar performance with its per capita GDP doubling every 15 years since 1980 and at 98 percent of Canadian per capita GDP has essentially reached parity with us.

The world has developed rapidly since 1980 with the world per capita GDP growth rate being a bit below South Korea's and that has been driven by two of its largest economies - China and India. The United States and Australia and the U.K. in the end have seen their real per capita GDP expand by just under 2 percent annually while the E.U. and Japan are closer to 1.5 percent. Canada clocks in at 1.1 percent in terms of its annual implied annual growth rate - below New Zealand at 1.3 percent but above Brazil, Mexico and South Africa.

For all the talk about the E.U, as a sclerotic trade partner for Canada given its productivity issues, it has grown faster than Canada and its per capita GDP is also for all intents and purposes on par with Canada. These types of growth numbers should be a wake up call for Canada. We have only done as well as we have because of inertia and that cannot last for ever.

Wednesday, 16 September 2026

The Trade War and Employment: So Far So Good

The current trade war between Canada and the United States has been now underway since March of 2025 with the imposition of 25 percent tariffs by the United States on Canadian steel and aluminum which then saw our own retaliatory tariffs. Since then, there has been back and forth tariffing culminating in the latest onset of 50 percent U.S. tariffs on a range of Canadian goods (including toilet paper of all things) followed by our September 8^th retaliation of 15, 25 and 50 percents counter tariffs on a range of U.S. products. Since then, the Americans signalled that there are some products they need from Canada more than they are willing to admit (like toilet paper) and has removed tariffs on them – road salt, cement and bottoms up everyone – toilet paper.

What the impact of the tariffs and trade disruptions have been on the Canadian economy is an important consideration and to date the Canadian economy appears to have been relatively resilient based on the latest GDP growth numbers as well as the employment numbers. In term of GDP growth, there was second quarter growth of almost 1 percent in the most recent release led in part by higher exports of all things. There seems to be some diversification of our exports underway given that trade volumes with the U.S. are flat.

As for employment, August 2026 did see a monthly drop in employment relative to July of 42,000 jobs but what is important is not month to month but more annualized numbers. Over the August 2025 to August 2026 period, employment in Canada has grown, notwithstanding the trade war. However, the composition of that employment change is interesting. Moreover, Ontario has fared better than one might have expected given its manufacturing exposure via the automobile sector.

The accompanying figure plots the percent change in employment for Canada, Ontario and Canada minus Ontario over the August 2025 to August 2026 period. At the left of the figure, employment growth is provided for total employment, goods sector employment and then service sector employment. After that, employment growth is also provided by class of worker and industry (Statistics Canada Table 14100376). To start, total employment (not seasonally adjusted) over the course of twelve months has grown by one percent in Canada – almost 213,000 jobs. Of these, 23,500 were in the goods sector while 189,400 were in the services sector. Ontario added 119,100 of these jobs with 4,700 in the goods sector and 114,400 in the services sector. The trade dispute with the Americans has certainly slowed the growth of goods sector employment but not so much the service sector. If one looks at Canada minus Ontario, total employment grew by 93,800 jobs with goods accounting for 18,800 and services 75,000 jobs.

When broken down in more detail, the results are also quite interesting. The agricultural sector is not doing as well with employment shrinking by 5 percent in Ontario and 2 percent in the rest of the country. Natural resources (fishing, hunting, mining, quarrying, oil and gas) is down nationally overall but grew by 12 percent in Ontario or 5300 jobs while it shrank by 7100 jobs in the rest of the country. It seems Ontario’s northern mining sector is finally getting some traction. Employment in utilities is down pretty much everywhere while construction employment is down in Ontario but up in the rest of the country.

Paradoxically, over this twelve month period, manufacturing employment is up in Canada by 1.5 percent nationally (28,500 jobs), 1.8 percent in Ontario (15,200 jobs) and 1.3 percent in the rest of the country (13,300 jobs) outside Ontario. Transport and warehousing employment is up everywhere but wholesale and retail trade are down. The finance, insurance and real estate sector is up in Ontario but down in the rest of the country. Then there is public administration which is down everywhere and likely reflects federal government downsizing of employment which one certainly cannot blame on tariffs. As well, education sector employment is down in Ontario but up slightly in the rest of the country while the health and social assistance sectors as well as the information culture and recreation sectors appear to have gained a lot of jobs in percent terms.

So, what is one to make of this? While despite the language of there being a “Trade War” in progress, it needs to be realized that most goods being exported and imported between Canada and the United States are not subject to tariffs and business is continuing as usual. Jobs losses are not concentrated where might one expect them to be with the losses in agriculture, education, public administration and utilities not easily attributable to tariffs. The effect on manufacturing has been muted though perhaps there has been some effect on wholesale and retail trade but certainly not transport and warehousing.

In short, things seem to be going better than expected for now. Despite the rhetoric, the trade war seems to be in its phony war phase.

Friday, 4 September 2026

Ontario’s August Employment Numbers: Yours to Discover

In the wake of Canada’s employment surge in July, August appears to have brought everyone back down to earth. According to the August 2026 Labour Force Survey, Statistics Canada reported that employment declined by 42,000 (-0.2%) in August though the national unemployment rate remained unchanged at 6.4%. Employment fell in business, building and other support services, public administration, natural resources and utilities though it increased 1.2 percent in in manufacturing adding 22,000 jobs. Nevertheless, it should be stressed that one should not agonize over month to month numbers given they do not indicate a trend and are frequently revised.

While Ontario lost jobs according to the raw numbers once the numbers are seasonally adjusted, Ontario saw a small increase of 5700 jobs which essentially means that employment growth in Ontario was lacklustre in August. If one examines the seasonally adjusted numbers for Ontario and its major urban areas in August (Figure 1), Windsor, Toronto and Guelph added 6100, 5900 and 2600 jobs respectively. It’s pretty much downhill from there in terms of the absolute number of jobs added with Thunder Bay, Oshawa, London, Hamilton and Ottawa seeing job losses. Indeed, Hamilton and Ottawa were the hardest hit with Hamilton seeing 5100 jobs lost and Ottawa – still seeing cuts in public sector workers – fell by 9200 jobs.

If one looks at the growth rates in annual terms (August 2025 to August 2026; See Figure 2), seasonally adjusted monthly employment is still up substantially with Ontario seeing 96,500 jobs added since August 2025 for an increase of 1.2 percent in employment. Guelph and Bellville-Quinte lead the annualized employment growth rates at 13.5, and 9.9 percent respectively followed by Windsor at 6.1 percent and Greater Sudbury, at 5 percent. Again, several cities saw negative employment growth with Thunder Bay and Kitchener-Waterloo-Cambridge at -0.3 percent, Hamilton at -1.4 percent and London at -4.5 percent.

The impact of tariffs and the trade war to date over the course of the year are not yet having a major impact in Ontario though the performance across some cities is a bit more mixed. Hamilton, London and Ottawa appear to be having the most turmoil in their employment. The monthly August numbers in the wake of the July surge cannot really be taken as indicative of any trend though the annualized numbers suggest Ontario is holding its own. As for the two northern Ontario CMAs, Figure 3 plots their longer-term employment evolution in more detail.

Both Thunder Bay and Greater Sudbury have seen increasing employment since 2021 based on both the profile of monthly numbers as well as the fitted trend. Since August of 2021, Greater Sudbury has added over 18,000 jobs while Thunder Bay has added 4700. In percent terms, employment in Greater Sudbury has grown by 22 percent while Thunder Bay has grown by 8 percent. However, Thunder Bay, based on these monthly seasonally adjusted numbers peaked in January of 2026 at an employment level of 70,400 jobs meaning that over the last eight months, it has shed 3800 jobs. This suggests that there has been a substantial slowdown in employment in Thunder Bay and may be tied to the winding up of major construction projects at places like the airport, assorted hotels and of course the new correctional facility as well as some reductions in public sector employment.

A return to the mid 60000s in total employment suggests that Thunder Bay will not be permanently staying above the 70000-job employment ceiling at least for now.

Monday, 17 August 2026

120,000 Could Be the Tip of The Iceberg

A CBC story this morning stated that “applications from people around the world seeking Canadian citizenship certificates have been rising rapidly in recent months, fuelled by thousands of applications from the United States.” Under Bill C-3, those who can prove they were descended from a Canadian ancestor even if that ancestor left several generations ago can now apply for citizenship. Apparently, half of the applications are from the United States and the number of applications in general has soared to the point where there are now about 120,000 applications for citizenship waiting to be adjudicated and processed.

This is potentially just a drop in the bucket given that since the mid 19th century, literally several million Canadians emigrated to the United States. The period from 1867 to 1896 prior to the opening of the Canadian west, was a period of relatively anemic economic growth in Canada and many residents of Canada crossed the border into the opportunities offered by the larger US economy.

Indeed, by the 1910 US Census, Canadians were one of the largest categories of foreigners in the United States. As estimated by G.E. Jackson in a 1923 article in the American Academy of Political and Social Science, between 1850 and 1920, 1,890,000 Canadian born citizens moved to the United States. Figure 1 provides a chart of the numbers on Canadian net emigration to the United States provided by Jackson in his article. Note the decline after 1900 as the Canadian wheat boom era and prairie settlement and the industrialization of central Canada offered more opportunities and slowed the outflow.

In 1910, there were 1,204,637 Canadian born residents living in the United States. One imagines that their descendants easily number ten-fold today. If there are 10 to 12 million Americans of Canadian ancestry, then potentially, there could be many more applications to come regarding the recovery of lost Canadian citizenship.

Of course, it is unlikely that there will be ten million applications for lost citizenship from the United States, but the ultimate numbers could be more substantial than one might think. In any event, this story certainly helps highlight what for many Canadians is a forgotten aspect of our past.