As 2023 winds
down and 2024 arrives, a retrospective combined with a look ahead on the economy
is a timely exercise. The economic
indicators to date for 2023 suggest that Thunder Bay has had a very good
year. Average monthly employment in 2023
to date is up about 3 percent over 2022 – representing nearly 2,000 new jobs. However, while average monthly employment
appears to have recovered from the pandemic, it has yet to permanently surpass the 2018
level. However, on the plus side, the
accompanying figure suggests that Thunder Bay’s employment does appear to be on
a modest longer-term upward growth trend after years of being seemingly flat. As well, the seasonally adjusted
unemployment rate remains around 5 percent and the average for 2023 is lower
than 2022 which suggests that the local labor market does not have a lot of
slack in it.
Along with employment
opportunities being generated in large public sector construction projects in
both the city and the region, there is also substantial activity in the local
retail and tourism /hospitality sector with the opening of new retail and food service
outlets as well as a very successful cruise ship season. The port has also seen growing grain
shipments as Thunder Bay resumes much if its traditional role in Canada's grain transport network. On the housing front, while
starts are not at historic highs, there nevertheless has been substantial activity
particularly in the multi-residential unit sector. Overall, Thunder Bay has seen healthy
economic activity despite the recent rise in interest rates. This is the result of
continued activity in its traditional sectors of construction, forestry and
port activity combined with activity on the mining front. As a result,
population can be expected to grow albeit at rates still well below provincial
and national growth rates.
Perhaps the
biggest impact locally is the construction of Thunder Bay’s $1.2-billion provincial jail which
until completion in 2025 will drive Thunder Bay’s labor market and economy
even if the Canadian economy slows down in 2024. At the same time, the massive
project has complicated the availability of local trades people with lengthy
waiting lists for electricians, plumbers and carpentry services for smaller
projects and home renovations assuming that you can even get trades people to agree to come. However, completion of the jail project will
likely see a ramping down of economic growth in the economy and in the absence
of equally large new projects some alleviation of a relatively tight labor market particularly
in building trades.
According to the Conference
Board of Canada, housing starts in Thunder Bay are expected to grow but the
numbers in their forecast seem unlikely to meet the 275 annual units required
to meet provincial targets. Nevertheless,
Thunder Bay appears to be pressing forward with plans to apply for federal
funding to build two thousand homes over the next three years - over 600 new units a year. An average of 600 to 700 new homes a year is
an amount that has not been seen in Thunder Bay since the baby boom years of
the 1960s and 1970s. Ultimately the
success of such a grand scheme depends on local demand and this depends on what
interest rates are like, what the state of the economy is and whether people
have the incomes and purchasing power to pay for the housing. Never mind if enough building trades people
are available to actually do the work.
Going into 2024
and as noted in the most recent Conference Board Report, one can expect to see employment growth in construction, transport and warehousing,
health care and social assistance, accommodation and food services and public
administration. Other sectors such as
manufacturing, utilities, professional and scientific services, and educational
services are expected to remain flat or even decline slightly. Declines can particularly be expected in the
areas of educational services given regional demographics and public funding
levels, as well as the local FIRE sector (finance, insurance, real estate) given
the rise in interest rates. The post-secondary
sector in Thunder Bay is also in uncertain territory given the dependence on volatile
flows of international students and lack of clarity from the provincial government
as to what directions in funding it may pursue in the wake of the Blue-Ribbon
Panel Report. While the Blue-Ribbon Report called for increases in tuition and
the provincial government grant to post-secondary institutions, the
government’s response to date has been to continue to seek efficiencies which
means the structural problems of university finances are unlikely to be
resolved anytime soon.
Going forward
there is also some economic uncertainty on several fronts. It remains to be seen what the long-term
outcome of the sale of Resolute Forest Products to Atlas Holdings will be on both
local production and employment levels. The
future of the Alstom plant is also always precarious in the absence of a major
transit project to generate longer-term employment. As for the future of lithium refining in the
region by companies such as Rock Tech Lithium, Toronto’s Avalon Advanced
Materials and Green Technology Metals of Australia, there are positive
expectations that these projects will finally trigger the long-awaited mining
boom given the flurry of recent announcements and media stories.
However, despite
purchases of waterfront land, to date these are all plans, and the industry
appears to be waiting for public money to assist their development. It is unclear if any of these companies will
be able to raise the necessary funds either publicly or privately to finance
their activity in the face of international competition in the industry with
other players with their infrastructure needs already in place. As well, demand for fully electric vehicles –
a key driver of the demand for lithium – has also been exhibiting weakness
given the cost of the vehicles, their range, the availability of charging
facilities and competition from alternatives such as hybrids as well as
traditional gasoline powered vehicles.
As a result, the lithium refining industry in Thunder Bay and Canada while hopeful in its signs, may
remain a work in progress for the foreseeable future.
Of course, in
terms of what Thunder Bay can do to deal with all these changes and the
economic uncertainty does not have a simple answer. Thunder Bay, much like Canada as a whole, is
a small economy unable to influence global economic and political trends beyond
its borders. Nevertheless, given the
current buoyancy in the local economy, it is important to make hay while the
sun shines. Going forward, Thunder Bay
must continue to make itself as attractive a jurisdiction for business investment
as it can. That means continuing to
provide quality of life amenities, a range of useful and timely services for
all demographic groups and a competitive local municipal service and tax
environment. Needless to say, at
particularly at the municipal level, there will be a need to provide more while
keeping the tax burden down – a tall order to fill at the best of times.
