Well, it is nearly year’s end and for Thunder Bay, time for a
retrospective on economic things past as well as a brief look ahead. Thunder Bay has had a particularly good year
given that population is growing, construction is up, and the Port is doing the
best it has in years. The really big driver in Thunder Bay this past year would
have to be the construction sector given the continuing construction of the new
more than one-billion-dollar provincial prison as well as substantial rental
accommodation construction. In the case of the jail, as the Conference Board
noted in its November 2024 Metropolitan Report on Thunder Bay’s economy: “Work
on the jail really helps.” Think about
it, Thunder Bay’s GDP is just shy of $6 billion. A project the size of the jail represents a
massive distortionary shock to the local economy.
There are many workers who are commuting to Thunder Bay for
the construction work or commuting through Thunder Bay to work at the mines and
this has helped buoy demand for accommodation and services this year. Indeed,
local employment is up as well having grown from about 61,200 workers in 2021
to 63,700 by 2024 and is projected to reach nearly 65,000 in 2025 as current
activity continues. And our CMA
population is indeed up also and now expected to be well over 130,000. However, 65,000 seems to be the upper end of
our new “post forest sector crisis employment range.” Prior to the forest sector crisis in the
early 2000s, our employment used to fluctuate between 65,000 and 70,000. There has been a permanent downsizing of
local employment. Even the Conference Board has noted that: “Despite the
run-up, employment remains below the 2003 all-time summit of 65,500 workers.”
Given the reliance on construction, the real concern is
moving into 2026 to 2027 when the provincial jail construction winds up given
the massive scale of the project. The projection for housing starts
coming from the Conference Board suggest an annual flow of less than 200 new
starts a year for the foreseeable future.
While the Art Gallery and the proposed Turf Facility may take up some of
the construction slack as the jail project winds down, neither of those
projects are of comparable scale to the jail project. If there is a silver lining to this, it is
that local homeowners might finally be able to get a hold of a local tradesman
to do their repairs and renovations.
By the end of next year, the full impact of changes to
international student visas will also have emerged which will more fully affect
the local post-secondary sector as well as local retailers that rely on
international student labour. Should the currently lagging lithium and
critical mineral projects finally emerge by this period, then they will likely
help take up the economic slack. Unfortunately, at present with the sales
of electric vehicles slowing, it appears that demands for regional lithium
development may have stalled for the time being. As well, the demand for forest sector
products remains weak. Indeed, when it
comes to GDP growth, the Conference Board notes that: “Thunder Bay’s real GDP
has essentially stagnated against this sombre backdrop. It is on tap to ease by
0.2 per cent in 2024, after rising only 0.1 per cent in 2023. We expect 2.0 per
cent growth in 2025. Local GDP growth will ease to 1.2 per cent in 2026 and 0.7
per cent in 2027, then return to 1.2 per cent in 2028”.
And then there is of course what the impact of President
Trump and the proposed tariffs may be on the local economy. It is of course unclear what the impact of
tariffs might be unless they are also applied to regional natural resource
products. There are industries in our area that ship to the U.S.
including wood and paper products, and minerals and a slowdown here may also
impact the Port of Thunder Bay. However,
the incoming US President is more of a known quantity this time around and the
evidence is that he is quite transactional with much of his behaviour designed
to stake out bargaining positions. Canadians should be prepared to wheel
and deal. It will be a tumultuous year
to be sure with President Trump sending out assorted signals about how he feels
about Canada.
