Tariff Exposure and Employment Change in Canadian CMAs: A Crisis Averted?

 

Well, we are now nearly six months into regime change in American foreign and trade policy and the subsequent the trade war and it is well worth seeing what the impact of the trade chaos and disruption has been on employment growth in Canadian cities since January.  Early in 2025, there was a highly publicized report by the Canadian Chamber of Commerce that ranked Canadian CMAs by their exposure and vulnerability to tariffs based on the trade component of their economies.  According to the report, the most tariff exposed cities – and likely to face high economic costs as a result – were Saint John, NB followed by Calgary, Windsor, Kitchener-Cambridge-Waterloo and Brantford Ontario.  Also high on the list after these five were Guelph, Saguenay and Hamilton. At the bottom – the least exposed was Sudbury followed by Kamloops, Nanaimo, Winnipeg and Regina. 

So, how has employment growth in these cities fared since January of 2025?  Figure 1 plots ranked data for Canadian CMAs obtained from Statistics Canada and used to calculate the percent growth in employment from January 2025 to July 2025 (using three-month moving average seasonally adjusted data).  A couple of notes. First, Prince Edward Island is included in Figure 1 treating the small island province as a CMA. It is not in subsequent figures. Second, Belleville-Quinte is not included as the employment growth over these six months came out to 90 percent and the official note mentioned there was a small sample issue and to use caution in interpreting – so out it went. There were small sample issues noted for several other CMAs, but they were retained as the percentage changes did not seem as extreme as Belleville. 

 

 

Figure 1 shows that Canada despite the trade war saw some employment growth going from 20,912,00 jobs in January 2025 to 21,019,900 jobs by July 2025 – an increase of half a percent.  Percent growth in employment was greatest in Red Deer (10.4 percent), followed by Hamilton (8.1 percent), Nanaimo (6.3 percent), Saint John New Brunswick (6 percent), Kamloops (5.8 percent) and Sudbury (5.8 percent).  Of these 41 CMAs, well over half – 25 of them – saw their employment grow since January 2025.  The remainder all saw their employment shrink to varying degrees with the worst hit being Windsor (-5.2 percent), Trios-Rivieres (-4.6 percent), Saguenay (-3.9 percent), Kelowna (-3.2 percent) and Kingston (-3 percent). 

 

 

Based on what were projected to be the worst hit cities because of their tariff exposure, it appears that there are some surprising anomalies.  For comparison purposes, Figure 2 plots the CMAs ranked from highest (most exposed) to lowest (least exposed) based on the February 2025 Canadian Chamber of Commerce study and ranking. Saint John, NB was ranked most exposed and yet at 6 percent growth saw the fourth highest gain in employment across Canada’s CMAs.  Calgary was ranked second most exposed but at 1.2 percent employment growth (well above the national performance) ranked 15^th highest in terms of CMA employment performance.  Most interesting of all is Hamilton, Ontario where there has been much gnashing of teeth and wailing about the demise of steel and its impact on the local economy.  Between January 2025 and July 2025, Hamilton went from 421,3000 jobs to 455,600 jobs – an increase of 34,300 jobs or 8.1 percent growth in employment.  Hamilton was ranked 8^th highest in terms of tariff exposure leading to  the expectation it would be nearer the bottom of any CMA employment growth and yet here we are at essentially first place in the country among major cities (because Red Deer’s numbers are also problematic given the small size of the sample apparently).

Now, at the same time, there are some cities where their negative employment growth has matched expectations given their tariff exposure ranking.  Windsor was ranked third highest in terms of tariff exposure and indeed has fared the worst of all the CMAs.  Trois Rivieres and Saguenay also were highly exposed to tariffs and in both cases are also at the bottom in terms of employment growth.  Sudbury, on the other hand was ranked least tariff exposed of all the CMAs and to expectations, its employment growth has been quite good ranking 6^th highest in the country.  

What this all suggests is that the impact of the trade war and tariffs has probably been more complex and variable on Canada’s assorted economies than one might have expected based either on resilience or local responses as well as other activities which may have taken up the slack.  Hamilton, for example, seems rather anomalous but the reality is that it has a large educational and medical sector and has become a major transport and logistics hub both due to cargo through its airport as well as the location of a large new Amazon distribution centre there. 

 

 

 

The relationship between tariff exposure and employment growth across these CMAs is further explored in the two remaining figures.  Figure 3 is a radar plot of ranked CMA employment against the tariff exposure index, and some very large divergences are obvious.  Saint John ranks quite high in terms of employment growth but there is an extremely large tariff exposure spike associated with it.  Calgary also is approximately in the top third of employment growth but also has a rather large tariff exposure spike.  Figure 4 does a scatterplot with trend charting the relationship between employment growth and the tariff exposure index.  Greater tariff exposure is indeed related to lower employment growth on average but there is a lot of variation around the trend.

All in all, some cities have done much better than one might have expected, some have done worse, and some have been bang-on.  The factors accounting for this variable performance are probably as numerous and unique as the performance differences and greatly influenced by local economic conditions and responses.

Charting CMA Population Growth in Canada

 

The news that the Greater Sudbury CMA is poised to reach 200,000 people much sooner rather than later highlights how Canada’s recent population surge has begun to permeate even regions and cities that for years have seen rather lack luster population and economic growth. In the case of Sudbury, the city’s Mayor has made it his goal to grow the city-region’s population to 200,000 by 2050 and given that it is 2025 and population seems to be over 190,000, it is apparent the Mayor may still be in office by the time the goal is reached and thus able to personally celebrat the achievement. 

Meanwhile, Thunder Bay has embarked on a “Smart Growth” Plan that among other things also seeks to attract new residents and population though it has not set a goal for population. Such goals and forecasts are dangerous given that the urban renewal schemes of the 1960s forecast that Thunder Bay (The Lakehead) was going to hit 186,000 people by the 1980s. Yet, even in Thunder Bay, the news is that population growth has been higher than anticipated in recent years with international migration boosting the population of the CMA to over 130,000.

All the optimism for growth in Northern Ontario’s two major urban areas is a cause for celebration given what have been decades of low expectations and performance.  At the same time, one needs to place the recent performance of northern Ontario’s premiere cities into comparative context.  When one looks at the growth of population of Greater Sudbury, and Thunder Bay relative to other Canadian CMAs, the results suggest that even when growth picks up, the lag abides.

 

 

Population data for Canada’s CMAs from Statistics Canada is used to plot several charts to provide some context for the last statement.  Figure 1 plots Canada’s population by ranked CMA in 2001 but by the current number of CMAs which have increased since that year (for example, Red Deer, Drummondville, Nanaimo, Kamloops and Chilliwack were not CMAs in 2001 but have since grown to over 100,000 people). Not surprisingly, Toronto, Montreal and Vancouver were the top three CMAs at 4.9, 3.6 and 2.1 million people respectively. Of the forty CMAs shown in Figure 1, Greater Sudbury ranked 21^st out of 40 with 164,210 people while Thunder Bay ranked 31^st.  Below Thunder Bay were Moncton, Peterborough, Bellville, Kamloops, Lethbridge, Nanaimo, Drummondville, Chilliwack and Red Deer. 

 

 

Fast forward to 2024 and Figure 2. In 2024, Toronto, Montreal and Vancouver were still the three largest CMAs at 7.1, 4.6 and 3.1 million people respectively.  Greater Sudbury, even with nearly 192,000 people, had fallen to 25^th place while Thunder Bay with 133,000 had fallen to 34^th place out of 40.  Figure 3 plots the percent growth in population from 2001 to 2024 for these 40 CMAs and here the evidence shows that population growth was the highest in Calgary, Edmonton, Kelowna, Red Deer and Chilliwack with growth ranging from a high of 82 percent for Calgary to a low of 59 percent for Chilliwack. In terms of growth rates, Greater Sudbury grew 17 percent putting it in 37^th place in terms of population growth while Thunder Bay at 5 percent growth came 39^th out of 40^th.  While second last place in the population growth sweepstakes is better than last – the honour which went to Saguenay – it was not a sterling performance.  

 

 

On the plus side all CMAs saw growth from 2001 to 2024 but in the end it is both growth per se as well as relative growth that matters if you are seeking to promote a growth agenda.  Of course, the key question is why Thunder Bay (and even Sudbury) have continued to do so poorly when it comes to the relative population growth sweepstakes.  Bear in mind that population growth per se is only one indicator of economic performance and the presence of economic opportunity.  Rising per capita incomes and by extension individual economic welfare require the economy to grow faster than population.  Thunder Bay and Greater Sudbury have done somewhat better in terms of per capita income growth.  For example, out of 64 major Ontario communities ranked by CMHC, Thunder Bay and Sudbury rank 41^st and  21^st  respectively in terms of average household income before taxes placing them closer to the middle of the distribution.

Still, despite the celebration of recent population and urban growth, it remains that Greater Sudbury and Thunder Bay are at the bottom in terms of their population growth when it comes to wider comparisons with the rest of Canada. And even worse, Sudbury’s population growth rate since 2001 has been three times that of Thunder Bay at 17 versus 5 percent. Thunder Bay appears to have been particularly afflicted by low overall growth both in terms of its economy and its population and the question is why?  Is it a function of remoteness?  Likely not as many of these CMAs have as many locational disadvantages as Thunder Bay which likes to boast it is in the middle of the country at the confluence of major transport links. Is it the absence of resources or skilled labour?  Again, likely not given its location in the mineral and forest rich shield and the presence of both a community college and university in the community.  

This leads to another factor – institutions, or the arrangements that people have for dealing with one another.  What is it about Thunder Bay in terms of the environment of the community both in terms of local culture and governance that may be militating against growth?  I would argue that it is the absence of competitive behaviour and the prevalence of monopoly that has most stifled the city’s economic growth and development.  In this regard, Thunder Bay is a microcosm of what ails Canada as a whole – a country that has long tolerated monopolies and oligopolies in its economic fabric as manifested in its banking, telecommunication, transport and retail sectors.

In Thunder Bay, this type of non-competitive behaviour that often seeks to block entry of new firms through lengthy approval processes has been compounded by a monopoly municipal government in the wake of amalgamation that has also effectivelt stifled local initiative and innovation (it is no coincidence economic growth in the city dramatically slowed after the merger of the ultra competititve cities of Port Arthur and Fort William in 1970) and a growing reliance on the public sector as the main driver of activity.  If one looks at Thunder Bay, one third of the population essentially works for the public sector and one third is retired or not working and deriving the bulk of its income from some sort of public sector pension.  The remaining third is your private sector and even they are essentially tailoring their businesses to attracting the spending of either the public sector directly via public sector construction projects and contracts or those who derive their incomes from public sector pensions.   With the taxpayer footing the bill in one form or another, there is little incentive for competitive behaviour even in the local private sector and their captive market often results in cost overruns especially on public sector projects.

Needless to say, it is amazing that Thunder Bay's population has grown as much as it has.

No quick fix for Ontario’s economic decline

 This originally appeared in the Fraser Institute Blog, August 13th.

 Ontario continues a decades-long economic malaise. From time-to-time economic analysts arise to point out the decline only for the news to be treated as so much water off a duck’s back. Indeed, the complete picture as measured by real per-capita GDP has evolved to the point where the response should be alarm rather than concern.

Moreover, the solutions now being advanced by the Ford government (and others) to move Ontario’s economy forward are quick big fix projects that do not address economic fundamentals. Despite an economy considered Canada’s powerhouse in terms of size, export intensity, and manufacturing depth, the trends are disconcerting. This is not a short-term aberration attributable to the tariff disputes with the United States but a sustained inability to effectively grow the economy.

The chart below plots Ontario’s real per-capita GDP (in 2020 dollars) along with the average real per-capita GDP of the rest of Canada from 1926 to the present using data from Finances of the Nation. For most of the last 100 years, Ontario has been the wealthiest province in the Canadian federation as measured by real per-capita income. Moreover, the gap has usually been substantial.

 

 

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For example, in the 1920s, the per-capita income of the rest of Canada was about two-thirds that of Ontario. This proportion persisted well into the early 1970s at which point it began to quietly erode. By the late 1970s, the average real per-capita GDP of the rest of Canada had reached more than 80 per cent of Ontario’s. The economic boom of the 1980s masked Ontario’s decline but the period since the 1990s has seen its relative decline continue and the per-capita GDP of the rest of Canada now is just over 100 per cent that of Ontario.

In 1960, Ontario has the highest real per-capita GDP of all 10 provinces. By 1990, it was in second place just behind Alberta but ahead of British Columbia. In 2005, Saskatchewan surpassed Ontario moving it to third place while by 2022 Ontario’s rank had moved to fifth place. Essentially over the course of just over half a century, Ontario went from the top province in terms of per-capita GDP to mid-ranked. Ontario is exhibiting more characteristics associated with the Atlantic provinces—Ontario received equalization for the first time in 2009—than the more dynamic western parts of the country. A province that once had hopes as high as the tallest tree, now is lucky to aspire to economic heights akin to a lilac bush.

What has happened to Ontario is more than a re-equilibration of the federation as resource rich provinces developed or the effects of adjustment to a more competitive free trade world in the wake of the FTA and NAFTA. Simply put, Ontario has experienced a productivity decline rooted in a failure to boost business investment. While Ontario is a mineral and resource rich province, it has been unable to bring resource projects online—the Ring of Fire a case in point. This has been accompanied by a governmental and business culture focused more on process and regulation than on trying to get things done and a cultural shift to gaining wealth through supply restraint and asset appreciation rather than hard work.

Nowhere is this more evident than in housing investment where population growth has outstripped additions to housing stock. The regulatory framework towards getting projects approved, permitted and built is generally a labyrinth. Large amounts of both suburban and northern land were environmentally sequestered from development without steps to ensure density development creating artificial scarcity particularly in the Greater Toronto Sarea (GTA). The effects on new supply were worsened by the fact that new housing began to be treated as an investment by the public and a revenue source by governments given the plethora of tiny investor driven condo buildings and the development charges accounting for a large proportion of the price of new housing.

While there are signs that the Ontario government is finally trying to overcome these past missteps, it’s an uphill struggle given the continual grasping at quick fixes designed to promote rapid economic growth. The passage of Bill 5 gives the Ontario government the powers to establish special economic zones to speed up mining and other development projects. One suspects the goal is to speed up development in the critical mineral rich Ring of Fire area which has been on the cusp of development for decades but has yet to really go anywhere. Yet it may be too little too late as critical minerals are considered crucial for electric vehicle production but the demand appears to be slowing.

The Ontario government does not have a coherent economic strategy designed to boost long term productivity and investment but rather is hitching its wagon to quick fix large scale investment projects and the attraction of federal investment dollars in the face of President Trump’s economic and commercial assaults on the Canadian economy. Among the nation building projects that the Ford government would like federal support for are a tunnelled expressway under Highway 401, all season road access to the critical minerals of the Ring of Fire, new nuclear generation projects, and a new deep sea port on James Bay.

Ontario is also supporting the idea of an east-west pipeline made with domestically produced steel that would connect to a not-yet-built port of James Bay as well as a new rail line from the mineral rich Ring of Fire to mineral processing facilities in Western Canada. Strangely enough, Ontario has not put forward the enhancement of the vital east-west Canadian highway link passing through its north as a major nation-building project which is a curious oversight, instead leaving it up to municipalities to advocate.

In many respects, this aspirational mega project vision of economic development for Ontario is a serious case of déjà vu as many of these projects resemble a wish list from the 1960s and 1970s. Even developing deep-water ports on James Bay is a concept with a history stretching back to the 19th century. Some of these projects—such as new pipelines—are tied to resource development and are welcome given Canada’s comparative advantage in resources but a return to simple hewers of wood and drawers of water is also not where we should be going.

How does Ontario invest in 21st-century resource extraction in a manner that boosts high technology and create backward linkages into our tech and AI industries? How can Ontario break through the regulatory morass slowing the construction of homes, new resource projects and economic activity in general—regulations that in total have been estimated at 386,000 requirements? What will Ontario do to create tax incentives for business investment and individual labour supply, given that highest marginal personal income tax rates are close to 54 per cent?

Getting on the quick fix mega-project bandwagon is easy. Putting in place the environment that might help some of these projects succeed is not.

 

Municipal Employment in Ontario's North

 

Municipal public finances are always of interest to the average city resident given that municipalities are the level of government closest to the public providing important and much needed services.  At the same time, municipal ratepayers are sensitive to the taxation of their property and are always interested in indicators that shed light on efficient provision of municipal services.  In northern Ontario, the concerns are amplified by generally weaker property tax bases and a greater reliance on both residential taxation as well as borrowing in order to get things done.

One important indicator is municipal employment given that wages and salaries often account for two thirds or more of city budgets.  In the case of Ontario, data is readily available from the Financial Information Returns of the Ministry of Municipal Affairs.  Figure 1 plots total municipal employment (FT, PT and Seasonal) for northern Ontario’s five major urban centers as reported in the FIR reports from 2001 to 2023 (only 2022 for Thunder Bay as at the time of putting this blog post together, it appears the report has not been filed yet).  

 

 

All municipalities except for North Bay have seen employment trend upwards but with some substantial differences.  Thunder Bay saw the largest increase at 44.7 percent followed by Greater Sudbury at 18.2 percent, Timmins at 15.8 percent, the Sault at 14.1 percent and finally North Bay at only 0.4 percent.  As well, of these five cities, Thunder Bay has the largest municipal workforce clocking in at 3,404 in 2022 compared to (2023 numbers) 2,647 for Greater Sudbury, 1501 for The Sault, 827 for North Bay and 957 for Timmins.

 

 

Of course, the total numbers can be misleading given that these cities vary in population size, so Figure 2 calculates the total number of municipal employees per 10,000 population and again plots them for the 2001 to 2023 period.  Here the numbers partially parallel Figure 1 given that Thunder Bay even after adjusting for population has usually had the most municipal employees per 10,000 population.  At the end of the time-period, Thunder Bay had 313 municipal employees for every 10,000-population compared to 158 for Greater Sudbury, 191 for the Sault, 157 for North Bay and 233 for Timmins.  Finally, Figure 3 plots the percent growth in municipal employees per 10,000 population since 2001.  Here, Thunder Bay again tops the list at 49.4 percent growth followed by Timmins at 24.7 percent, Sudbury at 24.0 percent, the Sault at 13.4 percent and North Bay at 2.6 percent.  

 

So, the numbers pretty much speak for themselves.  Of course, one might argue that some cities have much larger numbers of municipal employees than others because they provide more services or have chosen to structure the delivery of services in a manner that best meets the needs of their ratepayers and that requires more staff.  On the other hand, municipal politicians at budget time often lament that their hands are tied by provincial legislation that pretty much mandates everything that they do and as a result all they can do is pass the costs down to ratepayers.  The question that arises in that case is why such widely varying numbers of employees if everyone is providing similar services because of provincial mandates?  Of course, the answer is probably more complicated than this simple analysis allows for but one wonders what it is.