When Budget Requests Collide: Thunder Bay 2026

  

Thunder Bay has released its planned 2026 operating budget and as usual there are a plethora of numbers, facts and figures splashed across our local media.  This year’s budget is especially interesting given that in the lead up to its release, the messaging from The City was that the tax levy increase would be held to 2.6 percent.  However, as it has emerged, this initially did not consider the rather large request from the Police Services Board of a 9.1 percent increase for their requirements as well as larger requests from other external boards. Apparently, those are 'external' and the City itself has done a good job of keeping its increases to 2.6 percent though one should add City Council needs to approve all of these increases if they are to go forward.

Given that police services alone account for 22 percent of the property tax levy, this has bumped up the proposed municipal levy increase to 4.4 percent though the City as usual is doing its after growth schtick and saying it is only 4 percent. With the Growth Plan setting 3 percent in the assessment growth as a target, we can joyfully anticipate the day when there will be a 4 percent levy increase but which only amounts to 1 percent after growth. And as usual, one also needs to factor in the rate-supported budget in all of this. The average residential household will see a 4.1 percent increase in their total Water and Wastewater charges bring the average per household up to $1,479.88 from $1,436.84.  As a further note, The City will also be expanding its employment in 2026 adding 57.1 Full Time Equivalent positions in areas such as safety and security, growth, service delivery and to run the 2026 municipal election.

 

As has been my practice, the accompanying figure plots Thunder Bay’s tax levy increases since 1990 to provide context.  The last four years have seen a distinct increase in the tax levy not only from the lows of the pandemic but from the period immediately pre-pandemic.  Over the 2023 to 2026 period, the levy increases average 4.7 percent putting this year’s increase slightly below the four-year average but well above the 2015 to 2022 period average of 3 percent.

Of course, the budget still must be ratified and there is a period of public input but the current Thunder Bay City Council is not likely to push back much against what is being asked for even if public opposition emerges given their performance last week largely endorsing the sale of public properties and development as proposed to build new density housing projects in established neighbourhoods. On the other hand, the debate will be interesting to monitor to see what finally emerges given that we are going into an municipal election year. 

 

 

Recent Labour Force Performance: Thunder Bay and Sudbury

 

Welcome to 2026! While everyone is interested in what 2026 will bring economically, it is also important to review what the recent trends have been. While 2025 has been an economically tumultuous year for Canada, in the end the Canadian economy has performed more resiliently than one might have expected.  This is also the case in northern Ontario’s two main urban centres of Thunder Bay and Sudbury.  The accompanying figures plot monthly labour force data from Statistics Canada over the 2011 to 2025 period for the two cities for four variables: total employment, the unemployment rate, the labour force, and population aged over 15 years of age.

 

 

The most interesting development is when comparing pre and post pandemic employment levels (Figure 1) which suggests that there has been an upward trend in job creation in both cities since 2020.  It turns out that 2025 continued this trend with Thunder Bay going from about 66,200 to 69,100 jobs over the November 2024 to November 2025 period – an increase of 2,900 jobs or 4.4 percent. Over the same period, Sudbury saw an increase in employment from 90,400 to 94,800 – an increase of 4,400 jobs or 4.9 percent.  While Sudbury had relatively greater employment growth, interestingly enough, its unemployment rate in 2025 was higher than Thunder Bay’s (Figure 2). By the end of 2025, Thunder Bay’s unemployment rate was just under 5 percent while Sudbury’s was nearly 7 percent. 

 

 

The reasons for this is that compared to Thunder Bay, Sudbury had a faster rate of both labour force and population growth in 2025 (Figure 3 and 4) relative to jobs created. Sudbury’s working age population in 2025 grew nearly 2 percent, while its labour force grew just over 6 percent.  On the other hand, Thunder Bay's  population growth in 2025 remain flat after several years of growth while its labour force nevertheless rose 4.5 percent as participation rates increased. 

 

 

Needless to say, both Thunder Bay and Sudbury did quite well in 2025 when it comes to employment creation and this naturally bodes well for the coming year.  While northern Ontario’s economy still faces challenges going into the new year as a result of the continuing economic adjustment to a more tariff prone United States (Sault Ste. Marie and its steel industry comes to mind), its resilience so far bodes well for the future.  It is important that the region remains alert and on guard to take advantage of new opportunities as they emerge.

 

Canada: Economic Outlook for 2026

 

It is that time of the year and every good economist should offer their thoughts for the coming year’s economic performance.  However, forecasting the outlook for Canada’s economy in 2026 is ultimately an exercise in caution given the large number of domestic and international economic moving parts.  The trade and tariff situation between Canada and the United States including the future of CUSMA is an important variable as is the large number of proposed infrastructure and nation building projects and increased defence spending all which are sources of stimulus.  Then there are the efforts at export diversification and the role of prices for Canadian resource commodities. At the same time inflation and economic uncertainty may dampen consumer confidence and spending along with the headwinds of flat home construction and population growth which have been major drivers at least in terms of overall though not per capita economic growth.

A worst-case scenario would see CUSMA falling apart and a new set of higher tariffs shocking the Canadian economy and prompting capital outflow.  New tariffs would further depress exports.  If planned national infrastructure projects are bogged down, then that source of stimulus would not be there.  The economy would likely enter a recession with the loss of several hundred thousand jobs and the unemployment rate rising to the 8-9 percent range though inflation would likely moderate to below the 2 percent target.  On the plus side, lower inflation would result in downward movement of the Bank of Canada Overnight Rate to below 2 percent. 

Real GDP growth in this worst-case scenario would be negative but hopefully not catastrophic given the large amount of fiscal stabilization government spending is already injecting into the economy and the self-directed efforts by more Canadians to spend and travel domestically.  However, the Canadian political situation could be a factor in further making a worst-scenario case worse if the minority government falls plunging the country into the uncertainty of a federal election and both Alberta and Quebec announce they are going to hold referendums on separation leading to additional outflows of capital and investment.

However, there are reasons to be optimistic that 2026 will be at least as good as 2025 if not better.  Indeed, the recent update of GDP growth numbers by Statistics Canada suggests the Canadian economy has more steam than one might expect.   In the face of trade disruption and uncertainty, Canada’s economy in 2025 has been more resilient than one initially might have thought. High government spending for the time being is already injecting stimulus into the economy and the self-directed efforts by more Canadians to spend and travel domestically has been its own domestic stimulus program.  In the end, while there has been an impact of U.S. tariffs on specific Canadian sectors such as autos, steel and aluminum, it remains that most Canadian trade with the United States that is under CUSMA remains tariff free.

Going forward, despite President Trump’s rhetoric, the United States does need Canadian exports and there is eventually going to be some type of trade agreement that will ensure reasonable access to the American market.  If all goes well in terms of resolving trade issues with the United States, there is no major international crisis that disrupts trade, there is a start on one or two major infrastructure projects, some stimulus from defence spending, continued export diversification and commodity prices strengthen, then one might even see robust real GDP growth in the 2-3 percent range with the unemployment rate falling to the 5-6 percent range as hundreds of thousands of new jobs are added to the economy.   Indeed, faster than expected growth may put inflation well above the Bank of Canada target range resulting in higher interest rates and even a higher exchange rate relative to the U.S. dollar.

So, economic outcomes in 2026 are uncertain but the evidence suggests that when push comes to shove, the U.S. will have to negotiate some type of arrangement with Canada and Mexico if it does not want to harm its own economic welfare.  Even a cross between the best- and worst-case scenarios outlined here would be a reasonable economic outcome in terms of growth and employment.   I think guarded economic optimism is a good way to sail into the New Year.