Thunder Bay's Economy: Rebound in 2022 With Future Stable

 

The July 2022 Major City Insights Report for Thunder Bay has been released by the Conference Board of Canada and it paints a picture of major and broad based economic rebound that is “firing on all cylinders”. According to the Conference Board:

 

·      Thunder Bay’s economy will rebound again in 2022 as forestry, tourism, and transportation boost economic activity to pre-pandemic levels. Real GDP growth of 3.9 per cent is forecast this year, down slightly from our forecast at the beginning of the year.

·      The economy’s recovery is expected to continue into 2023, but risks are plentiful, especially if the Bank of Canada is unable to contain inflation.

·      Thunder Bay is lagging the economic recovery province-wide, as real GDP in Ontario is already back to pre-pandemic levels. On the other hand, the city’s labour market has tightened markedly, even more than the province’s.

·      Continued economic recovery, a tight labour market, and the possibility of teleworking should help improve the city’s attractiveness to migrants. This could be an opportunity for the city, especially as the federal government ramps up international immigration targets over the next few years.

·      Real GDP is forecast to grow 1.0 per cent annually on average over 2023–26, while the city’s population will remain flat at around 125,000

 

While generally an upbeat report, it does note that Thunder Bay is nevertheless lagging the province wide economy, and this is expected to persist.  While Thunder Bay’s real GDP growth in 2022 is ranked fifth amongst 11 comparator CMAs (including places like London or Sudbury) for the 2023-26 period it is forecast to remain at number 11.  Total employment will recover to about 65,000 jobs (up from 61,000 in 2021) but will essentially remain around there until 2026.  Housing starts will also recover and return to their annual figure of circa 200 starts a year.  These are ceilings that has not been breached since the end of the forest sector crisis.  It should be noted that while the unemployment rate is very low, the shrinking of the labour force has been a factor in that.

 

Until the forest sector crisis of the early 2000s, Thunder Bay’s employment would essentially range from about 65,000 to 70,000 jobs.  Since then, there has been a permanent downsizing of employment in the city and has ranged from about 60,000 to 65,000.  Over the long term, there have not been sufficient long-term and sustained economic opportunities to boost growth above that.  And, with slow in migration and an aging population, the paradox of a growing labour shortage at a time when there has been an economic rebound has driven costs and prices of skilled trades and many renovations upwards. As well, it remains that much of the recent growth remains in broader public sector activities such as health and education – indeed educational employment surged in 2021 according to the Conference Board.

 

At the same time, the report points out opportunities in tourism, transportation and manufacturing, and resources and while high inflation and rising interest rates are eroding household purchasing power, some of the city’s industries should see increased profitability form high resource prices. As noted, transportation will benefit as airport and port activity improves. Potash shipments are booming, while a rebound in western agriculture production will help lift grain shipments through the port this summer.  Overall, transportation and warehousing output is forecast to grow by 15.8 per cent in 2022 as the sector continues to recover from the hit it took during the pandemic.

 

Indeed, one point acknowledged by the Conference Board Report is that there is significant “upside” risk to these projections – that is, they could turn out to be better than expected.  As they note: “A significant upside risk to the forecast is the plan to spend as much as $1.2 billion over the next four years to build a new Thunder Bay Correctional Complex. The project will be funded by the province as part of an effort to modernize the correctional system.”  Indeed, this project based on some expectations could generate an additional 700-800 construction jobs though given the current labour shortages in the city this will either drive up local costs even more crowding out other local activity or require out of town temporary workers.  As well, there is future highway construction for the Thunder Bay to Nipigon corridor and numerous local road projects that will generate activity. 

 

So, 2022 appears to be a positive year.  Things are rebounding quite well to the point that there are local labour shortages and rising costs.  Once the rebound bump is complete however it would appear that the local economy will stabilize at its recent historical levels of employment.  Even projects like highway corridor upgrades and the new correctional center construction represent short term bursts of employment growth rather than a permanent long-term increase.  Indeed, Thunder Bay’s economy continues to grow at below the rate of most other Ontario cities.  What impact the rise in interest rates will have on planned or scheduled construction projects is of course a major downside risk on activity going into 2023.  However, if inflation peaks this summer and subsides in the fall, one can expect interest rate increases to level off and a slow decline begin.

 

 

Northern Ontario Economic Forecasts: Conference Board Forecasts Slower Growth for Thunder Bay and Sudbury

The Conference Board of Canada recently put out its Summer 2018 Metropolitan Outlooks for Thunder Bay and Greater Sudbury.  Greater Sudbury’s real GDP growth is expected to be 1.2 percent in 2018 and 1.1 percent in 2019 while its employment growth will be  -0.4 per cent in 2018 and rise 1.1 percent in 2019.  Meanwhile, Sudbury’s unemployment rate will rise from 6.7 per cent in 2017 to 7.0 per cent for 2018, before falling to 6.6 per cent next year.  Thunder Bay’s real GDP is expected to grow 1.2 percent in 2018 and 1 percent in 2019 with employment expected to rise 2.2 percent in 2018 but fall -0.7 percent in 2019.  The unemployment rate is expected to be lower than Sudbury’s at 5.1 percent in 2018 compared to 5.6 percent in 2017 but is expected to be 5.4 percent in 2019.

As the accompanying figures show, Thunder Bay and Sudbury have been growing more slowly and are expected to grow more slowly than Canada or Ontario.  Sudbury’s economy has been described as “unsettled” with a steady string of employment losses over the last few years.  Its primary hope is the current rebound in nickel prices given the employment losses have been hitting its mining sector.  


 



 
Thunder Bay saw a very good employment growth performance in 2017 that basically helped recover from the 3 percent drop in 2015 – its economy currently can be characterized as “moderate expansion.”  What seems to be driving things at the moment in Thunder Bay s a stronger construction sector with numerous small non-residential projects as residential demand is weak.  Indeed, the housing forecast for 2018 is 155 units – the lowest number of starts in 15 years.  As well, there has been some upturn in manufacturing and transportation.  

So, moving forward.  It appears that both Canada and Ontario are expected to see slower rates of economic growth moving towards 2020 with Thunder Bay and Sudbury even lower.  In terms of employment growth, Sudbury’s recent string of low employment growth is expected to end in 2019 if nickel prices continue their rebound while Thunder Bay in 2019 is expected to see negative employment growth again before resuming growth.  Thunder Bay’s economy has been performing marginally better than Sudbury’s recently as it is somewhat more diversified as in 2017 it had a higher economic structure diversity score of 0.78 compared to Sudbury’s 0.71.

Economic News Around the North: August 15th Edition

We are in mid-August and the summer is drawing to a close.  The economic news has been pretty slow in northern Ontario.  Here are the stories of economic significance to northern Ontario over the last week or so.  They are mainly focused on the Conference Board Reports which were issued in late July and early August and that show the northern Ontario economy is not growing as fast as either Ontario or Canada.

Thunder Bay economy advances "sluggishly".  Tbnewswatch, August 9th, 2017.

Incidentally, Netnewsledger in Thunder Bay ran this story August 3rd (and was reported in my last northern Ontario economic news post.) I suppose narrative is everything.  According to the Conference Board Report in the above story, real GDP in Thunder Bay will rise 0.2 per cent in 2017 and 0.9 percent in 2018 following a 0.2 per cent increase in 2016.  Compare this to the Canadian economy which is expected to grow 2.3 per cent in 2017 and just under 2 percent in 2018.  Ontario is forecast to surge at 2.3 percent in 2017 but then scales back to 1.8 per cent in 2018.  Real GDP growth in Thunder Bay is forecast at below 1 per cent until 2021,  Yet, apparently life in Thunder Bay goes on with personal income per capita expected to grow at greater than 3 per cent from 2018 to 2021.  While the overall economy is not growing, having 30 percent of your employment in the broader public sector is lending a certain punch to average personal incomes.

Meanwhile in Sudbury, the Conference Board projects real GDP will grow at 1.2 percent in 2017 and 1.0 percent in 2018 but real GDP growth over the period 2018 to 2021 is also not expected to top 1 percent.  Yet, the narrative in Sudbury is a little different.

Sudbury to grow in 2017: Conference Board. Thesudburystar.com. August 4th, 2017.

In other Sudbury economic news:

Vale looking at layoffs in Sudbury. Thesudburystar.com. August 12th, 2017.

In terms of the size of Vale's economic footprint in Sudbury: "Vale operates five mines in Sudbury, as well as a mill, a smelter, a refinery and employs nearly 4,000 workers. It mines nickel, copper, cobalt, platinum group metals, gold and silver."

Timmins and the Sault also made their way into the Conference Board's Mid-Sized Cities Outlook and the report forecast real GDP in the Sault to grow 0.6 percent in 2017 and for Timmins to grow 1.4 percent in 2017.  Of the four cities covered in these Conference Board Reports it would appear that Timmins is doing the best with the manufacturing sector as well as the primary and utilities sectors driving growth.  Thunder Bay is forecast to grow the least. 

Timmins ready for economic growth says Conference Board of Canada. timminspress.com, July 27, 2017.

Sault growth behind that of Ontario, Canada. saultstar.com. July 28th, 2017.

So what about North Bay?  Well, no Conference Board Report for them.  They are neither a "big" northern CMA like Thunder Bay or Sudbury or a "Mid Size" city like Sault Ste. Marie and Timmins.  I'm sure that North Bay at least self-identifies as a Mid-Sized city and I wish to state that I consider North Bay one of the northern urban league of  five - the N5 as I sometimes like to refer to them.  

Still, here is an item of interest regarding the employment impact in northern Ontario - particularly North Bay -of an Electricity Trading Agreement entered into last fall with Quebec by the Ontario government.

Fedeli request leads to FAO probe on Ontario-Quebec Power deal. BayToday.ca. August 11th, 2017.

And another page in the inexorable march of retail change in the north:

Self-checkout threat to local jobs very real, labour warns. Nugget.ca, August 5th, 2017.


Enjoy the rest of the summer.