Oct 25 2018
With over 38.0% of the national population, and generating a forecast 38.6% of Canada’s GDP in 2018, Ontario has long been the epicentre of the domestic economy. Ontario is home to 38.0% of the nation’s business establishments in 2018, and employs an estimated 38.8% of the domestic workforce. While every province contributes to the national economy in its own way, Ontario is at the nexus of some key drivers of economic growth, including trade, financial and professional services, construction, healthcare and manufacturing. This diversification is the foundation of Ontario’s strong growth over the past five years and its relative stability during a collapse in commodity prices over 2015, which pressured growth for the majority of the Canadian economy. Canada’s GDP rose only 1.0% in 2015, which includes a recession in the first two quarters. This came after 2.5% and 2.9% growth the previous two years, while Ontarian GDP climbed 2.8% in 2015 due to the varied economic pursuits in the region and a depreciation of the loonie that year that bolstered the province’s strong manufacturing sector. All in all, with less than 2.0% of its GDP expected to be generated from the energy sector in 2018, the Ontarian economy is not tethered to volatile commodity prices, where the national economy is most vulnerable.
Ontario: At Your Service
The Heartland Province boasts a service-based economy, with an estimated 77.4% of 2018 GDP derived from services. The largest contributor to GDP is the real estate, rental and leasing sector, with an anticipated 13.5% of GDP in 2018, followed by manufacturing and the finance and insurance sectors, which comprise a forecast 12.5% and 10.1%, respectively. More broadly, the information and communication technology sector accounts for a projected 5.5% of GDP in 2017. However, its 4.4% annualized growth between 2013 and 2017 outpaces almost all other sectors of the Ontarian economy with the exception of the comparably miniscule arts, entertainment and recreation sector, which grew an annualized 5.5% during the same period. In general, the fastest growing sectors are service based, including the annualized 4.3% expansion in the transportation and warehousing sector and a parallel projected climb in the professional, scientific and technical services sector during the period. Other notable GDP growth is anticipated in the finance and insurance, wholesale trade, accommodation and food services and retail trade sectors, at an annualized rate of 4.1%, 4.1%, 3.9% and 3.7%, respectively, between 2013 and 2017. While construction and manufacturing GDP grew strongly during the same period, their annualized 3.2% and 2.1% respective growth during the five-year period pales compared with the broader service sector. All in all, GDP from service industries is forecast to climb an annualized 2.9% over the years to 2017, while goods-producing industries are expected to rise an annualized 2.0%, spelling out the trajectory of the province and the nation by extension.
The Province of Opportunity is flourishing with its namesake alongside this transition. Employment in Ontario has risen at a quicker pace than Canada in aggregate, securing an increasing share of the labour force within the province, particularly in the Toronto economic region, which accounts for an estimated 48.8% of all employment in Ontario. Most economic activity is centralized in this region, with 68.2% of Ontario’s finance, insurance and real estate employees, and 61.6% of the province’s professional, scientific and technical service workers in 2018. Toronto is an exemplar of the service-based nature of Ontario, leading the way with an outsize share of service industry workers and a negligible 5.6% share of the province’s agricultural employees, and only 16.5% of the forestry, fishing, mining, quarrying and energy labour force in 2018. Toronto is also a leader in hiring, posting the strongest growth over the five years to 2018 at an annualized rate of 1.7%, compared with the province’s annualized 1.1% growth and broader Canadian growth at an annualized rate of 1.0% during the period. Toronto recorded the most significant expansion in hiring in sectors such as professional and scientific services; finance, insurance, real estate and rental and leasing; transportation and warehousing; and construction, at an annualized rate of 4.4%, 3.6%, 3.5% and 2.9%, respectively, over the five years to 2018. Meanwhile, manufacturing employment fell and agricultural layoffs were prominent during this period, resulting in an annualized 7.9% fall in agricultural employment in Toronto. This bifurcation of goods and services is cementing the province’s increasing reliance on service-based industries, and is a herald of broader provincial and national trends.
Pressures Percolate to the Province
Canadian economic growth is expected to slow down despite the potential ratification of the United States-Mexico-Canada Agreement (USMCA). Broad-based GDP, housing, debt and business investment concerns are expected to compound the changing landscape of the national manufacturing sector, pressuring provincial growth. Manufacturing employment in Ontario mirrored that of the national economy over the past five years, which may signal a shift in production activity nationwide. Meanwhile, GDP and employment growth trends indicate a provincial economic landscape that is increasingly characterized by housing, financial and professional services rather than industrial production, which may temper any potential windfalls from the USMCA ratification. This evolution served as a buffer for Ontario during volatile moments in commodity markets, but it may undermine the province’s expansion potential amid a rebound in prices for most industrial commodities and a slower domestic housing market in 2018.