THUNDER BAY, ON – BUSINESS – Ontario’s upcoming budget will be an important indicator of the government’s approach to the economy. It will also be judged on its job creation effects.
Statistics Canada’s most recent Labour Force Survey shows Ontario shed 34,000 jobs in June and the unemployment rate rose from 7.3 to 7.5 per cent – remaining above the national average. While those figures indicate the province’s economy continues its decade-long poor performance when it comes to employment growth, the employment picture is significantly worse outside the Greater Toronto Area (GTA) and with respect to private sector job creation.
While total employment in Ontario grew 17 per cent between 2000 and 2012, Canada as a whole saw total employment over the same period grow by 20 per cent. Moreover, poor employment growth in Ontario reflects a weaker private sector. Over the period 2000 to 2012, public sector employment in Ontario grew 36 per cent while private sector employment grew by 11 per cent. While faster public sector job growth during this period characterized Canada in general, for the country as a whole public sector employment only grew 27 per cent while private sector employment grew by 16 per cent.
The private sector picture in Ontario is even more disappointing when the manufacturing sector is considered, given that this century has seen its employment shrink by 27 per cent – a loss of 290,000 jobs. Again, this was worse than Canada as a whole, which saw a decline in manufacturing jobs of 22 per cent. However, Manitoba during this same period only saw a manufacturing employment decline of 8.5 per cent while Alberta’s was 1 per cent and British Columbia’s 16 per cent.
The Ontario picture grows more complex when the employment picture is examined regionally. Weak employment growth is concentrated primarily in the southwest and north of the province whereas the GTA has been characterized by a buoyant performance. Over the period 2000 to 2013, total employment in the GTA grew by 32 per cent – outperforming Canada and quite respectable when compared to resource producing western provinces like Alberta, which saw total employment growth of 36 per cent. Indeed, the Toronto area is booming.
In central Ontario (Muskoka-Kawarthas, Kitchener-Waterloo-Barrie and Hamilton-Niagara), employment grew 21 per cent while in eastern Ontario (Ottawa, Kingston-Pembroke) it was 22 per cent. Central and Eastern Ontario are performing at the national average. But employment in southwestern Ontario (London, Windsor-Sarnia, Stratford-Bruce) grew only 2 per cent while the north of the province actually shrank 1.3 per cent.
The first decade of the 21st century has been one long recession for the southwest and north of the province, with the decline in manufacturing the prominent feature. The manufacturing plants of the southwest and the pulp and paper and sawmill industry of the north have been decimated.
Regional variation goes a long way in explaining Ontario’s laggard economic performance, with the GTA disconnected from the provincial economy’s employment performance. In economic terms, the GTA now dwarfs the other regions of the province and accounts for 48 per cent of provincial employment and 44 per cent of its population. It was not always so: going back a century, population and economic activity in Ontario were much more dispersed.
Ontario’s economic challenge, therefore, will be to turn the economy outside of Toronto around. The transition to a knowledge-based economy has primarily benefitted larger urban centres in Ontario, with Toronto as the chief beneficiary. Toronto’s role as a service-based commercial, distribution, financial and government centre tied directly into a global economy has made it a jobs engine for Ontario, even given the province’s lackluster performance as a whole. Meanwhile, the costs of economic adjustment from a changing world have been heavier on regions outside of Toronto.
The upcoming provincial budget will lay out an activist government economic agenda that ostensibly aims to turn Ontario’s economy around with infrastructure investment, particularly in transportation in the GTA area. But given Ontario’s employment growth is already strongest in the GTA region, and that private sector employment growth has lagged in the province as a whole, more must be done to ignite private sector employment growth in Ontario’s flagging regions.
There will be little point in concentrating more government spending in the GTA without regional spillovers.
Livio Di Matteo
Livio Di Matteo is Professor of Economics at Lakehead University.