The next four years will bring 230,000 new jobs to the Greater Toronto Area (GTA), according to a new report released April 7 by BMO Economics.
The report on Canada’s most populous urban region is the latest in a series of economic, housing and business overviews for various cities and regions across Canada that will be published by BMO throughout this year.
“Strong demographics and a diverse labor market continue to support Toronto’s economy, which is poised to gain some momentum in the coming years,” said Robert Kavcic, senior economist, BMO Capital Markets. “While the housing market is expected to cool, these fundamentals combined with only gradual interest rate increases should help the city avoid a deep near-term correction in home prices.”
Kavcic stated that factory and transportation/warehousing activity will benefit from stronger trade flows, the service sector will remain sturdy, and public infrastructure spending will provide an added boost.
The report states that employment was growing at a solid pace in Toronto, at least up until the turn of the year when the ice storm and a harsher-than-normal winter hit. Construction employment rebounded strongly last year after slipping in the prior year; transportation and warehousing, retail and finance all saw solid growth; and cuts in the public sector subsided.
“Employment expanded by 4 percent in 2013, the strongest single-year performance in 13 years, though the unemployment rate remains elevated at 8 percent,” noted Kavcic. “Looking ahead, employment growth is expected to pick up again. The city will likely see roughly 230,000 jobs created by the end of 2017, pulling the unemployment rate down to 7 percent, or just slightly above pre-recession levels.”
Kavcic observed that like much of Ontario, Toronto’s economy stands to benefit from a weaker Canadian dollar: “Manufacturing, which directly accounts for about 10 percent of employment, will get a boost, along with the tourism sector with Toronto – along with Canada as a whole – suddenly looking like an improved value for both U.S. and local tourists.”
Kavcic also stated that a sturdy Canadian financial sector will also continue to support growth, while business and personal services provide a stable employment base in the city: “Taken together, tourism, finance and business and personal services account for more than a third of Toronto employment.”
Bill Wu, BMO’s regional vice president of Commercial Banking in GTA North, noted that businesses throughout the region are optimistic about the state of the local economy and prospects for the year ahead.
“There’s a lot of momentum in the GTA across its broad base of sectors, and particularly among specialized manufacturers with niche markets such as health-sciences, service-based industries and IT companies,” said Wu.
Doug Palmer, regional vice president Commercial Banking for GTA Central, added that business owners need to remain adaptable to change and should continue looking for ways to grow their business. “Economic realities, including the low Canadian dollar, are creating opportunities for businesses in the GTA and across the country to invest in initiatives that will allow them to grow in their marketplace and become more profitable and productive in the process.”
The report, released April 7, revealed:
- The Toronto housing market continues to perform well, but a gradual rise in mortgage rates and increased condo supply should temper price growth in the years ahead.
- The average transaction price sat at $558,000, up almost 8 percent year-over-year, while the more representative MLS Home Price Index was up just over 7 percent year-over-year. The market continues to defy the skeptics and push higher.
- Despite the run-up in prices over the past decade, income gains and a significant decline in mortgage rates have left Canadian housing affordability close to historically-normal levels-this is true in Toronto as well. With Bank of Canada policy expected to remain stable through mid-2015, and longer-term interest rates rising gradually to levels lower than historically normal, the market should support price gains slightly below the rate of income growth.
- New housing starts in Toronto have moderated, but some risk remains from the high number of condo units currently under construction.
- Nonresidential activity is an area that should continue to support growth.
- Transit expansion is a key priority area for local and provincial policymakers, even if many of the details remain undecided and the revenue tools to fund it are still to be determined at the provincial level. Activity is underway to revitalize Union Station, create a rail link between Pearson Airport and Union Station, and build out light rail transit.
- Additionally, construction activity to host the 2015 Pan Am Games is underway and expected in the $500-to-$700 million range.
The full report can be downloaded at bmocm.com/economics.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had total assets of $593 billion and more than 45,500 employees at January 31, 2014.