Hon. Peter Bethlenfalvy—Ontario Finance Minister & MPP
Dr. Eric Kam—Associate Professor of Economics, Toronto Metropolitan University
Having gone through a global event that’s unprecedented in our lifetimes, we’re still feeling many lingering, unpredictable effects in our economy—and in turn—our lives. While there’s still reasons to remain cautious, there’s a lot to be hopeful about, especially here in Ontario.
A Province-Eye View
With Ontario being the biggest contributor to Canada’s GDP—generating about 38%—its economic health has a huge effect on the nation and can also be a good bellwether for where the country is at.
“The Ontario economy continues to grow with overall economic activity now above its pre-COVID level, but recovery by sector has been uneven,” said Ontario Finance Minister & MPP Peter Bethlenfalvy.
“The hardest hit sectors as you would probably imagine are the services sector and the travel sector,” said Eric Kam, Associate Professor & Undergraduate Program Director, Economics Department, Toronto Metropolitan University (formerly known as Ryerson).
“Compared to the pre-pandemic level in late 2019, industries that have contributed the most to Ontario’s GDP growth include finance and insurance; real estate, rental and leasing; construction; professional and administrative services; and retail trade,” said Bethlenfalvy.
Despite the uneven nature of the recovery, the overall economic picture is positive. During the most dire moments early in the pandemic, it wasn’t clear where the economy would be by this point.
“The ability of the economy to be nimble and bounce back after the recession was very interesting—I didn’t expect the GDP to find its own level so quickly,” said Kam.
Back to Work
“Despite numerous headwinds, the Ontario labour market remains strong, with high levels of employment and a low unemployment rate,” said Bethlenfalvy.
As of August 2022, the unemployment rate was 5.7%—only 0.2 percentage points higher than the pre-pandemic rate, but low by historic standards. According to Statistics Canada’s Labour Force Survey data on annual employment by establishment size, Ontario’s small and medium sized businesses recorded an increase in employment in 2021. Ontario’s small businesses with less than 100 employee saw a 5.7% increase in employment (+204,700) and medium-sized businesses with 100–500 employees saw a 6.0% increase (+77,800). This growth comes after employment decreases of 6.4% (-248,100) for small businesses and a decrease of 2.4% (-31,800) for medium-sized businesses in 2020 associated with impacts of the COVID-19 pandemic.
“Small businesses face a lot of difficulty in recovering from the pandemic. Capital costs are higher than expected and the labour shortage is severe. Businesses that require front-facing employees are finding it more difficult to hire labour now that people have become used to working from home,” said Kam.
“The government is creating an Entrepreneurship Council to focus on a range of key themes that will support the development of a dedicated Entrepreneurship Strategy. The Council will include leaders from across diverse sectors to advise on the issues facing Ontario entrepreneurs and small businesses, and actions needed to set them up for success,” said Bethlenfalvy.
“The government is enabling an estimated $8.9 billion in cost savings and support for Ontario businesses in 2022, with $4.1 billion to go to small businesses. Examples of these actions include: supporting a reduction in Workplace Safety and Insurance Board premiums and the WSIB rebate; increasing the Employer Health Tax (EHT) exemption from $490,000 to $1 million; and, reducing the small business Corporate Income Tax rate to 3.2 per cent.”
Of course, discussions of the economy today are often discussions about inflation. This has become the dominant concern about the economy as inflation touches everything in one way or another.
“Anytime demand rises and supply falls, the only conceivable outcome is inflation, and now it’s higher than it’s been in three decades,” said Kam.
“Many jurisdictions around the world are experiencing higher than expected inflation driven by the strong economic recovery from the pandemic, the impact on commodity markets related to the war in the Ukraine and ongoing global supply-chain disruptions,” said Bethlenfalvy. “Global economic conditions remain highly uncertain, and there are a variety of factors beyond the Province’s control that may continue to impact the economic and fiscal outlook.”
“People and households should be very careful with savings. If we go into another recession, savings will be the key for most households,” said Kam.
The Road Ahead
“The government has a plan for economic growth that supports Ontario’s fiscal recovery. Economic growth and job growth will help provide revenues to support and protect critical public services,” said Bethlenfalvy.
The Minister highlighted several items from the government’s plan for rebuilding Ontario’s economy in the 2022 Budget, which include:
Releasing the province’s first-ever Critical Minerals Strategy, a five-year road map that will help strengthen Ontario’s position as a global leader in supplying critical minerals and Ontario’s supply chain for electric and hybrid vehicle manufacturing.
The Ontario government is investing $5 million to create a Critical Minerals Innovation Fund to support the mining industry, academia, startups and research and development firms to find innovative solutions for extraction and processing of critical minerals.
Releasing its Low-Carbon Hydrogen Strategy to accelerate the development of the low-carbon hydrogen economy in the province that will create jobs, attract investment and reduce emissions.
Ontario Power Generation is working to deploy Canada’s first grid-scale Small Modular Reactor (SMR) as early as 2028, which would add clean, affordable and reliable energy to Ontario’s electricity grid, attract investment, and support good-paying jobs in the nuclear sector for decades to come.
Ontario is supporting investments to help make the province a world-leading producer of clean low-emission steel to help build the hybrid and electric vehicles of the future.
As of early April 2022, Ontario has attracted nearly $11 billion in new investments in transformative hybrid and electric vehicle production and battery manufacturing in the province.
The Ontario government is investing nearly $107 million over the next three years to accelerate Ontario’s economy through critical technologies.
Ontario is investing $10 million to establish a Food Security and Supply Chain Fund to strengthen the province’s food supply, grow the workforce and to help sustain and expand the agri-food sector.
We’ve made up much of the ground that was lost during the pandemic. We’re finding ways to adapt to the new realities of the workforce. And government investment is targeting both weak spots revealed by the pandemic and new areas that have deep potential. Though the future may be uncertain, investing in growth is the clearest path forward.
“Despite numerous headwinds, the Ontario labour market remains strong, with high levels of employment and a low unemployment rate.”