CANADIAN ECONOMIC OUTLOOK IN 2023

Travis Waite, WRLA

With 2023 right around the corner and so much fast-paced movement and uncertainty within the economy and markets, it's difficult to project where we may be in a year’s time.

There has been a lot of pessimism around the economy these days, and rightfully so. The past year has seen many challenges for Canadians, from coming out of the COVID-19 pandemic, to the war in Ukraine and the resulting supply chain challenges, to the rapid ascent of inflation driving up the price of almost everything we buy.

My last article in the Fall 2022 edition of the Yardstick Magazine covered inflation and the Canadian economy in 2022. In this issue, I will be focusing on an economic outlook into 2023 in Canada, using the data that we have going into the year to try to make sense of what we may experience in the year ahead.

Recessions And The Canadian Economy In 2023

Inflation has been a hot-button topic in 2022, and the one that I have been hearing about leading into 2023 is recession. Unfortunately, many of the top economists are now saying this is a likely reality for Canadians.

A recession is defined as “a period of temporary economic decline during which trade and industrial activity are reduced.” Since this definition can be a bit vague and subjective, economists often use the standard of two quarters of negative GDP measure as the benchmark for an official recession, but there are other factors to look at, including non-farm payrolls, industrial products, and retail sales, among other indicators.

Recessions are a normal part of the economic cycle. The average recession lasts around ten months, though their effects can be felt for years.

It really is a chain effect that we see driving what is happening in the economy, all as a direct response to the period of growing inflation in 2022. As interest rates have gone up, consumer and business spending has gone down, causing business income to decrease and for businesses to scale back spending and operations. This in turn, impacts the unemployment rate due to layoffs and hiring freezes, which again drives consumer spending down.

Labour Force

A major challenge that Canadian businesses have been facing, and based on conversations with our members, one that the Lumber and Building Industry is not exempt from, is labour shortage. Over a third (36.9 per cent) of Canadian businesses expect to experience difficulty recruiting skilled employees in the next three months. These numbers are even higher for the construction (49.5 per cent) and manufacturing (47.4 per cent) industries.

Because of the high level of job vacancies, Canadian unemployment rates are below pre-pandemic levels, but have begun to trend upwards in the past few months, from a five-year low in July of 4.9 per cent, to 5.1 per cent in November.

The data on page 23 alone would seem to indicate that labour shortages are not an issue, but we are seeing record lows when looking at the ratio of unemployed workers per job vacancy and new hires per job vacancy in Canada. Similar to how the supply and demand of goods have become imbalanced in 2022, the supply of people ready and available to work cannot keep up with the demand for workers in the market.

This is expected to begin to level out in 2023 as companies will begin hiring freezes and layoffs. Experts are projecting unemployment rates to trend around 6.5 per cent in 2023, though this would still be below the average over the past decade. The Bank of Canada is watching these figures closely, as any signs of continued accelerated wage growth will likely further drive their inclination to increase interest rates.

One of the WRLA’s four pillars in its strategic plan is Attract. To help combat some of these labour issues in our industry, we have already begun investing in a new public awareness campaign with the goal of attracting skilled workers. We will highlight our industry’s sustainable careers and raise awareness of the benefits and opportunities that exist in the Lumber and Building Materials Industry.

Some Optimism Ahead

Despite several negatives highlighted in my research for this article, there is optimism and silver linings to be found.

Even with the projected recession at the beginning of 2023, the Canadian economy is still expected to grow around 1.5 per cent according to the International Monetary Fund (IMF). Because of Canada’s strong economic fundamentals, many are expecting Canada to fair much better and bounce back faster than its peers, particularly the United States and United Kingdom. Economists are anticipating a “soft-landing,” with Canada returning to growth in the second half of 2023.

Approximately 83 per cent of small and medium-sized business leaders in Canada are optimistic about their company’s growth over the next year. Canadian businesses deserve a lot of credit for how they have continued to respond and adapt to the economic volatility of the past two years.

I share this belief that growth isn’t too far off. 2022 has been a year of extreme economic turmoil. I believe we’ve already seen the worst of this instability. That’s not to say that we’ve reached the bottom, and there is surely more adversity ahead, but signs are indicating that we are nearing the end of the storm.

As the pandemic has taught us to be prepared for the unexpected, there is a high level of confidence within our country that we can overcome the economic obstacles ahead, and I too believe Canadians will come out stronger on the other side of what 2023 has in store.

STONE WOOL INSULATION IS A TWO-PRONG SOLUTION FOR MEETING DECARBONIZATION GOALS

ROCKWOOL EXPLAINS HOW STONE WOOL INSULATION SUPPORTS DECARBONIZATION EFFORTS IN BOTH ITS MANUFACTURING AND USE IN ENERGY-EFFICIENT BUILDINGS

ROCKWOOL North America

Global decarbonization of buildings plays an important role in lowering greenhouse gas (GHG) emissions, particularly amid intensifying urbanization. New high-performance building construction and deep-energy retrofits have the potential to significantly lower energy demand. Yet, to alter the trajectory of global warming going forward, it is essential that project plans address both operational carbon and the embodied carbon of each building. Operational1 carbon refers to the carbon emissions from the energy used in the building during its lifetime. Embodied carbon is the carbon emissions associated with the construction of the building and all of its building materials, throughout the building’s full lifecycle, including raw material extraction and transportation, manufacturing, transportation of products to build sites, installation, maintenance, and disposal of building materials. Buildings that incorporate strategies that include minimizing both operational and embodied carbon will have the greatest impact on meeting decarbonization goals.

Professionals in the building industry can support decarbonization efforts by working with manufacturers and placing preference on materials that are built on a model of promoting and prioritizing global sustainability.