Major City Insights

Hamilton

July 17, 2024

Overview
Labour and employment
Economic indicators
Construction and real estate

Sluggish growth to start the year, but signs of optimism on the horizon

Growth in Hamilton’s real output slowed dramatically near the end of 2022 as the impacts of higher prices and interest rates began to hamper consumer demand, slightly sooner than in the province as a whole.
Last year, local real GDP is estimated to have risen just 0.2 per cent, compared with a 1.6 per cent increase in Ontario.
The economy remained sluggish through the first quarter of 2024, but it should pick up in the second half. Overall, the annual gain in real GDP will remain subdued, however, dragged down by the first-quarter weakness as well as the slow pace of recovery.
Our call is for real GDP to grow by a still tepid 0.3 per cent this year.
The goods sectors were the biggest drag on output growth in 2023, declining by an average of 1.2 per cent last year. A slowdown in housing starts in 2023 stymied construction output, while lower demand for goods pulled down output in the manufacturing sector.
The goods-producing sectors will contract again this year, but we expect a strong recovery in 2025, led by manufacturing and construction. Both industries will then continue to do well over the outlook period as rising demand for goods and growing housing starts lift output further.
The services sector has been helping to buoy the economy during the slowdown. Indeed, services such as restaurants, hospitality, and recreation have continued to do well, as these sectors remain in recovery mode from the pandemic and public health restrictions.
By 2025, we expect real GDP will increase by a healthy 2.5 per cent. Annual growth will then remain near that level for the rest of the forecast, 2026–28.
Hamilton saw substantial population growth in both 2022 and 2023, driven mainly by record levels of net international migration. While this momentum is expected to ease slightly, net international migration will remain elevated by historical standards.
After falling by 1.1 per cent in 2023, employment is expected to recover slightly this year, rising by 1.8 per cent. With the labour supply continuing to rise from strong population growth this year, Hamilton’s unemployment rate is expected to increase to 6.4 per cent, a 0.9 percentage point increase over 2023, even as employment growth rebounds.
Still, labour shortages, which have been an issue since the lifting of public health restrictions in 2021, will likely remain in some sectors over the next few years. We expect the unemployment rate to fall after this year and continue dropping to 5.5 per cent by 2028.

Labour and employment

As the region’s economy slowed through 2023, employment growth stalled. Hamilton lost a net 4,550 jobs last year, a decline of 1.1 per cent.
In turn, the unemployment rate rose to 5.5 per cent in 2023, up from a low of 4.9 per cent in 2022. With still high net migration and slow employment growth to start 2024, we expect the unemployment rate will rise further this year, to 6.4 per cent.
Employment should start to pick up in the second half of this year, with growth expected to come in at 1.8 per cent on an annual basis. Despite the recovery in the economy in the coming years, more moderate population gains will hold employment growth to just above 1 per cent, on an average annual basis, through the next few years.
Labour market tightness will remain a feature in the job market as retirements rise, in line with an aging baby-boom population. As a result, despite the only modest job gains, the unemployment rate will start on a downward trend, slipping to 5.1 per cent by 2028.
Strong consumer price growth was one of the key hits to Hamilton’s economy. The good news is wages and salaries per employee have kept up with rising inflation in Hamilton, helping mitigate some of the rising costs.
By the end of 2025, consumer price growth should fall back to 2 per cent on an annual basis. At the same time, we expect growth in wages and salaries will remain consistently above inflation.
Retail trade suffered the second largest job losses last year of any sector as consumer spending waned. Employment in this sector is expected to rebound this year, rising by 2.9 per cent. However, it will then follow a downward trend beyond 2025 as automation and online shopping continue to put pressure on retail employment.
Industries related to leisure, hospitality, and recreation had done relatively well since 2021, gaining back some of the job losses of the pandemic. But last year’s slowing economy hit employment in these industries again—employment in accommodation and food services declined by double-digits in 2023.
The good news is, between 2024 and 2028, industries related to leisure, hospitality, and recreation will average job gains of 6.2 per cent annually, as this sector still has room to fully recover from pandemic-era closures. In fact, even with this healthy job growth, accommodation and food services employment will remain below 2019 levels through the entire forecast period.
As the knowledge economy continues to grow, professional, scientific, and technical services will see some of the strongest job gains over the outlook period. The sector, which has been doing well since the pandemic with the accelerated shift to digital services, is expected to continue to post strong job gains over the next four years, at an average of more than 700 new net jobs per year.

Economic indicators

Hamilton’s economy has been sluggish since the second half of 2022, hampered by the impact of inflation and higher interest rates on consumer demand and discretionary spending. These issues continued to hurt hold back growth in the first quarter of this year as well.
Real output slowed to 0.2 per cent growth in 2023 and will rise by only 0.3 per cent this year, just below the 0.4 per cent expected provincially.
The goods sector was particularly hard-hit last year. Manufacturing output declined due to slowing demand for goods, both domestically and globally, while construction sector output dropped as result of slowing residential investments.
Both sectors will contract again in 2024 because of a weak first quarter. However, the manufacturing sector will see solid output growth from 2025 onward, at an average rate of about 3 per cent per year, as supply chain challenges continue easing and as domestic and global demand rises.
Moderating inflation and interest rates will support a bounce-back in industries across Hamilton by 2025, with overall real GDP rising to 2.5 per cent next year and averaging close to this rate for the rest of the outlook period, 2026 to 2028.
Services related to leisure, hospitality, and recreation will lead the way in terms of output growth over the next two years. In particular, the accommodation and food services sector is expected to expand by 3.7 per cent this year and 4.0 per cent in 2025.
Output growth in arts, entertainment, and recreation will slow this year, but it is expected to rebound and reach 5.5 per cent in 2025. This sector is still in recovery mode following the lifting of pandemic-related health restrictions—and will reach pre-pandemic output levels only by the end of our outlook.
With housing starts expected to rise in Hamilton in the coming years, the finance, real estate, and insurance industry is expected to see healthy output growth, averaging 2.5 per cent annually from 2025 to 2028.
Healthcare services will experience robust growth for the foreseeable future as well. With demand for services increasing alongside healthy population growth and the aging of the baby-boomer generation, output in this sector is expected to expand by more than 3 per cent annually.

Construction and real estate

Hamilton’s population has seen healthy gains over the last two years, rising an average of 1.5 per cent annually. We expect another 1.4 per cent increase in 2024 before population growth starts to cool.
Net international migration has been the main driver of population growth. Last year, a record of nearly 12,500 net international migrants came to Hamilton. Immigration will fall from this peak over the outlook period as temporary migration pulls back, falling to 4,700 net international migrants by 2028, but overall will remain above historical averages.
Net intercity migration peaked in 2020, reaching 4,873 net migrants as people from Toronto who were able to work from home looked for more affordable housing.
Net migration from other cities in Ontario has since eased but will remain at historically high levels for the rest of the outlook period, averaging about 3,500 net migrants per year.
Overall, Hamilton’s population growth will average about 1 per cent per year between 2025 to 2028.
Given the recent strong gains in the population and the continued trend upward, we expect demand for housing to remain high in the coming years.
Housing demand will be further buoyed by falling interest rates.
After the slow start this year, housing starts are forecast to rise on a consistent basis. We forecast total housing starts will average about 4,800 units per year from 2025 to 2028, led by multiple-unit starts.
Ongoing multiple-unit housing projects include the Cobalt Luxury Residences and the Muse condos.
Business investment is also strong in the city, with building permit records continuing to be broken every year. Plans are slowly moving forward to revamp most of Stelco’s former waterfront land—a multi-million-dollar project that will be done in two phases over a decade and include advanced manufacturers and public access to Lake Ontario.
Hamilton’s light-rail transit project should also begin within the next two years, providing further activity for the construction sector.
Given the expected housing demand and the number of non-residential projects, our call is that construction will remain on an upward trend. Although growth will slow in 2024, we forecast average annual construction output gains of nearly 3.7 per cent between 2025 and 2028.