Major City Insights

St. Catharines–Niagara

June 10, 2024

Overview
Labour and employment
Economic indicators
Construction and real estate

Economy to slow, but light at the end of the tunnel

The St. Catharines–Niagara economy will grow more slowly this year as the impact of elevated interest rates takes its toll on the region. The good news is that the region will avoid a major downturn.
Our call is for the local economy to expand by only 0.8 per cent this year, following three years of impressive growth averaging 4.5 per cent per year, as the economy rebounded from the COVID-19 pandemic.
Non-discretionary spending had already begun to slow in the second half of last year as consumers struggled with high prices and rising interest rates. In fact, nominal retail sales declined in 2023.
This slowdown will continue through the first half of 2024, before the economy picks up in the second half of the year as interest rates slowly ease. Nominal retail sales will rise to just shy of 2 per cent this year.
The goods sector is being hit the hardest. Our call is for a 0.2 per cent decline in goods sector output in 2024, mostly due to a weaker manufacturing sector pulled down by lower global demand for goods.
Services sectors will also see smaller output growth this year relative to the previous three years, but the annual overall services output gain will remain above 1 per cent. The region’s reliance on services, particularly tourism, made it vulnerable to public health restrictions during the pandemic. However, with demand for services continuing to recover, this overreliance will help the economy avoid a recession this year.
By 2025, we expect healthier output growth of 2.4 per cent in St. Catharines–Niagara as inflation moves into the Bank of Canada’s target range of 2 per cent. Disposable income and, in turn, consumer spending will rebound, helping push employment growth back up as well.
For the rest of the forecast, output growth will remain robust, averaging 2.5 per cent per year as both goods and services sectors show healthy increases.
Although we expect the unemployment rate to rise to an average of 6.8 per cent this year, it will then resume a downward trend, reaching 5.5 per cent by 2028.
Stronger population growth since the pandemic has been helpful in terms of labour supply, but the growth will teeter off from 2025 onward. Labour shortages could remain an issue for the rest of the forecast, as we expect immigration to slow and retirements to keep mounting.
Housing starts are forecast to keep rising, albeit at a slower pace than in 2021–22. Developers are expected to continue to play catch-up with the region’s housing stock, as demand has outstripped supply for years. Demand will also improve as mortgage rates come down from their peak.

Labour and employment

Employment growth in St. Catharines–Niagara was meagre last year, at just 0.4 per cent, especially compared with the stellar year in 2022, when job gains reached 11.5 per cent as public health restrictions were lifted.
Job growth began to stall in the second half of 2023 as economic activity started to cool. The slowdown will persist in 2024, with employment forecast to rise only 0.2 per cent for the year.
After reaching a historical low of 5.3 per cent in 2022, the region’s unemployment rate started to move higher and is expected to average 6.8 per cent this year. The slower economy has meant that job vacancies have been falling and the labour market has become somewhat looser.
However, workers are still hard to find in some industries, and many companies may be opting to retain their workforces through the period of slower economic growth, as the cost of rehiring workers can exceed the short-term savings achieved from cutting payrolls. This is keeping the unemployment rate from rising even higher.
From 2025 onward, the unemployment rate will fall once again as employment growth picks up.
At the same time, more baby boomers will retire, and population growth will slow.
Accordingly, we see the unemployment rate moving below 5.5 per cent by 2028, well below the 10-year average of 7.7 per cent from 2010 to 2019.
Services sectors, such as arts, entertainment, and recreation, along with “other services”—a category that includes services such as hairdressing, housecleaning, and repair and maintenance—will post the largest percentage increases in employment this year, at double-digit rates. These sectors still have room to recover from the public health restrictions.
Next year, in addition to strong employment gains in hospitality and leisure, we expect the transportation and warehousing sector to add about 450 workers, an increase of 4.2 per cent. This sector is also strongly connected to the tourism sector.
Retail trade and wholesale trade will have weak job gains for the rest of the forecast period. Both industries will be below their 2023 employment levels by 2028, and the retail sector will lose jobs every year after 2025, the result of automation and online shopping.
Demand for healthcare workers will remain robust over the next five years, as the need for healthcare services continues to rise with the recent population gains and the aging baby-boom population. Between 2025 and 2028, the region will add about 1,000 net new workers to the health-care and social assistance sector annually.
The aging population is having the reverse effect on the education sector. This year, educational services employment will decline by about 650 jobs, or 3.3 per cent. Employment will fall in three of the next four years as well, and by 2028 the educational services sector will employ 18,800 people, 500 fewer than in 2024.

Economic indicators

St. Catharines-Niagara’s economy started stronger than expected in 2023, as consumers remained resilient in the face of strong price gains and rising interest rates in the first half of the year. But spending dropped off through the second half of 2023, leading to much slower economic activity to end out the year.
Overall, real GDP in St. Catherines–Niagara grew by a respectable 2.3 per cent in 2023.
The economic slowdown seen later last year has continued into 2024, as elevated interest rates are still taking their toll on the local economy.
Disposable income will grow by only 1.1 per cent this year, dragging down consumer spending in the region. Tourism to the region will also be hit, as many other parts of the country are also feeling the pinch of higher rates.
We expect real GDP growth in St. Catherines–Niagara will slow to 0.8 per cent this year.
Inflation is expected to continue to move toward the Bank of Canada’s 2.0 per cent target rate this year, and so we expect the Bank will begin cutting interest rates. In turn, consumer spending will pick up, especially with wage growth staying persistently above inflation.
Our call is that real GDP output will expand by 2.4 per cent in 2025 and remain above 2 per cent annually over the rest of the outlook period.
St. Catharine–Niagara’s reliance on vehicle travel from the United States means international travel to the area recovered from the pandemic more quickly than to some other cities.
However, overseas travel to the region is still in recovery mode, as tourism from China has not returned to pre-pandemic levels.
Despite the slow recovery in overseas visits, we are forecasting healthy gains this year in services industries related to tourism, with output rising by about 3 per cent in arts, entertainment, and recreation and in accommodation and food services.
These sectors, plus the transportation and warehousing sector, will see some of the healthiest output growth rates of about 3 per cent per year over the next few years as well.
However, the healthcare services and social assistance sector will have the strongest growth of all sectors of the local economy in the coming years as demand for health services rises with an aging baby boom population. Our call is for consistent and robust output growth over the outlook, at an average of 3.3 per cent per year.
Manufacturing output will be hurt by lower demand for goods both domestically and globally, while construction output will grow slowly this year as residential investments recover from 2023.
Beyond 2025, the goods sectors are expected to rebound, with robust average growth of 2.6 per cent annually.
Manufacturing will benefit from a rebound in global demand and from government investment in electric vehicle production. The Regional Municipality of Niagara, for example, is getting $300,000 from the federal government to develop a strategy to support growth in Niagara’s EV sector.
Public administration output has expanded since 2021, as increased government spending was needed to deal with the pandemic. With governments at all levels now limiting spending, we expect more modest average annual output growth of just 0.7 per cent between 2025 and 2028.
Population growth peaked in 2022, reaching 2.1 per cent. It remained elevated last year as well, at 1.7 per cent. These gains were driven by higher levels of net intercity and net international migration.
This year, we expect net migration from other cities in Ontario to be relatively strong still, at 3,500 people. It will remain close to that level for the rest of the forecast as well, as the region’s affordability will continue to attract people.
Meanwhile, net international migration reached a record 6,500 people last year. Although it will slow in the coming years, it will remain a significant driver of population growth through the next few years. In fact, it will stay above historical averages, with an expected average of 3,000 net international migrants coming to St. Catharines–Niagara every year between 2024 to 2028.
With slower net migration, overall population growth will cool in the coming years, rising by just under 1 per cent annually beyond 2024.

Construction and real estate

Although population growth is slowing, the increases will continue to put pressure on housing demand in St. Catharines–Niagara.
Accordingly, after a slight dip last year due to elevated interest rates, housing starts are expected to pick up from 2024 onward as mortgage rates fall.
After reaching a record 3,168 units in 2022, housing starts fell to 2,747 units in 2023. They will increase to 3,230 units in 2024 and then slowly rise through the rest of the forecast period, reaching 3,530 units in 2028.
Both single-detached and multiple-unit starts will be an important part of housing development going forward. Multiple-unit starts will, however, slightly increase as a share of the total. In 2020, multiple housing starts accounted for 52 per cent of all starts. By 2028, that share will grow to just under 66 per cent.
Major residential construction projects include a 30-storey condo building on James Street, which will be the tallest tower in St. Catharines when complete, and a development at 10 Pleasant Avenue, the former General Motors site.
Industrial development is expected to be strong in the region: Shimco North America, an aerospace parts maker, is expanding its Cambridge operations; Airbus Helicopters is increasing capacity at its Fort Erie plant; AMSi Inc. is spending $20 million to build a larger plant; and Ontario Shipyards (formerly Heddle Shipyards) is investing $107 million in its Port Weller Dry Docks in St. Catharines.
Investment in electric vehicle production is also strong in the area, helping to support the national and provincial EV strategy. Linamar’s gigacasting plant in Welland will make EV chassis once it opens next year.
Construction on a new 1.3-million-square-foot hospital with 469 beds in south Niagara began last summer and will be done by 2028.
These residential and industrial investments will help to support average annual growth in construction output of 2.9 per cent from 2025 onward.