St. Catharines–Niagara

Last year, as public health restrictions were lifted and the economy reopened, a record 22,850 net new jobs were created in St. Catharines–Niagara, an 11.5 per cent increase.

The unemployment rate fell to 5.3 per cent last year and then continued to move lower, averaging an estimated 4.7 per cent in the first quarter of this year.

Labour shortages have become one of the biggest concerns for business across the country, particularly in services sectors such as leisure and hospitality, which are still catching up after businesses struggled to find workers over the past two years.

We expect employment to decline by 2,400 people this year, with net job losses in about half of the sectors in St. Catharines–Niagara’s economy.

As a result, the unemployment rate will rise to 5.7 per cent by the middle of 2024, before starting to come down again as the economy picks up in 2025.

On the whole, the unemployment rate will still be relatively low, even with the increase forecast for this year, partly because some employers are holding on to their employees.

With workers hard to find, many companies may opt to retain their workforces through the period of slower economic growth expected this year, since the cost of rehiring workers can exceed the short-term savings achieved from cutting payrolls.

The accommodation and food services sector will see the largest increase in employment, rising by 2,500 workers, or 13.2 per cent, as the sector still has room to recover from the pandemic lockdowns.

With the region located along key trade routes, manufacturing and wholesale trade will also add jobs this year as supply chains improve, with employment increasing by a combined 2,400 jobs.

Next year, in addition to hospitality and leisure, we expect strong employment gains in the construction sector of 10.5 per cent, or 1,900 workers. The transportation and warehousing sector and the professional, scientific and technical services sector will also post solid job gains in 2024.

The St. Catharines–Niagara economy has been on a solid upward trend since the reopening of the economy from pandemic-related restrictions, but rising interest rates and persistent inflation will take their toll later this year.

The economy started 2023 stronger than expected, as consumers have been resilient. Population growth has also been robust due to increased levels of net migration, which are also helping to buoy the economy. Nonetheless, economic activity is expected to slow as spending drops off later this year.

Overall, real GDP in St. Catherines–Niagara will grow by 1.3 per cent this year and 1.5 per cent next year.

After two years of double-digit gains, retail sales growth will plummet in 2023, slowing to 1.6 per cent. The slowdown will be temporary, however.

Retail sales growth will rebound to 4.1 per cent in 2024 and maintain a healthy average rate of more than 3 per cent per year over the rest of the forecast period, 2025–27.

Inflation is not expected to reach the Bank of Canada’s 2 per cent target until the end of 2024. By then, consumer spending will be picking up, as wage growth will persistently remain above inflation.

Our call is that real GDP output will expand by2.5 per cent in 2025 and remain above 2 per cent annually over the rest of the outlook period.

During the slowdown this year, St. Catharine–Niagara’s services sector will lead growth in the overall economy, as it has for the previous two years.

Tourism, a key component of the local economy, has continued to expand. Despite higher costs, travel intentions remain high.

St. Catharine–Niagara’s reliance on vehicle travel from the United States means international travel to the area recovered more quickly than to other cities.

Internationally, China opening up its economy after strict public health restrictions brings good news to the region and Canada’s travel industry as a whole.

Not surprisingly, we expect strong output growth this year in services industries related to tourism, including arts, entertainment, and recreation; accommodation and food services; and transportation and warehousing.

All these sectors are forecast to post output growth above 4 per cent in 2023, with gains in the arts, entertainment, and recreation sector reaching double-digits.

Healthcare and social assistance will also see strong output growth over the next three years, averaging of 3.7 per cent per year. This sector will grow in importance as the region’s population continues to age.

Rising interest rates have put a damper on housing demand and on growth in the finance, insurance, and real estate industry, where we expect output to decline slightly in 2023, down 0.6 per cent, and then rise by only 1.4 per cent in 2024.

However, with continued healthy population gains, demand for housing will remain on an upward trend in the coming years. Our call is that the finance, insurance, and real estate sector will grow by an annual average of 2.7 per cent from 2025 to 2027.

Among the goods sectors, only construction will post a solid gain this year, bolstered by continued residential and commercial investments in the region. Going forward, we expect construction output to average healthy annual growth of 2.6 per cent between 2024 and 2027.

Manufacturing will rebound and remain key to the local economy as industrial investments continue. Airbus is hiring at its Fort Erie helicopter plant, part of efforts to add 800 new workers in Canada this year as it ramps up A220 production.

Between 2021 and 2022, output in the public administration sector in St. Catharines–Niagara averaged growth of 7.4 per cent per year. With public health restrictions now lifted and governments at all levels limiting spending, we expect more modest average annual output growth of just 0.7 per cent between 2023 and 2027.

Net intercity migration peaked in the region during the pandemic. In 2020 and 2021, a combined 12,000 people moved to St. Catharines–Niagara from other cities in Ontario, with nearly 7,000 of those in 2021 alone.

Last year brought an additional 5,812 net intercity migrants to the region. Our call is for 3,550 people to come this year.

Despite the region continuing to remain a destination for people, intercity migration is expected to fall further in the coming years. We expect an average of 3,290 net new intercity migrants to the region annually over the next five years.

Net international migration is expected to be the biggest driver of population growth over the next five years. Although it will slow from its 2022 high of 6,354 people, it will stay above historical averages, with an expected 3,200 net migrants to St. Catharines–Niagara per year between 2024 to 2027.

After reaching a high of 2.2 per cent last year, total population growth will slow over the next five years but remain healthy, averaging just about 1 per cent per year.

These population increases will continue to put pressure on housing demand. After a slight slowdown this year due to elevated interest rates, housing starts will pick up sometime in 2024 to help meet population gains.

Total housing starts reached a record 3,168 units in 2022. Our call is that starts will fall to 2,889 units in 2023 and then slowly rise through the rest of the forecast period, averaging 3,000 starts per year between 2024 and 2027.

This rise is attributed to both increasing net international migration and an aging population, as people in these demographics tend to relocate to urban areas that offer proximity to amenities.

Both single-detached and multiple-unit starts will be an important part of housing development going forward. Multiple starts will, however, increase slightly as a share of the total.

In 2020, multiple housing starts accounted for 52 per cent of all starts. By 2027, that share will grow to just under 60 per cent.

Multiple-unit residential construction under way includes a 30-storey condo building on James Street, which will be the tallest tower in St. Catharines when complete, and a 365-unit development at 10 Pleasant Avenue and Ontario Street, at the former General Motors site.

Industrial development is also increasing in the region as companies such as Airbus, AMSi Inc., and Linamar invest in the region.

Construction on a new 469-bed hospital in south Niagara is expected to begin this year and last about five years.

In all, total construction output is expected to rise 3.0 per cent this year and 2.1 per cent next year.