The struggle is real for Canada’s economy and construction

COVID-19 has pushed the Canadian economy into a slump from which it is still struggling to recover.

Consider these facts.

In October 2021, total employment had crawled back to where it was in February 2020, just before the pandemic struck, but most of the gains were in part-time jobs.

Thanks in part to disruptions in the global supply chain caused by COVID-19, the prices of many commodities and consumer products have increased to the point that the annual rate of inflation in Canada hit an 18-year high of 4.1 percent in August 2021.

And in a recent report, the International Monetary Fund downgraded Canada’s 2021 Gross Domestic Product growth forecast to 5.7 percent.

To put some flesh on the bones of the data, the Journal of Commerce asked several experts what has caught their eye about the state of the general economy – and the construction industry – and what they think could be in store in the future.

Germain Belzile, senior associate researcher at the Montreal Economic Institute, says the “over-the-top reaction of the authorities to COVID-19 and their never-waste-a-crisis attitude” has led to an increase in the influence of government, especially the federal government, in the Canadian economy that will be permanent.

“When the pandemic is over, federal spending as a share of Gross Domestic Product will be greater than it was before the start of COVID-19, and it has all be done stealthily,” said Belzile.

Jack Mintz, president’s fellow of the University of Calgary’s School of Public Policy, calls the state of the national finances “very worrisome.”

“The federal government has greatly increased the national debt with its payments to individuals and businesses, to help them get through the pandemic,” Mintz said. “It says it isn’t worried about paying off the debt, because interest rates have remained low until now. But if inflation keeps increasing,  interest rates will follow and that will increase the weight of all debt, including personal debt. And that will slow the economy.”

ConstructConnect’s chief economist Alex Carrick says the post-pandemic recovery won’t be the usual return to normal after a cyclical downturn.

“Many things will be coming out of this pandemic that we aren’t prepared for,” said Carrick. “For one, thanks to all of the new technologies that will be in use, the future will be more expensive.

“The cost of living and the cost of doing business will be more expensive. Keeping up with all the high-tech advances will be more expensive. Many of us are in for a surprise.”

Looking to the future, Dan Breznitz and Daniel Trefler, two University of Toronto academics, say Canada needs an innovation strategy that will help generate good jobs for all, rather than high-paying jobs for a few.

“This is essential to remember since too often in Canada when we talk about innovation, we mean the Silicon Valley model, the ultimate inequality-generating machine,” they said.

Brenitz, the Munk Chair of Innovation Studies at U of T, says there are two reasons why an innovation strategy is essential to the Canadian construction industry.

“Now it’s dependent on the global supply network, and you can’t build without it,” he said. “When it’s disrupted, as it has been during the COVID-19 pandemic, the result is shortages of essential building materials. Canada should be innovating and making more building materials here.”

The second reason is to make housing more affordable for more people.

“At the same time as housing prices have been getting out of reach of more and more people, wages have been stagnating,” said Brenitz. “By innovating more we’ll increase productivity, which will increase wages and make housing more affordable for more people.”

The trend in construction is to more energy-efficient building practices and materials, says Helen Goodland, head of research and innovation at Scius Advisory Inc. in Vancouver.

“In the future we’ll continue to move away from any building material with a heavy carbon footprint, such as concrete,” said Goodland. “There will also be a move to do more with less – less energy, fewer people and fewer building materials.”

And because we will need to learn how to work within greater limits than in the past, we’ll need to increase construction productivity by, for example, making more use of industrialized construction methods.

“We have the research and development capacity in our universities and research institutes the construction industry needs, but they exist separately and seldom talk to each other,” said Goodland. “Construction is backward in that respect, compared to other industries, and needs help getting started.”