Thu. May 26th, 2022

The steady decline in the number of active COVID-19 cases in Toronto since mid-July is clear evidence of the effectiveness of the rapid increase in the percentage of the metro area’s population that has been fully vaccinated. By early fall, about 72% of Toronto’s population was fully vaccinated, slightly above the national rate of 71.5%.

Longer lockdowns hurt Toronto more than other CMAs

With a number of cases of 27 / 100k population against 70 / 100k for the whole country, Toronto’s success against the epidemic has so far been far above par. However, with several measures, the economic performance of the metro area has been less excellent due to the CMA’s extremely restrictive public health restrictions. First, although employment in the Toronto CMA has increased by + 7.5% over the last 12 months and the metro area’s workforce is +32,000 jobs above the level before COVID-19 of 3,444 million, the city’s unemployment rate is 9.2% far above the national figure of 6.9% and sits in third place among the country’s 35 metro regions in the census.

The increase in vaccination coverage accompanied by reopening has increased employment in the Toronto hospitality industry by a very strong + 22% y / y; but it still lets the sector’s jobs count below 21,000 before its height before covid. Other sectors that have shown significant year-on-year gains in employment include construction (+ 19%), health and social services (+ 17%) and professional and technical services (+ 12%).

Gains from hiring full time promise good for retail

Restrictions on in-store purchases have hobbled consumer spending in Toronto more than in the other major metro areas across the country. While retail sales for the country as a whole have increased by + 16.2% year to date (YTD), sales in Toronto are ahead by only + 7.5%. Despite the headwinds of lack of supply chains, just over half of the YTD gain in Toronto sales has been “driven” by a + 15% jump in motor vehicles. Other notable retail sales increases have occurred in building materials, + 16%, and furniture and home decor, + 9%. Driven by +120,000 jobs jumps into full-time employment in the third quarter and fewer COVID-19 restrictions, and spending will pick up next year, provided it is not prevented by continued disruptions in the supply chain.

Housing is under construction this year and again in 2022

Although COVID-19 restrictions set the sideline from Toronto consumers, they have not had any significant impact on suburban home buyers. Driven by record low interest rates and a + 30% YTD increase in net permanent migration, existing home sales have increased by + 54% YTD (August) against the same period in 2020 and by + 48% compared to the first eight months of the 2019 pre-pandemic. This unusually sharp increase in demand has surpassed the supply of both new and existing homes.

According to the Toronto Region Real Estate Board, new listings had fallen by a third y / y in September, while the number of completed and unoccupied new homes hit a two-year low. This combination of strong demand and limited supply has driven the MLS Composite House Price Index up by over + 17% year to date.

Going forward, while the recently reported sharp decline in affordable prices indicated by Royal Bank’s Housing Affordability Measures will force more buyers to stay on the sidelines and contribute to a slowdown in home sales, several factors are likely to support both ownership and demand for rental housing well into next year. These include a shift after COVID-19 from working at home to working “in the office” and an increased desire to live closer to the office. Also, fewer restrictions on international travel will lead to an increased influx of permanent residents.

Finally, full-time employment has increased by +220,000 jobs over the last 12 months (which is +130,000 compared to the height before the pandemic). On the supply side, approvals for one-, half- and terraced homes have increased by + 49% and for apartments by + 40% YTD. Given that demand is likely to continue to outpace supply over the next several quarters, upward pressure on prices is likely to continue well into 2022.

Rise in new business openings and TTC ridership

Construction outside housing will stop in the first half of this year due to a decline in the cost of retail projects, production facilities, hotels and restaurants as well as trade and service projects. After this break, the prospects for construction without buildings light up, as design plans are planned for transport terminals and tunnels in several places and for entertainment venues, offices and retail stores. According to Cushman Wakefield, vacant offices in the Toronto CMA are 18 years at 11.8%. This will dampen office construction in the short term.

However, the steady increase in TTC equestrian activity since May plus an upward trend in office leasing activities in the city’s central and suburbs indicates that the economic pulse of the metro area is accelerating. The argument for improved visibility is supported by a + 5.8% YTD increase in business openings in Toronto, the fifth highest among the country’s 35 metropolises in the census.

John Clinkard has over 35 years of experience as an economist in international, national and regional research and analysis with leading financial institutions and media in Canada.

Retail Y / Y% Change and Unemployment Rate% – Toronto vs Canada

Retail Y / Y% Change and Unemployment Rate% - Toronto vs Canada Chart

Data source: Statistics Canada, Bloomberg.
Diagram: ConstructConnect – CanaData.

Please click on the following link to download the PDF version of this article:
Economic Snapshot Vol. 19, Issue 19 – Reaching Step 3 Along the Reopened Roadmap, Toronto’s Prospects are Much Brighter – PDF

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