The Manufacturing Crisis and Greater Toronto
It is notable that TD Economics is much more concerned about the scale and impacts of the manufacturing crisis than colleagues like Jeff Rubin at CIBC – not to mention Steve Poloz of Export Development Canada.
TD’s recent report on the state of the Toronto economy http://www.td.com/economics/special/db0707_gta.pdf notes that 100,000 manufacturing jobs have been lost in the Greater Toronto Area since 2002 (and note that the Toronto Census Metropolitan Area does not include two GTA cities, Oshawa and Burlington.) The direct impact on employment and unemployment has been offset to date by job growth in construction (up 40,000) and housing-related consumption and services as well as continued strength in finance and tourism – but there’s grounds for concern about an economy whose key drivign force has been housing.
“A cyclical upswing in housing activity has helped to mask the impacts (of the fallout in manufacturing) so far” but this is “an effect that can’t be counted on to continue indefinitely” (pii) Moreover, “the shift in the sectoral mix away from the manufacturing sector – which generates higher than average value-added per hour – toward a number of lesser value-added industries has put downward pressure on the economy-wide performance.” (p.8) In fact, TD calculate that real GDP per capita in the GTA has grown at just 0.5%, 2002-2006 — that’s just half the national pace, and one third of the pace of other big city regions in Canada.
The GTA standard of living relative to other big US and Canadian cities is slipping. The report goes on to document some other key problems of the Toronto area, including a municipal funding crisis caused mainly by the downloading of social services to the cities by the Harris government, which has not been significantly reversed, all in the context of increasing income inequality and poverty and a growing population. No less than 42% of new immigrants still come to now-struggling Toronto.
The GTA is huge – one in six Canadians live there, and it still accounts for almost one fifth of Canadian GDP. With the Ontario provincial election coming this Fall and the federal Conservatives still struggling to get a foothold in the GTA, the state of manufacturing is going to get a great deal of political attention— Jeff Rubin and Steven Poloz notwithstanding.