A new report is predicting the Liberal government will soon come under pressure to curtail federal spending, putting a drag on the National Capital Region’s economic growth.
The rebound in government spending under the Liberal government has been widely credited with reinvigorating the region’s housing market and helping to send the unemployment rate to its lowest level in a generation.
But in a new report released Tuesday, the Conference Board of Canada forecasts that Ottawa-Gatineau’s economic growth is about to start to slow.
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Coming off last year’s decade high of 2.7 per cent growth in the economy, the report projects that Ottawa-Gatineau’s economy will expand by two per cent in 2018 with next year’s growth anticipated to slow slightly to 1.8 per cent.
On the employment front, job growth is on track to hit a six-year high of 2.2 per cent this year but will cool to one per cent in 2019. The city will add 16,200 net new jobs in 2018 but return to “normal” next year with 7,300 new jobs.
While the forthcoming Amazon distribution centre on Boundary Road is slated to add 600 jobs to the local economy in the near-term, the Conference Board said that anticipated slowdowns in public sector hiring will bring the region’s unemployment rates – verging on record lows of 4.7 per cent today – back to average levels. The report projects an unemployment rate of 5.3 per cent in 2019.
“A prolonged federal budget deficit could prompt the government to curtail spending, leading to lower-than-expected local public administration output and job growth,” the report writes.
The public sector has seen a period of prolonged growth under the Liberal government, with 6,300 public administration jobs added since 2016. That compares to 14,300 jobs lost in the public sector from 2011 to 2015.
Ottawa is not alone in its regression to the mean: economic growth is expected to slow elsewhere in Ontario and Canada as interest rates rise and fewer jobs are added.
The National Capital Region’s population is expected to hit 1.4 million this year and 1.5 million by the middle of the next decade.
Sectors outlook
Thought the much-discussed “Canada 150 hangover” hasn’t turned out as badly as observers had feared, the Conference Board says tourism in Ottawa-Gatineau is nonetheless entering a cooling period. The report also projects slowdowns in Ottawa’s retail sector, as consumers become more cautious with their spending amid rising interest rates.
“Ottawa-Gatineau’s construction sector has been on a bit of a roll the last few years, and we do not see the good times ending anytime soon.”
The local tech sector, on the other hand, is expected to continue to boom. Despite highlighting the closure of Amazon’s software outpost in Kanata, the Conference Board points to the Shopify’s success and growth plans as a reason to remain high on the city’s tech players.
Real estate is a bit of a mixed bag: While housing starts are expected to contract closer to the 10-year average, major non-residential construction projects such as LeBreton Flats, the Ottawa Hospital’s new $2-billion civic campus and the second stage of light-rail all in the near-term pipeline.
“Ottawa-Gatineau’s construction sector has been on a bit of a roll the last few years, and we do not see the good times ending anytime soon,” the report states.
