Experts are forecasting a potential spending cooldown this Christmas, lasting into the new year
In 2022, a lot of Canadians were worried about money.1-2 According to FP Canada’s 2022 Financial Stress Index released back in June, nearly 40% of Canadians considered money to be their biggest concern, beating out personal health, work, and relationships. About just as many Canadians said they feel more discouraged about their financial futures now than they did last year.3
With whisperings of a looming recession on the horizon, many people are wondering what kind of economy they should expect in 2023.4 Reveal posed that question to economy and business experts in the Niagara region. Here’s what they said we might see on the local front.
Potential Christmas Cooldown
“The Niagara region generally experiences a boost in retail employment and sales during the holiday season,” says Blake Landry, Manager of Economic Research and Analysis with Niagara Economic Development.5 But given inflation, the high cost of housing, and the looming economic slowdown, many economists, he says, are forecasting a lighter Christmas season defined by a dip in seasonal spending.
“It’s not going to cool all of the activity, obviously people are going to celebrate Christmas and buy gifts and spend more than they typically do,” says Landry. “But it may not be the same level as we’ve seen in previous years.”
The Christmas dip is part of a larger economic slowdown that Landry expects to see persist into the new year. He says this recession likely won’t mirror those of the recent past, like the financial crisis of 2008 or the recession Canadians weathered during the height of COVID in 2020. Instead, Landry says people should expect a softening of Niagara’s economy — it won’t be the best it’s ever been, but it won’t be the worst, either.
(Slower) Economic Growth
That’s because, over the last five to six years, Niagara has experienced what Landry describes as an economic boom in terms of GDP growth, retail sales, and investment in new building construction. Population growth is a driver of that trend. More people are migrating to Niagara. Between 2016 and 2021, the region’s population grew by more than 30,000 people.6 Earlier this year, Statistics Canada reported Thorold to be the eighth fastest growing suburban municipality in Canada.7
Overall, Landry anticipates seeing relatively strong levels of investment, GDP growth, and employment growth in the Niagara region this coming winter. But at the community level, the impacts of an economic downturn could be felt more strongly. Some businesses and sectors fare better than others in recession conditions, says Mishka Balsom, CEO and President of the Greater Niagara Chamber of Commerce.
“Historically, [recessions] have resulted in higher unemployment, a decrease in personal income and a decline in assets,” Balsom wrote to Reveal. “[That] can result in a downturn in demand, and therefore a decline in sales and profits. Small businesses are especially vulnerable during those times.”
So are businesses in the tourism, entertainment, arts, and recreation sectors, says Landry.
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Expert Contribution:
Blake Landry, Manager of Economic Research & Analysis with Niagara Economic Development
Blake Landry is a Certified Economic Developer responsible for economic, industrial, and business research and analysis at Niagara Economic Development.
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Competition for Labour
Accessing labour is a challenge for Niagara business owners, many of whom, Balsom wrote to Reveal, “are unable to find qualified candidates to fill job vacancies.” Those shortages are significant in the healthcare, early childhood education, construction, food and beverage, and accommodation sectors, to name a few.
For employers of remote or hybrid workers, non-competitive pay could be culprit. Historically, salaries and overall income in St. Catherines-Niagara has fallen short of Ontario’s median income.8 But during the pandemic, remote and hybrid work opened Niagara’s labour market to a larger geographic area, says Landry. That means that Niagara is now part of a labour market that competes with cities like Hamilton, Toronto, and Kitchener for talent.
“Even though we’ve had record job creation [and] the labour force is at a record high right now, employers are still having trouble recruiting people,” he says. “And in order for companies to compete in this labor market, they’re going to have to start paying more, so that’s also going to affect things in the immediate future.”
Landry suspects that in the new year, Niagarans are probably going to see income gains as employers compete in this larger, Ontario labour market. To tackle the labour shortage, Balsom wants to see comprehensive workforce development strategies implemented at all levels, from the government to the private sector.
Getting the economy back on track after nearly three years of navigating lockdowns, supply chain disruptions, and labour force changes will continue to be a priority for businesses and leaders in Niagara. But the region’s economic indicators—population growth, new investment, and trade, says Landry—mean its economy is in an ideal position to weather the downturn.
“It’s going to be a minor slowdown,” says Landry of the forecasted recession. “And I don’t think it’s going to last much longer than 2023.”
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Expert Contribution:
Mishka Balsom, CEO and President of the Greater Niagara Chamber of Commerce
Mishka Balsom also sits on the Niagara College Board of Governors, Brock U Goodman School Advisory Council and is Vice Chair to the Chamber Executives of Ontario.
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Sources:
1https://www.cbc.ca/news/canada/saskatoon/food-inflation-making-thanksgiving-more-expensive-1.6610823
2https://globalnews.ca/news/9239093/interest-rates-home-buying-selling-challenges-simcoe-county/
3https://fpcanada.ca/planners/2022-financial-stress-index
4https://www.cbc.ca/news/business/economy-jobs-inflation-column-don-pittis-1.6640659
5https://niagaracanada.com/team-members/blake-landry/
6https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=9810000701
7 https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98-200-x/2021001/98-200-x2021001-eng.cfm