Here's where the Canadian economy stands 3 years into the COVID-19 pandemic
As Canada approaches the three-year mark since the start of the pandemic, Statistics Canada has reviewed how COVID-19 has changed the Canadian economy and society, showing a mixed bag of trends.
The StatCan report released on Thursday found that while employment growth and economic activity continues to be strong, essentials such as groceries and housing have gotten more unaffordable. Meanwhile, some of the negative social impacts of COVID-19, including increased drug and alcohol use and poorer mental health, continue to persist.
"Life in Canada, as in other countries, has changed in many ways since the start of the pandemic—some changes were direct impacts of the pandemic, while others were trends that were accelerated by it," StatCan said.
StatCan described Canada's economic activity as "resilient," as real GDP has outpaced other G7 countries since the second quarter of 2021. The report notes that Canada's real GDP was 2.7 per cent above pre-pandemic levels in December 2022.
The Bank of Canada has steadily increased interest rates since February 2022 in an attempt to slow down the economy, and by extension, inflation. Interest rates currently stand at 4.5 per cent, but the Bank of Canada says it typically takes 18 months to two years to see the full effects of rates hikes.
But despite strong economic growth, new business openings appear to have plateaued. After the initial stages of the pandemic saw a wave of business closures, the number of active business recovered to pre-pandemic levels by late 2021. However, as interest rate hikes have driven up borrowing costs, business entries have slowed and business closures have remained stable.
In November 2022, business openings fell to their lowest level in two years, while insolvencies rose up due to challenges relating to supply chains, inflation and the labour market.
AFFORDABILITY PRESSURES REMAIN 'WIDESPREAD,' REPORT SAYS
The Canadian economy also faces serious challenges with deteriorating housing affordability. While home prices have come down since peaking in early 2022 thanks to the Bank of Canada's interest rate hikes, the average cost of a home was still 33 per cent above pre-pandemic levels as of December 2022.
In some cities, the figure is much higher. Average home prices in the Montreal area and the Greater Toronto Area were 37 per cent above pre-pandemic levels, while in Halifax, home prices were 58 per cent higher.
The rate hikes may have brought down home prices, but at the time, the report notes that mortgage interest costs had gone up by 18 per cent within a year as of December 2022.
On top of the high cost of housing, inflation was above six per cent for 10 consecutive months in 2022. And while the headline inflation rate has come down in recent months, food inflation remains high, with some grocery items seeing yearly price increases in the double-digit range.
The high cost of food and housing has led to serious financial stress for many Canadians. Low income earners had major reductions in their personal savings and higher-than-average increases in their household debt, and in April 2022, StatCan found that one quarter of Canadians had to borrow money or use credit to meet day-to-day expenses. In late 2022, nearly half of Canadians said they were concerned with their household's ability to afford housing, a StatCan survey found.
STRONG LABOUR MARKET GROWTH, BUT WORKFORCE CONTINUES TO AGE
Meanwhile, Canada has also seen strong growth in the labour market, as unemployment rates remain at or near record lows. In January 2023, employment levels were 800,000 jobs above pre-COVID-19 levels, with gains largely driven by jobs in professional, scientific and technical services, as well as public administration and health care.
But in the coming years, one in five working-age Canadians are set to retire, StatCan says, adding that the gap between retirees and new entrants to the labour market is at "record levels."
In order to combat these labour market trends, Canada has plans to boost immigration levels to up to 500,000 newcomers per year by 2025. However, StatCan says immigration will "only partially alleviate the impacts of population aging," noting that newcomers' skills tend to be underused in Canada's labour market, and that new immigrants typically settle in larger cities, which have the worst housing affordability.
SOCIAL IMPACTS OF COVID-19 STILL LINGERING
StatCan also says the social impacts of COVID-19 on well-being and mental health persist, especially for younger Canadians.
In late 2021, a StatCan survey found that six in 10 working-age Canadians and two-thirds of seniors felt they had a "strong sense of meaning and purpose." However, only half of respondents aged 15 to 24 reported the same thing. Older Canadians were also more likely to report higher levels of perceived well-being compared to those under 30.
And while COVID-19 was the biggest cause of excess deaths since March 2020, deaths due to alcohol and drugs also skyrocketed during this time period.
In 2020, there were 4,605 deaths due to accidental poisoning, and in 2021, there were 6,310. By comparison, the height of the overdose crisis in 2017 saw 4,830 poisoning deaths. Young people were also disproportionately affected by these deaths.
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