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It has been a tumultuous three years in the construction sector says an Ontario �鶹��ý����ion Secretariat (OCS) researcher, but the OCS is not ready to concede a slip into recession next year.

Director of research Katherine Jacobs addressed members of the Provincial Building Trades and �鶹��ý����ion Council of Ontario at their recent conference in Niagara Falls and delivered a generally positive economic forecast for the near term. The OCS has identified over $140 billion in major projects over the next five years, driving non‐residential investment up 12 per cent over that period.

“It’s certainly been turbulent the last couple of years and the pandemic was something no one anticipated. It caused a lot of havoc for everyone,” Jacobs said.

“We are seeing some strong headwinds coming towards us and the economy is starting to slow down. At this point we hear rumours of a recession but no one’s really predicting a recession.”

Growth in Ontario’s GDP is expected to reach 3.9 per cent in 2022, 1.6 per cent in 2023, 2.3 per cent in 2024 and 1.8 per cent in 2025, according to a Conference Board of Canada forecast from September.

The province’s inflation peaked at 7.9 per cent in June 2022 and dropped to 6.9 per cent in August. Key drivers were pandemic supply chain disruptions, unprecedented stimulus, increased demand for goods and the war in Ukraine, Jacobs said.

Looking ahead, according to the Conference Board, inflation should be 7.2 per cent in 2022, falling to 3.5 per cent in 2023, 2.2 per cent in 2024 and two per cent in 2025. Jacobs said she believes the final inflation number for this year could be in the 6.5 to 6.8 per cent range.

“You see some modest recovery there in August,” Jacobs said of inflation. “With any luck we’ll be on a downward slope.”

Jacobs also offered a snapshot of the recent collective bargaining season for Ontario’s 25 trades. As of Sept. 12, 24 of 25 trades have ratified three-year collective agreements. Wages rose between $5 and $9 per hour in the three-year packages, and there were eight tentative agreements rejected by union members.

There were five strikes in ICI totalling 60 days: by the carpenters, demolition workers, glaziers, operating engineers and painters.

Jacobs said the OCS will be undertaking more detailed analysis of the agreements when it receives complete wage schedules.

“That is a unique situation that hasn’t happened historically,” she said of the rejected agreements.

“That is something the industry will want to talk about as it prepares for the next round of bargaining in three years.”

Looking at ICI investment trends, 2022 is shaping up to be the best of the last five years.

The OCS expects investment in the sector to reach $14.3 billion in 2022, up from $13.3 billion in 2021; $13.1 billion in 2020; $11.7 billion in 2019; and $12.8 billion in 2018.

“In 2023, investment is up by about a billion over the previous year and that is growth in all three sectors, industrial, commercial and institutional,” said Jacobs.

“The industry hasn’t been slowing down and will continue to see strong growth as we move towards 2023.”

The OCS is using September 2022 BuildForce numbers to forecast construction investment over the next five years. �鶹��ý����ion engineering is expected to approach the $30-billion mark in 2023 and linger in that vicinity through to 2027. As for investment in ICI buildings, investment is expected to rise above $25 billion by 2024 and stay there the next three years.

Among other drivers of construction demand will be the green retrofit market. The federal government’s 2030 emissions reduction plan requires 75 per cent of domestic office space to be net-zero by 2030.

Jacobs noted the OCS participated in a Green Retrofit Economy Study with the Canada Infrastructure Bank (CIB) and other agencies, and it’s been determined that the inventory of retrofit floorspace in Ontario is 275 million square metres.

The CIB has committed $2 billion to net-zero transformation of commercial buildings.

As for the workforce, data presented by Jacobs showed a razor-thin gap between labour force and employment in Ontario this summer. In July 2022, unemployment in Ontario was down to 2.1 per cent. That was a significant drop from January, when unemployment stood at 6.2 per cent. Last December unemployment in the construction workforce stood at 2.8 per cent, it was 9.6 per cent in January 2021 and 4.8 per cent in October 2020.

“That’s the lowest rate it’s ever been in the construction industry,” Jacobs said of the July unemployment rate.

She noted the aging of Canada’s construction workforce has been well documented but the latest projection of working cohorts to 2027 brings the transition into sharp focus.

Whereas only 24 per cent of construction workers were aged 55 and older in 2007, by 2027 the percentage of 55-plus workers will be 33. By 2027, one in five construction workers will be 65 or older.

Jacobs urged stakeholders to look around across the marketplace, as there are numerous labour force development incentives being created to help the industry address labour market challenges.

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