THE CURRENT STATE OF CANADA’S CONSTRUCTION INDUSTRY

The well-being of our national economy can often readily be determined by examining the pulse of the construction industry. On the one hand, there’s an ability to assert Canada’s construction sector is moving along at a solid pace. On the other hand, there are signs of a more meandering recovery after the global economic downturn, which kicked in five years ago. Determinants come down to two things: the region and the type of construction. The current construction landscape is not unlike a direct mirror image of the overall economic disposition of our national economy – with a degree of uncertainty as to what’s around the corner.??

There are assuredly various levels of movement depending on whether one looks at statistics for industrial, institutional, commercial, or residential. The positive reinforcement is that there have been many large-scale projects in the building and infrastructure sectors from coast to coast.

The construction sector has always been an important driver of the overall Canadian economy and also serves as an accurate barometer for how strong or weak the national economy is at any given time. Canada is widely recognized as one of the world’s largest markets for commercial, residential and infrastructure development.

Infrastructure and construction have undergone tremendous growth over the past decade with about 50 skyscrapers being built in major cities including Toronto, Vancouver, and Calgary. In addition, 6,500 projects were supported through Infrastructure Canada to build and repair thousands of kilometers of expressways and highways across the country.

Canada’s economy is currently quite stable, especially compared with other western nations, but there’s still that constant reminder that 2008 wasn’t all that long ago. While we’re methodically plodding along, there’s not exactly an excessive surge to invigorate business and consumer confidence.?

The Construction Sector Council forecasts that Canada will need close to 320,000 new construction workers between now and 2020 as resource projects peak and retirements continue to rise across the country. The citizens are getting older but there are not several replacement workers to fill the void, which means we’re going to continue to be dependent on immigration. The forecast estimates a need for 100,000 jobs due to expansion demands in the mining, oil and gas, electricity, and transportation sectors – all of which are very well-paying jobs. The federal government, the provinces, and employers are working together to create a reservoir of skilled workers who could be selected to immigrate to Canada to fill the jobs.

Help Wanted

Despite the fact the national unemployment rate currently sits at 7.2 percent, there remains a shortage of skilled workers in several employment sectors, including construction. Companies have sent out the call that they will need to look to foreigners to come in and do the jobs they require, which are often multimillion dollars projects already underway. There are numerous opportunities in many areas of construction, although some regions are much more active than others. For the unemployed willing to learn a trade, it can be a rewarding job.

Several areas have shown marked strength in the construction industry over the past couple of years, and they stand to continue. Ontario, Alberta, B.C. and Prince Edward Island have seemed to follow the overall national pattern of recovery following the global economic downturn. Other regions such as Saskatchewan, Newfoundland, and Labrador have turned in very impressive employment growth numbers. Quebec, New Brunswick and Nova Scotia report more moderate year-to-year changes in total construction employment.

With a 3-billion-dollar Nickel mine processing plant on the shores of Placentia Bay and a proposed underground mine set to get the green light, Newfoundland and Labrador have been booming recently. There’s also the strength of the oil and gas sector looking to increase exploration. Construction of new sites, whether for oil or mining, can often result in the creation of thousands of jobs for those carrying a skilled trade.

Another solid destination is Winnipeg. According to a report by buildforce.ca, much of Manitoba has had an excellent construction industry for the past 20 years and the pace is expected to increase over the next five.

Then there’s Saskatchewan, which leads the nation in residential construction. The boom in the prairie province is attributed to the success of mining, pipelines, and electrical utilities. The province is one of the largest potash producers in the world. Commercial construction is also rock solid.?

CSC Labour Co-chair Robert Blakely, Director of Canadian Affairs for the Building and Construction Trades Department AFL-CIO says, “Another major challenge for human resource managers will be in tracking the mobility of the key non-residential trades across regions and potentially from abroad.”

The current forecast highlights a new plateau in the battle for skilled workers to focus on specialized labor markets created by the increase in resource projects such as mining, oil and gas, pipelines, electrical generation, and transmission.

“Many of these projects are in remote, northern locations,” Blakely confirms. “But the scale of this work generates significant demand requirements across many provinces.”

Room for Growth

However, while there are pockets of Canada that are showing room for optimism, the Conference Board of Canada believes the overall sector has not been all that robust in recent times. If you separate the various categories into industrial, institutional, commercial and residential there’s a noticeable difference in strength.

“We see the institutional – which is based on government spending – as the weakest of all,” says Maxim Armstrong, a senior economist at The Conference Board of Canada. “Governments are cutting back on the stimulus packages they gave during the recession and now they’re trying to rebalance their budgets, so you see large drops in the provinces.”

Last year, seven out of 10 provinces had declines in the institutional segment and in four instances the decline was more than 30 percent.

“Industrial activity has been somewhat better because we see some renewed activity in the manufacturing sector,” Armstrong tells us. However, the manufacturing industry as a whole has been declining for many years and the recession made it that much worse. We’re now back to seeing manufacturing at pre-recession levels, meaning it’s much improved compared with four or five years ago, but not what it once was in its glory days of the 1970s and 1980s.

“Manufacturing is benefiting from larger investment in transportation and mining, mostly from the west,” Armstrong continues.

It should be noted that not all the work done in mining and transportation would fall under the category of industrial construction. For example, if a new mine is built only the buildings on site are counted as construction; the rest falls under the category of engineering construction, which is extremely specific and targeted and not something where a lot of data is available.

“Alberta and Saskatchewan are doing a lot better, where the economies are driven by commodity demand and company prices,” Armstrong notes. “It’s bringing people and businesses into the cities.”

Mining demand is being driven from several locations, including the U.S. and the broader global trading markets. We’ve always had the closest trading ties with the Americans, but in terms of generating growth, China will be the No. 1 destination according to Armstrong.

“Growth is coming from countries that need a lot of natural resources, most emerging countries, including China and Brazil,” he says.

Concern in many sectors of Canada is that the Chinese economy has slowed down. It hasn’t stopped growing, but the pace at which it was escalating has declined, which unto itself has had a ripple effect on countries such as ours sending goods to the world’s largest country. It now stands at about 6 percent, down from 9 to 11 percent at the height of exportation.

“I know that growth is slowing but it’s still fantastic by our standards,” Armstrong says, putting it into perspective. “That being said, if growth isn’t as strong as expected it has an impact on global prices and investors, such as in mining, are extremely sensitive when it comes to putting the millions or billions of dollars that they need. They want to make sure the price is strong enough and that the strength is going to be there long enough to make it worthwhile.”

“We see little chance that the strength from the growing economy is not going to come back,” Armstrong continues. “It’s a matter of whether it will be this year, next year or the year after. Over the medium term, there’s no doubt that mining and transportation are going to be driving the industrial segment.”

The strength of Alberta and Saskatchewan is thanks largely to what they produce via natural resources that many other provinces and territories just don’t have.

Such resources bring people in; each has a remarkably high international migration. This is the start of the trigger effect because the high-paying jobs mean people are willing to spend more on bigger homes and vehicles and go out to dinner more often – all of which support a strengthening economy.

Ontario on the other hand has a completely distinct set of industries that drives its provincial economy. When you talk about cities, you have Ottawa that’s been slowed because the government has cut a lot of jobs, which has affected the housing and retail markets. Toronto has the financial sector and it continues to prosper but the manufacturing sector is still making a slow rebound from the recession.

An interesting dynamic when talking about Toronto is the number of condominiums that are constantly under construction. Some analysts believe the condo ceiling has already been reached, but many developers don’t see it the same way, as increasingly continue to go up. It’s the continuance of constant building that Armstrong admits he doesn’t understand.

"We’re wondering what builders are seeing that we are not seeing,” he says when asked about the non-stop building. “The data says it should be slowing, yet they continue to build. So, either it’s going to happen soon or maybe builders will adjust because there is a capacity that has not yet been absorbed and that would indicate there will be a correction in the future.”

Credits to The Canadian Business Journal.

Adapted by Tiago Nunes.