THUNDER BAY – Thunder Bay’s regional economy has been slower to recover from the impact of the COVID-19 pandemic than the province as a whole, according to its most recent local economic index.
The researchers behind the Thunder Bay Economic Activity Index also warned of a potential looming recession in 2023 as they unveiled the results of the 2022 index late last week.
Professor Bahram Dadgostar and associate professor Camillo Lento, both of Lakehead University’s faculty of business administration, presented the newest version of the index to a small group of leaders at the Northwestern Ontario Innovation Centre late last week.
The index, which can be viewed online, is compiled using five data points: total employment, retail sales, the average home resale price, the unemployment rate, and the affordability of housing.
Researchers have been updating the index every two years since 2014, with a gap in 2020.
“The idea is to provide more unique data specific to Thunder Bay, as opposed to using broader measures,” said Lento.
“Our index shows Thunder Bay experienced quite a significant shock during the pandemic — probably bigger than some of the Conference Board data on GDP would suggest — and our recovery has been a bit slower than the province..”
The index typically looks at the number of employment insurance (EI) claims in the district, but replaced that data point with the unemployment rate because of changes to the EI program during the pandemic.
The unemployment rate was weighted much higher than the other factors, at about 50 per cent.
It means although resale housing prices have remained strong – climbing by 26.1 per cent locally from 2019 to 2021 during the height of the pandemic – the overall picture is shakier.
Increasing interest rates are expected to slow down real estate price hikes, with declines predicted for 2023.
One of the biggest takeaways from the team’s analysis is that Thunder Bay appears to have been hit harder by the pandemic, and be rebounding more slowly.
Thunder Bay’s real GDP is estimated to have declined by a whopping 7.1 per cent in 2020, largely driven by the pandemic.
The district economy rebounded in 2021, but hasn’t yet recovered to pre-COVID levels, unlike Ontario’s economy as a whole.
Data from the economic index and the Conference Board of Canada indicated the district would recover in 2023.
However, Lento and Dadgostar now see worrying signs of a potential recession next year as the Bank of Canada raises interest rates to combat inflation.
“What we’re reading, what we’re seeing does suggest we might see a recession and a softening of the labour market going forward,” Lento said.
“We can’t really predict what’s going to happen next year. It’s highly uncertain. But it might not be as rosy as some of the original estimates.”
Dadgostar suggested any recession is likely to hit lower-skilled workers in industries like hospitality and food service harder. He’s optimistic it will have little impact on major projects, like a number of potential mines in development in the region, which he called crucial to its economic future.
“Specifically for unskilled labour, it’s going to be a little bit more difficult,” he said.
“For long-term investment, one year [of high interest rates] is not going to kill [a project]. When you’re looking at mining, it’s a ten-year plan. One year of interest rates going up might delay things a little bit, but it’s not going to actually stop the process of investment into mining.”
Despite the looming threats, Dadgostar sees some fundamental strengths the city of Thunder Bay can leverage for longer-term economic success.
He sees the opportunity to attract many more newcomers to the city, he said, something local economic agencies have said will be necessary to keep its economy afloat.
“Jobs are available, and the cost of living, compared to the rest of cities in Canada, is much lower,” he said.
