Despite a stronger 2017, Ontario’s economy still has a long way to go
Over the past decade and a half, Ontario has had more than its share of economic pain. So it’s good news that 2017 was a stronger year for the provincial economy, with Ontario among the national leaders in economic growth.
It would be a mistake, however, to overlook the bigger picture and conclude that because it had a stronger year, Ontario’s economy is fully restored to health. The sobering reality is that the provincial economy has suffered from a prolonged period of weakness, and that strong growth will have to continue through 2018 and beyond to make up for lost ground.
Let’s start by considering what’s happened to the overall size of the provincial economy. Economists use a metric called “Gross Domestic Product” (GDP for short) to measure the value of all the goods and services produced in one year in a specific jurisdiction. No single metric is perfect, but growth in inflation-adjusted GDP per person is generally considered the best single indicator of overall economic progress.
Ontario’s performance on this critically important measure picked-up last year, but it has been dismal if you take a longer view. Between 2001 and 2016, Ontario’s inflation adjusted GDP per person increased at an average annual rate of just 0.6 per cent. For context, that’s about half the growth rate that prevailed in the rest of the country taken as a whole (1.1 per cent). Ontario’s performance looks even worse when compared to stronger performers such as British Columbia, which has averaged 1.8 per cent inflation adjusted per-person economic growth during this period.
Crucially, Ontario’s weak performance in overall growth isn’t just a matter of academic concern for economists—it has a real impact on people’s lives. Strong growth in an economy’s overall productive output as measured by GDP generally goes hand-in-hand with faster rates of job-creation and faster growth in household incomes.
Consider this. Between 2001 and 2016, the average annual rate of job-creation in Ontario was higher than just two other provinces—Nova Scotia and New Brunswick. Every other province in Canada either tied or beat Ontario.
The story is even more worrying when it comes to income growth for the median household in each province. Recently released data from Statistics Canada shows that between 2005 and2015, Ontario was dead last in this important measure of economic progress.
Sadly, Ontario’s economic difficulties in recent years have led to more Canadians voting against the province with their feet, choosing to leave Ontario for other jurisdictions where there was more opportunity. In fact, over the past decade more Ontarians have left to live in other provinces than have moved here from elsewhere in the country. This is a departure from the trend of the previous decade, where the net flow of interprovincial migrants to Ontario was positive.
So while there’s no doubt that an uptick in economic growth in 2017 was good news for Ontario, it’s important to keep the bigger picture in mind. Ontario will need more quarters—and indeed, more years—of strong economic growth to make up for all the ground it has lost over the past decade and a half.
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