By Jock Finlayson, ICBA Chief Economist
As temperatures cool and winter approaches, the Canadian construction industry may welcome the looming end of what’s been a less than stellar 2024. Amid a stagnant Canadian economy that has produced serial declines in per person GDP, construction has been battling the same economic headwinds as the rest of the private sector. From runaway inflation and labour shortages to sharply higher interest rates engineered by the central bank, construction has been grappling with an array of significant challenges.
At the national level, the Canadian construction industry has experienced zero growth in the value of production (real GDP) so far in 2024 (Figure 1). In comparison, the overall Canadian economy managed to eke out a tiny gain over the same period. Taking a longer view, construction sector real GDP rose by a modest 5% from 2019 to 2023, similar to the growth rate of the wider Canadian economy.
Within the broad construction sector, residential building has been particularly soft in 2024. Residential investment spending has fallen, despite the recent political focus on boosting homebuilding to try and narrow the yawning gap between Canadian population growth and net additions to the housing stock over the past 8 years. So far, the actions taken by various levels of government across the country have not led to a noticeable rise in housing starts, although that is partly explained by lags between new policy measures and actual housing-related investment. There is reason to believe that Canada-wide housing starts will tick higher over the next several years. However, as noted in a new report by Desjardins, 2025 is likely to be another lacklustre year for homebuilding.
The non-residential construction industry has been more resilient, even with a tough business environment. The engineering segment of the industry has been expanding. However, GDP in the non-residential building sector did contract slightly in the second quarter of 2024.
Looking ahead, a somewhat better macroeconomic backdrop should pave the way for brighter days for the construction industry. According to the Canadian Construction Association, as interest rates ease further and demand for housing gradually climbs, along with increased investment in multi-residential projects and ongoing strength in infrastructure-related investment, “growth is expected across the residential, non-residential and engineering construction sectors”… But that scenario may not become evident in the first half of 2025. In fact, it may take until 2026 before business conditions have visibly improved for the construction industry.
Turning briefly to B.C. and Alberta, the employment statistics shed light on key developments in the construction sector. From January to September 2024, B.C. posted no change in the number of construction jobs compared to the same period last year, based on data tracking by BC Stats. Employment in the industry has averaged around 236,000 so far in 2024 (seasonally adjusted). B.C. construction jobs peaked at 250,000 in 2019.
Alberta saw construction jobs rise from 223,000 at the start of 2024 to 250,000 by September, reflecting its stronger economy, rapid population growth, and higher levels of activity in the residential sector.
Data on building permits present a similar picture. Over January-August 2024, the value of building permits was up by 19% in Alberta, relative to the same period last year, while permit values in B.C. were down by 4%.
