As a new year beckons, Canadian policymakers and business leaders find themselves staring at an unsettled economic landscape that renders the task of forecasting more perilous than usual.

The past two years have been underwhelming for Canada’s $3 trillion national economy. Growth in inflation-adjusted gross domestic product (GDP) has lagged well behind the country’s surging population, leading to serial declines in real GDP per person – the most common measure of prosperity. In fact, on a per person basis Canada arguably has been in a recession since the end of 2022, even though top-line economic growth has remained modestly positive. Business investment – an area of chronic weakness under the Justin Trudeau government – has continued to languish. Housing starts have failed to gain traction, despite the unprecedented policy attention being lavished on Canada’s housing supply and affordability crisis. Meanwhile, productivity – the principal driver of long-run gains in real wages and incomes – has been going backwards, with Canada’s shortfall relative to the U.S. on labour productivity (GDP per hour) reaching record levels.

The sharp uptick in inflation in 2021-22 set the stage for a rapid tightening of monetary policy by the Bank of Canada beginning in early 2022 and extending into the early months of this year. Higher interest rates and constraints on the availability of credit quickly cooled economic growth, putting a squeeze on heavily indebted households, dampening business investment, and triggering a fall-off in residential construction and other real estate-related activity. With inflation pressures ebbing, the central bank shifted to an easing stance by mid-2024, lowering its short-term policy interest rate from 5.0% to 3.25% as of December. This has provided a much-needed lifeline to a faltering economy that recently has been growing at a tepid 1% pace (annualized) — and where the unemployment rate has been marching steadily higher.

For 2024 as a whole, ICBA Economics expects Canada to post real GDP growth in the vicinity of 1.2%, down from 1.5% last year, with an expanding public sector…

Weak research and development investment – largely caused by high taxation and government policies seemingly designed to discourage investment and innovation – is causing sluggish productivity growth, says the June 2024 edition of The Construction Monitor, published by the Independent Contractors and Businesses Association.

Up until 2000, Canada achieved productivity growth rates above or roughly comparable to those in the U.S., but the country has been consistently falling behind since then.

“We are witnessing Canada’s long, slow decline. On productivity growth and many other measures of well-being and competitiveness, Canada is coming up short among its global peers,” wrote ICBA President Chris Gardner in his introduction to The Construction Monitor. “Why does productivity matter? Because the more Canadian firms innovate, the more they spend on upskilling their people and on adopting new technology, the more profitable they are and the more they can increase the size of paycheques for workers.”

Jock Finlayson is Chief Economist for the Independent Contractors and Businesses Association (ICBA), Canada’s largest construction association. He is the first Chief Economist in ICBA’s 50-year history. Analyzing industry trends, market conditions, and economic factors to provide insights and forecasts relevant to the construction sector, he advises ICBA and its members on developments in the business and policy environment affecting the construction sector and the broader economy and assists in strategic planning and public policy advocacy.

Previously, Mr. Finlayson served as Executive Vice President and Chief Policy Officer at the Business Council of British Columbia. In that capacity, he directed the Business Council’s work on economic, fiscal, tax, environmental, regulatory, and human capital issues of interest to the largest employers in the province and the wider business community.

Prior to returning to B.C. in 1994, Mr. Finlayson was Vice President of Research at the Business Council of Canada, a leading business association in Ottawa.

Mr. Finlayson holds a master’s degree in business from Yale University, undergraduate and M.A. degrees from UBC, and an honorary Doctor of Laws from Royal Roads University.

He is the author/coauthor of two books and more than 50 published articles, book chapters and monographs. A frequent commentator on economic, business, and public policy issues, Mr. Finlayson writes regularly for Business in Vancouver, the Globe and Mail, The Orca, Black Press, Troy Media, and Postmedia.

From 2007 to 2013, Mr. Finlayson was a member of the Board of Directors of the Bank of Canada, where he chaired the Corporate Governance Committee and the Fellowship Committee and served on both the Pension Committee and the Human Resources Committee. He is a past member of the National Statistics Council, the principal advisory body to the Chief Statistician of Canada, and previously sat on the Boards of the Institute for Research on Public Policy, the Canada West Foundation, and Genome BC. From 2019 to 2021, he was a member of the Expert Panel on Housing Supply and Affordability jointly appointed by the B.C. and federal governments.

Mr. Finlayson is a Senior Fellow at the Fraser Institute, a Fellow of Royal Roads University, and past president of both the Association of Professional Economists of B.C. and the Ottawa Economics Association. He resides in West Vancouver with his wife Marlene.