Ontario’s outlook dampened by labour shortages, supply chain issues

Pain points throughout Ontario’s economy are impairing business operations, and now consumers are feeling the pinch, too.

The frustration is palpable. From the grocery to entertainment venues to their pocketbooks, Ontarians are experiencing the very real consequences of labour shortages, global supply chain disruptions, and inflation. Today, the Muskoka Lakes Chamber of Commerce and the Ontario Chamber of Commerce (OCC) released the sixth annual Ontario Economic Report (OER) providing regional and sector-specific data on business confidence, policy priorities, and economic indicators, which together provide a unique view on the hurdles ahead.

“Ontario began to see some positive momentum in 2021 thanks to progress on vaccines and reopening. Business confidence, GDP, and employment growth are trending upwards after record lows in 2020. However, the road ahead remains uncertain for businesses and households as labour shortages, supply chain disruptions, and inflation are hitting home,” said Rocco Rossi, President and CEO, Ontario Chamber of Commerce. “A staggering 62 per cent of sectors are facing labour shortages in Ontario and expect to continue facing them over the next year. This is having real-life consequences on the cost of living, service delivery, and product availability.”

Not surprisingly, of the 158 respondents to the survey in the Muskoka-Kawarthas region, 54 per cent agreed the labour shortage problem was a number one barrier for their business. When it came to confidence in business outlook for their own organizations, of results reported from 11 regions, Muskoka-Kawarthas took the middle ground, with 55 per cent reporting confidence in their own organizational outlook. For the entire region, the confidence rating for Muskoka-Kawarthas of those surveyed was slightly lower than others at 26 per cent.

“While some have struggled and some have even closed, sadly, small businesses across Muskoka have generally proven their strength and resilience over the past two years. Business confidence is rising across the province, and we have confidence here, too, but for many the strain from new variants and additional protection measures is dampening their recovery,” said Norah Fountain, Executive Director of the Muskoka Lakes Chamber of Commerce.

This year’s OER reveals the impacts of the pandemic continue to disproportionately impact small businesses, and organizations led by women and people with disabilities. The hardest-hit sectors are in the arts, entertainment, food services, and agricultural sectors.

“We are seeing a domino effect of structural issues. Jobs are going unfilled, demand is outpacing capacity, and these issues are driving up prices for consumers and uncertainty for businesses,” said the report’s co-author, Claudia Dessanti, Senior Manager, Policy, Ontario Chamber of Commerce. “Two years into the pandemic, there is light at the end of the tunnel, but we need a long-term plan that will provide stability and lay the groundwork for economic growth.”

Key highlights of the Ontario wide report include:

1. Overall, 29 percent of Ontario businesses are confident in Ontario’s economic outlook in 2021 (compared to 21 percent the year prior), and 57 percent are confident in the outlook of their own organizations (up from 48 percent).
2. Most sectors (62 percent) are facing labour shortages and expect to continue facing them over the next year.
3. Inflation of raw materials and transportation costs at the producer level are affecting consumer prices, which rose 3.5 percent and are expected to rise another 3.5 percent in 2022. Ontario’s year-over-year housing price growth was above 30 percent in December 2021.
4. Small businesses are more preoccupied with cost relief measures such as business taxes and electricity rates, while larger businesses are more focused on long-term infrastructure, regulatory, and workforce development issues.
5. All regions except Northeastern Ontario saw positive employment growth in 2021, though several regions have yet to offset the major job losses seen during the first year of the pandemic.

The sixth annual OER offers unique insights into business perspectives across Ontario. The report is driven by data from our annual Business Confidence Survey (BCS) and economic forecasts for the year ahead. The BCS was conducted online from October 6 to November 19, 2021, attracting responses from 1,513 organizations across Ontario. The OER was made possible by the Ontario Chamber’s Landmark Partner, Hydro One, and Research Partners, Golfdale Consulting and Bank of Montreal.