Summary:

  • Leading up to the pandemic, the Innovation Corridor – an area anchored by the Toronto, Hamilton and Waterloo regions – was a key driver of economic growth in Canada. As of 2017, the region accounts for a quarter of national GDP and two-thirds of Ontario’s GDP.
  • The region’s strong industry clusters, local talent and educational institutions, diversity, and connectivity have played a critical role in enabling economic growth over the past decade.
  • As of August 2021, employment in the Corridor is close to pre-pandemic levels, however the region has 250,000 fewer jobs than its previous growth trajectory.
  • The regional unemployment rate remains high, driven by the rise in joblessness in the Toronto CMA and a lagging accommodation and food services sector.
  • Economic recovery has been uneven across the Corridor, in part due to the unique characteristics of its Business Districts. The Metropolitan Centre continues to lag other Business Districts in its recovery as vehicle trips and in-person consumer spending remain 40% below levels seen in 2019. At the same time, the Goods Production and Distribution District has been the most resilient to the impacts of the pandemic – vehicle trips into the district in July were only down 21% relative to 2019 levels and in-store consumer spending was back to parity as of August.

What is the Recovery Tracker?

Since the start of the pandemic, the Toronto Region Board of Trade (TRBOT) has been assessing the recovery of the Innovation Corridor – the economic region comprised of the five Census Metropolitan Areas (CMAs) of Oshawa, Toronto, Hamilton, Guelph and Kitchener-Cambridge-Waterloo. Our research thus far has found that the economic impact of the pandemic has been unevenly felt across the region – even within individual municipalities. TRBOT has launched the Recovery Tracker as a tool to provide timely analysis of the Corridor’s recovery across different employment areas – or Business Districts.

Recapping the Corridor’s Pre-Pandemic Economic Growth

Leading up to the pandemic, the Innovation Corridor was a key engine of growth for the Canadian economy. Between 2007 (before the Great Recession) and 2019, the Corridor accounted for 32% of net new jobs in Canada. [i] Over this period, employment in the Corridor grew more than 19%, while unemployment fell from 6.6% to 5.8%. [ii] As of 2017, the region represented a quarter of national GDP and close to two-thirds of Ontario’s GDP. [iii] Health care, social assistance, and professional services made up close to half of total employment growth in the Corridor from 2007 to 2019. The growth in professional services was most prominent in Toronto and Kitchener-Cambridge-Waterloo CMAs, with Toronto alone adding 141,000 net new jobs in the sector. Within the Corridor, four out of the five CMAs had higher employment growth than the national average (Figure 1), while the unemployment rate fell across all five metropolitan areas.

Figure 1: Percentage Growth in Employment from 2007
Percentage (%), Canada and CMAs in the Innovation Corridor. 2007 – August 2021.

At its core, the economic prosperity of the Corridor is a by-product of its attributes that attract businesses and people while fostering growth. These include:

  • A diverse economy and strong industry clusters – including nearly 300,000 workers in high-tech industries
  • Talent and internationally renowned educational institutions – 423,000 students across 16 post-secondary institutions
  • Diversity – 40%+ share of foreign-born residents
  • Connectivity – Toronto Pearson International Airport serves the second-highest number of international passengers in North America and is connected to 175 destinations worldwide

Economic Consequences of the Pandemic

The historical success of the Corridor notwithstanding, overall economic conditions have deteriorated since the start of the pandemic. Based on pre-covid trends, employment was projected to be approximately 4,680,000 in August 2021. [iv] Despite partial recovery, there are close to 250,000 fewer people employed in Corridor than would have been in the absence of the pandemic. The unemployment rate in the region remains elevated at 8.8%, 3.4 percentage points above the jobless rate in February 2020. [v] (Figure 2) The jump in unemployment has been primarily driven by the Toronto CMA. The rise in joblessness in Toronto has been notably higher than most other metropolitan areas in Canada, including other large CMAs such as Montréal and Vancouver. From a sectoral perspective, the accommodation and food services sector continues to struggle, with employment declining close to 17% since August 2019. Over the same period, the number of jobs in the professional services and public administration sectors have risen by 10%.

Figure 2: Employment and Unemployment Rate
Three-month moving average, seasonally adjusted. Innovation Corridor. Jan 2019 – August 2021.

Varying Degrees of Recovery Across Business Districts

While traditional labour market indicators allow us to gauge the health and recovery of the region as a whole, the pandemic has had an asymmetrical impact on the regional economy. Some of this can be attributed to the physical, economic, and workforce differences across Business Districts. Among other factors, the risk of contracting the virus, rise of remote work, presence of essential workers, and growth in online-shopping have had varying economic consequences across work locations.

This is most evident when comparing the hollowing out of the Metropolitan Centre (MC) throughout the pandemic versus the revival of economic activity seen in the Goods Production and Distribution District (GPDD). A high-density environment and clustering of companies, institutions, and talent – including the concentration of white-collar workers – have historically been key enablers of the growth and prosperity seen in the downtown core. The same characteristics have led to the MC experiencing the worst of the pandemic-induced economic downturn. Trips into the MC have plummeted and consequently so has spending within the district. Vehicle trips to the district were down by approximately 40% in July 2021 relative to 2019 while in-person consumer spending remains 40% lower than pre-pandemic levels. The exodus of workers in the MC (67% of which have the capacity to work remotely), is in part responsible for the district’s weak recovery. While high-skilled service industries experienced the least impact since the start of the pandemic, their shift to remote work has had widespread ripple effects on the many local businesses in the MC supported by their workers. Outcomes in the MC mirror results from a recent study of US cities which found that locations with a greater presence of high skilled workers, most of which transitioned to remote work, experienced larger drops in consumer spending.

The opposite is true for the GPDD. Defined by its large geographic footprint, prevalence of essential jobs with low capacity for remote work, and larger stores, the GPDD has seen stronger economic recovery than other Business Districts. Travel to the district has been less disrupted by the pandemic, in part due to the continued travel of essential workers to their place of work. Trips into the GPDD were down 21% in July 2021 compared to the same month in 2019. In-person consumer spending at businesses in the GPDD has been more resilient relative to other Districts; as of August 2021, spending is close to parity with levels seen in 2019. Moreover, the retail e-commerce boom within the Corridor can be largely attributed to e-commerce merchants set up within the GPDD.

Tracking Recovery to Enable Evidence-based Decisions

Making evidence-based decisions in the face of economic certainty requires timely analysis. Beyond headline economic indicators, it is increasingly important to better understand how different types of Business Districts are navigating through recovery. We invite you to visit the Recovery Tracker tool on a monthly basis to gauge recovery in the region – the tool will be next updated during the week of October 25th.

  1. Statistics Canada, Labour Force Survey.
  2. Ibid.
  3. Statistics Canada.
  4. Based on the linear trajectory of employment growth between January 2018 and February 2020; Three-month moving average, seasonally adjusted.
  5. Statistics Canada, Labour Force Survey; Three-month moving average, seasonally adjusted.