ECONOMIC STUDIES | OCTOBER 28, 2020
ECONOMIC VIEWPOINT Overview of Quebec’s Urban Areas for 2020–2021
Because of our current public health and economic crisis, as GRAPH 1 for Quebec as a whole, economic growth in urban areas will be Economic growth in Quebec’s urban areas should rebound in 2021 down in 2020 (graph 1). The Laval area should record the smallest 2020f 2021f
decline whereas, in contrast, the Laurentides will record the largest Laval -4.5 7.3
downturn. One of its drivers, the aerospace industry, was hard hit Quebec as a whole -4.8 6.3 by the pandemic and will likely take some time to get back on its Lanaudière -4.9 6.7 feet. This is also why its economic recovery will be weaker than Quebec’s in 2021. Montérégie -5.0 6.4
Montréal -5.5 6.8
Although COVID-19 hit Montréal and its neighbouring cities Laurentides -5.7 5.0
hard, their economies generally stood up to the shock well. Their -7 -6 -5 -4 -3 4 6 8 economic structure, focused on services, made telecommuting Ann. var. in % Ann. var. in % easy, which helped businesses quickly adapt to the new situation. f: Desjardins forecasts Source: Desjardins, Economic Studies Overall, urban regions should recover at a slightly faster pace than the average for Quebec; the pace will be uneven, depending on the region. However, the economic rebound expected for 2021 could be downgraded if the pandemic’s second wave leads to tougher restrictions. This is currently the greatest risk to the forecast scenario. The COVID 19 crisis is still affecting many countries and uncertainty remains elevated.
MAP 1 Quebec’s regions
Nord-du-Québec Côte-Nord
Saguenay– Lac-Saint-Jean Gaspésie– Îles-de-la-Madeleine Abitibi- Bas- Témiscamingue Mauricie 1 – Resource regions Saint-Laurent Lanaudière Capitale- 2 – Manufacturing regions Laurentides Nationale 3 – Urban regions Outaouais Chaudière- 4 – Capital regions A - Laval Appalaches D B - Montréal C - Montérégie C A Estrie D - Centre-du-Québec B
Source: Desjardins, Economic Studies
François Dupuis, Vice-President and Chief Economist • Mathieu D’Anjou, Deputy Chief Economist • Chantal Routhier, Senior Economist Desjardins, Economic Studies: 418‑835‑2450 or 1 866‑835‑8444, ext. 5562450 • [email protected] • desjardins.com/economics
NOTE TO READERS: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. The data on prices or margins are provided for information purposes and may be modified at any time, based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. The opinions and forecasts contained herein are, unless otherwise indicated, those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group. Copyright © 2020, Desjardins Group. All rights reserved. ECONOMIC STUDIES
Demographic Growth Will Remain Stronger than for Quebec as a Whole he re lacement inde will remain low Based on the projections of the Institut de la statistique du Replacement index Labour replacement Québec (ISQ), on average, in 2020 and 2021, urban population index: In % growth will be slightly below that of the last two years. However, 151 20-29 years x 100 55-64 years its pace will outstrip the province’s (graph 2). The urban areas 140 128 130 will grow at the same relative pace, with increases ranging from 115 109 110 97 92 90 92 86 83 84 0.8% to 1.0% for 2020 (+0.7% for Quebec). 90 78 74 73 73 68 67 65
40 o ulation growth will remain relati el sustained 2006 2016 2021f
Average 2018-2019 Average 2020f-2021f Quebec as a whole Montréal Laval Lanaudière Laurentides Montérégie
Montérégie 0.9 0.8 f: Institut de la statistique du Québec projections, based on the baseline scenario for 2019 Laurentides 1.2 1.0 Sources: Institut de la statistique du Québec and Desjardins, Economic Studies
Lanaudière 1.0 0.9 The Employment Market Should Recover More Quickly Laval 1.0 0.9 than in Quebec as a Whole Montréal 1.5 0.8 The employment markets are gradually regaining the lost
Quebec as a whole 0.9 0.7 ground, but it will take some time for all of the urban areas to return to pre-crisis levels (graphs 4 and 5 on page 3). Businesses, 0 1 2 0 1 2 Ann. var. in % Ann. var. in % particularly merchants, restaurants and retailers, progressively f: Institut de la statistique du Québec projections, based on the baseline scenario for 2019 re-opened as the lockdown slowly eased, but they are not all Sources: Institut de la statistique du Québec and Desjardins, Economic Studies operating at full capacity. The new public health measures, such as social distancing, play an important role. Save for Montréal, migration (arrivals minus departures) will be the primary source of population growth between now However, the situation remains particularly difficult in downtown 1 and 2021, while natural growth (births minus deaths) will have a Montreal, which saw a 92% decline in traffic in August. This less significant impact. In Montréal, it is the opposite: its natural situation is curbing employment’s recovery in Montréal. growth will remain strong and sustained, whereas its balance of migration will be close to zero. Also according to ISQ projections, Among the key economic drivers are education, health care and in the coming years, the migration balance will tend to stabilize social services, the finance and insurance industry, real estate and in Laval, Lanaudière, the Laurentides and Montérégie, while leasing services, transportation equipment manufacturing and improving in Montréal. the wholesale and retail trade industries. For many municipalities around the major centres, agriculture and forestry are important Like elsewhere in Quebec, these regions will have to tackle economic activities. The speed of the recovery will vary the challenge of replacing labour (graph 3). Their labour force depending on the sector (graph 6 on page 3). replacement indexes have been declining for several years now, putting pressure on the employment market, particularly by The tourism industry is also a major driver for urban areas. It closing the gap between the labour demand and supply. For will take time to recover and could result in other layoffs and example, the Laurentides’ index will be at 67% in 2021. In other business closures. The data shows that Quebec tourists have words, for each group of 100 workers between the ages of been drawn to resorts and vacations in nature to the detriment 2 55 and 64 that leaves the labour market, there will be 67 people of the major centres, which were deserted, especially Montréal. who are of age to replace them (20 to 29). The index will To mitigate the scarcity of tourists and workers in urban centres, therefore drop 23 points compared with 2006. since July 18, private-sector employers have been allowed to bring their employees back to the office. However, maximum Montréal’s situation is different, as its replacement index is one occupancy is 25%. of the highest in Quebec. Still, attracting and retaining workers are growing challenges on the Island of Montreal, with many businesses vying to attract the best talent. Among other things, 1 Baisse de 92 % de la fréquentation du centre-ville de Montréal, La Presse, this is due to the ongoing poor fit between worker supply and September 16, 2020. (Viewed September 16, 2020). demand in the territory. 2 Montréal expects to bring in a mere 1 million tourists this year, rather than the regular 11 million visitors, not to mention the cancellation of sporting and cultural events, including the many festivals. Source: Les restaurants et les bars en arrachent, La Presse, July 26, 2020. (Viewed July 26, 2020).
OCTOBER 28, 2020 | ECONOMIC VIEWPOINT 2 ECONOMIC STUDIES
nem lo ment rate in urban areas in and able o outloo s or em lo ment growth
nemployment rate In E E E E E E a ecember griculture, fishing and a uaculture table table orestry, lumber, paper and furniture nfavourable nfavourable ransportation e uipment nfavourable nfavourable holesaling table table Retailing nfavourable table ransportation and warehousing nfavourable nfavourable f f inance and insurance table table uebec as a whole Montr al aval anaudi re aurentides Mont r gie Real estate and leasing services table table rofessional, scientific and technical services table ood Educational services ood ood f es ardins forecasts ealthcare and social assistance table ood ource es ardins, Economic tudies Arts, entertainment and recreation Difficult Unfavourable Accommodation and food services Difficult Unfavourable onthl em lo ment growth in E E In the “Economic Recovery” section, the estimate of employment recovery is established according to the E E E E E following considerations The employment recovery will be strong The employment recovery will be e el Good Unfavourable and rapid. more difficult. Quebec as number a whole The employment recovery will be fairly The employment recovery will be Var. in % 0.5 -1.7 -6.2 -4.9 -0.7 5.1 3.3 1.8 Stable Difficult rapid. very difficult. Level 1,117.1 1,096.1 1,036.6 977.07 958.0 974.3 992.2 1,018.2 Montréal (number) In the “Medium-term Outlooks” section, the assessment of the employment outlook is based on the following Var. in % 0.3 -1.9 -5.4 -5.7 -2.0 1.7 1.8 2.6 definitions Level Good Employment will be above pre-COVID-19 levels at the end of the period. 213.0 208.4 194.4 187.2 197.1 215.0 226.2 227.1 Laval (number) Stable Employment will be similar to pre-COVID-19 levels at the end of the period. Var. in % 2.3 -2.2 -6.7 -3.7 5.3 9.1 5.2 0.4 Employment will be below pre-COVID-19 levels or some additional layoffs could occur before the Unfavourable Level end of the period. 273.1 275.1 265.0 259.1 256.8 265.3 273.6 272.2 Lanaudière (number) Employment will be below pre-COVID-19 levels or additional layoffs could occur before the end of Difficult Var. in % 1.5 0.7 -3.7 -2.2 -0.9 3.3 3.1 -0.5 the period. Level 299.5 286.7 259.8 245.6 244.5 265.7 280.9 288.9 Laurentides (number) Var. in % -2.0 -4.3 -9.4 -5.5 -0.4 8.7 5.7 2.8 Sources: Service Canada and Desjardins, Economic Studies Level 834.2 816.5 760.9 721.6 719.3 766.1 796.4 810.9 Montérégie (number) Var. en % 0.9 -2.1 -6.8 -5.2 -0.3 6.5 4.0 1.8 1 3-month moving average; 2 Start of lockdown, 3 Lockdown; 4 Start of reopening. esales will grow in Sources: Institut de la statistique du Québec and Desjardins, Economic Studies ransactions verage sales price The Housing Market Is Flagging Except for Montreal and Laval, new construction fell in the first Mont r gie half of 2020 in the three other urban areas. Fairly large declines aurentides were recorded; in this context, they should see a slight downturn anaudi re for 2020 as a whole. In 2021, the housing market is expected to aval contract in all urban areas, and in Quebec overall. With respect Montr al to sales of existing properties, a downturn was recorded in the urban areas, aside from Lanaudière, in the first half of 2020. Except for Lanaudière, therefore, we can expect them to decline f f f f nn var in nn var in this year. Next year, all of them should see transactions tick up. f es ardins forecasts The average sale price posted solid growth. It will rise in 2020 ource es ardins, Economic tudies and 2021 (graph 7). As the resale market now has a shortage in all urban areas, it will continue to provide good support for price Numerous Capital Projects Will Support the Economic growth. Recovery in Urban Areas Although it is hard to predict how investment will go in In addition, more stringent rules for new mortgage loan these uncertain times, major infrastructure projects in the insurance applications with the Canada Mortgage and Housing Greater Montreal area, backed by the Quebec government, Corporation (CMHC) came into effect on July 1. For example, the should support the economy’s recovery. Although we could see maximum debt ratio permitted is lower, the mandatory minimum some flagging in the private sector, the government amounts credit score was raised from 600 to 680, and down payments injected should maintain good levels. from non-traditional sources are no longer accepted.
OCTOBER 28, 2020 | ECONOMIC VIEWPOINT 3 ECONOMIC STUDIES
Among the major projects that will keep stimulating economic activity are the Réseau express métropolitain (REM) and many hree e am les o economic stimulus ro ects in the urban areas ongoing residential developments, including Solar Uniquartier in Brossard, Urbanova in Terrebonne and Habitations Trigone ➢ sland o ontreal • aunch of the M economic recovery plan that contains measures to put Montreal in Saint-Jérôme. In Laval, revitalization projects to create a back on track he measures are aimed at three ob ectives stabili ing and supporting the new downtown and modernize many area infrastructures are economy in the short term, reinventing the metropolis’s economic development and mobili ing all partners around green, inclusive economic development ongoing, helping support the strength seen in recent years. ➢ it o a al • Launch of the economic recovery plan in July, 2020, with the theme “Laval, capitale des Lastly, many economic recovery projects will be put forward in opportunit s,” to “help and support entrepreneurs and businesses in the delicate transition to a post pandemic economy.” urban areas in the context of the pandemic. Graph 8 illustrates a ➢ eu ontagnes aurentides few. Simultaneously, the Chamber of Commerce of Metropolitan • Launch of the “Esprit local, j’achète!” campaign in the summer of 2020. The campaign will be visible on various platforms signage, web, social media, etc , and is offered to all Montreal has pinpointed seven “ready-to-go” infrastructure municipalities that belong to the R M projects in Greater Montreal to stimulate the economic recovery, including expanding the Palais des congrès as of 2021, increasing R M Regional county municipality the supply of social and affordable housing, and increasing port ources arious sources and es ardins, Economic tudies and airport capacity. Conclusion Issues and Challenges In urban areas, the economy will generally recover more quickly The speed at which economic activity recovers will depend on than in Quebec as a whole over the months to come. Urban many factors, including the recovery of driver industries, supply areas will continue to see some of the province’s strongest chain performance, a rise in the adoption of digital technology, population growth, the employment market will strengthen more and businesses’ capacity to reconcile profitability and the quickly than in the province as a whole, and the housing market challenge of respecting public health instructions, including social should also do better. For its part, investment will also remain at distancing measures. good levels. Lastly, the ability of businesses to adapt to the new reality, maintain or shorten their supply chains, and make the Moreover, the challenges involved in attracting and retaining shift to Industry 4.0 will be determining factors in the recovery. labour and in the flow of people and merchandise will slowly return to centre stage as the economy strengthens. Although the unemployment rate should remain above pre-crisis levels for Chantal Routhier, Senior Economist some time, there are still sectors and businesses that are actively seeking labour, including the high-tech, manufacturing and service industries, particularly education, and health care and social services.
OCTOBER 28, 2020 | ECONOMIC VIEWPOINT 4