While the overall trend in the construction industry in Canada for the coming 12 months remains largely unchanged from 2015’s growth forecast trajectory, two key factors are expected to have a major impact, especially on BC.
Plunging oil prices have resulted in a marked slowdown in the Alberta oil patch, and driven workers back across the Rockies to BC seeking employment.
The second key factor is the new federal government. Industry leaders are optimistic that Ottawa’s renewed commitment to infrastructure investment will create additional demand for new infrastructure construction.
According to a recent survey by The Independent Contractors Association of BC, the mood in the west is upbeat. “About half of our members expect an increase in work volume for 2016, and only four percent think volume will fall, which means that 96 percent think things will be as good or better this coming year,” says ICABC’s Phil Hochstein.
Although volumes are expected to remain strong, Hochstein does not expect to see significant growth in profitability. Input factor prices are also expected to stay stable, with a three percent labour cost increase and relatively stable commodity pricing in the forecast.
The Canada/US dollar exchange rate also continues to impact purchases of materials priced in US dollars. The National Bank forecasts a Canadian dollar in the $0.75 to $0.79 US range through out 2016.
According to the most recent BuildForce Canada report for British Columbia, an increase in major projects will create short-term demand peaks in 2017-2018. Recruiting will have to draw in workers from other markets to meet demand peaks.
Nonetheless, recruiting, training, and retaining good employees presents ongoing challenges. While an expected influx of labour from a slowing oil sector in Alberta may provide short-term supply, each passing year is expected to see additional retirements and an older age profile that restricts available labour force.
Excluding new federal government projects, major plans for mining, infrastructure, and LNG will all continue to drive construction growth in BC in 2016 and beyond. Between today and 2018, new projects are expected to create 12,000 jobs.
Employment demand in key trades will continue to grow, generated by big engineering projects. Growing demand can be expected for boilermakers, millwrights, gasfitters, heavy equipment operators, steamfitters and pipefitters, trades helpers and labourers, truck drivers, and welders.
Shorter-term labour requirements have in the past been filled largely from unemployment. However, unemployment in construction has been driven well below historic levels, and expansion demand will keep unemployment levels in the current range. Unemployment is not expected to be a reliable source for recruiting.
The Canadian Construction Association sees moderate growth across the country and points to new infrastructure projects as a key factor.
“What is encouraging is the renewed and enhanced commitment to infrastructure in Canada,” says the CCA’s Michael Atkinson. “The non-residential side has been on a buoyant ride for some time, other than 2008. We expect that to continue.”
Provincially, Alberta is expected to add 15 percent to the infrastructure pot. “That doesn’t include supplemental programs announced for Canada,” Atkinson says. “We may not see the impact in every sector in every region, but overall the picture is still pretty rosy,” he says.
As far as the oil and gas industry goes, Atkinson tries to keep things in perspective. “The oil and gas sector has lived with this (cyclicality) forever. The fact that prices are volatile is no surprise. But most of these companies work on a 20- to 30-year forecast, so projects are really just being deferred,” he says.
Atkinson also see critical issues in labour supply emerging over 2016 and beyond. Of the 322,000 new workers forecast to be needed by 2024, only half will come from traditional sources inside Canada. “For the next decade 1,000 people per year turn 65. We need training in principle trades, and we’ll need foreign trained people,” he says.
Since 2000, the construction industry in Canada has added 600,000 new jobs. One in 13 households in Canada derives income from construction, Atkinson notes. However, Canada’s geography will continue to create challenges.
“A lot of projects a very large and tend to be in the middle of nowhere,” Atkinson observes. “We need to work on bringing down barriers between provinces, harmonize apprenticeship, and work on mutual recognition of credentials to improve workforce mobility,” he says.
Low oil prices, while causing a major shakeout in Alberta, may contribute to higher levels of growth in industrial construction in Canada. Low energy prices combined with low interest rates and a low Canadian dollar are expected to stimulate Canada’s non-oil-producing sectors.
Rising US demand and the softer Canadian dollar bodes well for domestic manufacturers, according to TD Economics. Given the competitive manufacturing environment globally, Canadian producers will likely have to retool and reinvest in their operations, as well as improve the efficiency of their space. Capacity constraints should prompt producers to increase capital spending.
Overall, TD Economics forecasts modest growth in non-residential; however, that was prior to October’s federal election and the commitment to increased expenditure on infrastructure.
BC is still expected to lead provinces in growth rates and is expected to advance by 2.7 percent in 2016. Overall provincial unemployment rates are forecast to decline marginally from 6.0 percent in 2015 to 5.9 percent in 2016 and 5.7 percent in 2017.
Going forward, demand in construction is expected to remain strong through 2017 and 2018, with potentially tighter labour market conditions as infrastructure stimulus spending ripples out and if and when the Canadian economy starts to grow again at historic rates.
Blake Desaulniers is a Vancouver writer, photographer, and videographer. He is online at http://blakedesaulniers.com.