Montreal is on a slippery slope, and not just because of the mountains of crusty ice that have caused thousands of citizens to fall onto the sidewalks over the past two weeks – myself included.
It’s gray, it’s dirty, it’s February, you name it.
But more tangibly, several signals point to a slowdown in the economy. There are cyclical elements, which we also observe elsewhere in Canada and in the rest of the world. And others, more fundamental, which should require rapid decision-making by the authorities.
It’s not a disaster, but Montreal has already had a lot more pep in its shoes. This does not bode well, in any case, considering that the metropolis remains the financial locomotive of Quebec.
Let’s take things block by block.
A disturbing fact caught my attention this week. The information technology (IT) industry, one of the major drivers of the local economy, is going through a tough time.
Almost everywhere, in video game and software development companies, the time has come for rationalization. Some 17,000 positions were eliminated over the last year, according to an analysis by Montréal International, representing a decline of 9% in the total workforce.1.
It is enormous. And it’s not over.
I know a director in a big tech company whose job, for several weeks, has been to review all the departments. The results of his analysis will be used to determine how many positions will be eliminated in his company of several hundred employees.
Let’s call it the ax or the guillotine: it’s going to hurt.
This same scenario is observed almost everywhere in the city. This is a hard blow for the metropolis, because these are very paying jobs which have disappeared – or will evaporate shortly.
The IT sector is cyclical, yes, and employment also declined in other major cities after the pandemic boom, but not everywhere. In Vancouver, the number of techno positions fell by 12% in the last year, while it increased by 8% in Toronto. Montreal seems to have been hit quite hard in the context.
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I’ll throw out a few more figures at you, hoping not to gas you too much.
I obtained a fresh report from the Conference Board of Canada, which contains some not very encouraging forecasts. These projections should always be taken with a pinch of salt, but in this case they come from a well-established organization.
The year 2024, already underway, will see a “slowdown” in the Montreal economy. Gross domestic product (GDP) is expected to grow by just 0.4%. Suffice it to say that growth will be at a standstill.
The effect of interest rate increases will continue to be felt in employment, the housing market and consumer spending.
Retail sales growth, for example, is expected to reach 2.2% this year, compared to annual increases of 10% over the past three years. Which does not bode well for commercial arteries.
PHOTO MARTIN TREMBLAY, LA PRESSE ARCHIVES
According to a report from the Conference Board of Canada, retail sales growth is expected to reach 2.2% this year, compared to annual increases of 10% over the past three years.
In terms of employment, the group expects the unemployment rate to exceed 6% this year, after reaching a low of 4.4% last year. Population growth is expected to slow down, after the gigantic gain of 150,000 new residents (especially temporary) recorded in 2023.
There will be a certain rebound starting next year, but Montreal will still have lower growth than the national average by 2028, Jane McIntyre, economist at the Conference Board, predicted to me in an interview.
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Whether the metropolis welcomes 50,000, 100,000 or 150,000 immigrants, not enough housing is being built. Housing starts have fallen to a dangerously low level in the last year – 7705 on the island of Montreal! – and the numbers will remain starving for a while, according to most forecasts.
With my cane, courtesy of my fall on a sidewalk more slippery than the Bell Center skating rink, I tapped on the shoulders of several big developers in recent days, to get their reading of the state of the real estate market.
To put it very simply: things are bad.
Several factors affect Montreal as much as other large cities. High interest rates, labor shortages, abundant bureaucracy: the refrain is starting to become known. But unanimously, these builders denounce the excessive rigidity of the “regulation on a mixed metropolis” of the administration of Valérie Plante, which aims to encourage the inclusion of social and affordable housing in new construction projects.
I will not go over the history of this regulation here. What I can say is that it is considered too punitive and restrictive by the majority of manufacturers. The results, or rather the lack of, speak for themselves.
As flat as that.
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The Plante administration finds itself at a turning point in the way it will manage the economic development of the metropolis. There is no shortage of challenges, with the housing crisis, the explosion of homelessness, the accelerated devitalization of the Village and the Latin Quarter, popular discontent over high tax bills…
The City finds itself in a period of uncertainty, following the recent departure of its deputy general director Philippe Krivicky. He was supposed to serve as a bridge between the administration and the business community, but he remained in office for a year and a half.2.
His departure is not trivial. It suggests certain tensions within the municipal machine itself, between the economic “pro-development” fringe, and those which are less so.
Speaking of friction, there is also some between the Legault government and the Plante administration. Among other things, regarding the increase in tuition fees imposed on foreign students at McGill and Concordia universities. It got worse again on Thursday.
There seems to be more sand in the gears of this relationship than on the sidewalks, in short.
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All is not dark, of course.
Montréal International will soon announce its results for the year 2023, and they will be third among the best in its history in terms of attracting foreign investment. In 2022, they had reached 3.6 billion. The metropolis remains attractive in many respects.
The president of the organization, Stéphane Paquet, expects investments to “restart” with a vengeance towards the end of 2024 or the beginning of 2025. He also confirmed to me that the suburbs of the island of Montreal had been gaining ground for three years in terms of attracting projects.
A fundamental trend, which could exacerbate in the coming years to the detriment of the central city.
A yellow flag not to be taken lightly at Montreal city hall.
1. Read “Montréal International analysis: the IT job market in decline after strong years”
2. Read “Philippe Krivicky: notable departure from city hall”