Following a year in which Toronto added jobs at the fastest pace (4.0% year-over-year) since 2000, a number of indicators suggest that the impact of the abnormally cold winter chilled the Queen City's economic engine during the first half of 2014.
First, after recording a year-over-year gain of 3.5% in the second half of 2013, Toronto's employment growth slowed to 1.6% year-over-year in the first half of 2014.
Given the weather-sensitive nature of the construction industry, it's not surprising that it was by far the major contributor to this slower pattern of job creation.
Following growth of 24.6% year-over-year in the second half of 2013, a concomitant slowing of both residential and non-residential building caused the pace of hiring in the industry to slow to 1.9% year-over-year in the first half of 2014.
The cold weather also appears to have weighed on the pace of hiring in service-producing industries where growth slowed from 3.1% year-over-year in the second half of 2013 to 2.4% year-over-year during the comparable period in 2014.
Despite the relatively subdued pattern of job creation in the first six months of 2014, there are signs that Toronto's economic pulse is starting to beat a little more quickly as it heads into the second half of the year.
This observation is based in part on a moderately faster rate of growth in consumer spending, indicated by stronger year-over-year growth of retail sales in April and May and a significant acceleration in sales of both new and existing homes. The latter has caused the inventory-to-sales ratio for existing homes to increase from 52.8 to 58.5 over the past twelve months and the Canadian Real Estate Association's House Price Index to increase by 6% since the beginning of the year.
In addition, solid gains in office-based employment late in 2013 and well into 2014 point to a further shrinkage in the CMA's total office inventory which reached a three-and-a-half-year high of 8.1% in the first quarter.
Looking ahead, a number of forward looking indicators suggest that Toronto's economic health will continue to improve as it heads into 2015.
First, the very strong 11.3% increase in the U.S. Institute of Supply Management's Purchasing Manager's Index over the past six months suggests that the U.S. economy will continue to underpin manufacturing in the province as a whole and cause manufacturing employment in the CMA, which increased by 13,000 jobs year to date, to continue to be a major source of new jobs through the remainder of the year.
Second, the steady strengthening in business confidence through the second quarter reflected by the Conference Board of Canada's Index of Business Confidence and the concomitant rise in investor confidence indicated by the 25% increase in the S&P/TSX over the past 18 months, point to a further strengthening of finance, insurance and real estate and professional services in the CMA.
Finally, although the Eglinton Crosstown light rail transit line has a 2020 completion date, it and the other planned transit projects will likely trigger a significant increase in both commercial and residential development just as the Sheppard Subway Line has done since it was completed in 2002.