Short-term contractions may ease some labour market challenges, but Canada’s construction industry is poised for further growth through 2032

Canada’s construction sector continues to perform at an elevated level following the COVID-19 pandemic. Strong levels of investments by governments across the country have helped to stimulate the economy, demand for housing remains high, and private-sector entities continue to invest in construction. These factors combined in 2022 to increase total construction investment levels by 3% over the record high recorded in 2021.

BuildForce Canada released its 2023–2032 Construction and Maintenance Looking Forward national forecast today. The report finds that construction activity will step down from its 2022 peak, with contractions projected for 2023 and 2024. The contraction is brief, however. Growth is poised to resume by 2025, and by 2032, total investment should increase by 1% over 2022 levels. These numbers are based on existing known demands and do not take into account the federal government’s goal to double the number of new homes built across Canada over the next 10 years, nor the anticipated increase in demand for construction services related to the retrofit of existing residential, industrial, commercial, and institutional buildings to accommodate the electrification of the economy.

Across the forecast period, activity in the residential sector will be driven by a combination of factors. Demand for new housing is expected to contract in response to rising interest rates in the short term and return to growth between 2024 and 2029. Meanwhile, activity in the renovation and maintenance sector increases continuously. By 2032, overall residential employment is forecast to contract by a modest 5,300 workers (-1%) by 2032, with losses concentrated in the new-housing sector.

Construction in the non-residential sector will continue to benefit from stronger levels of public-sector investment in an array of projects, including major transit, utility, and road, highway, and bridge projects in Ontario, British Columbia, Quebec, Nova Scotia, and Prince Edward Island, and strong demand for projects in the industrial, commercial, and institutional (ICI) sector in every province.

Employment in the non-residential sector is poised to grow almost continuously between 2023 and 2027, rising to a forecast peak of just over 600,000 workers, and by 2032, employment should be 4% higher than levels recorded in 2022, as a moderate contraction of 1% in engineering construction is more than offset by gains in the ICI and maintenance sectors.

“The construction sector saw another strong year of growth in 2022, with overall employment growing further beyond pre-pandemic levels,” says Clyde Scollan, Chair of BuildForce Canada. “More than 1.5 million Canadians, or about one in every 13 working people, now works in the industry. The challenge now is how to manage demands, given an aging labour force. Employment has been growing faster than the labour force in recent years. These trends combined to bring the industry’s national average unemployment rate to below 5% in 2022, with a record low of 2.4% achieved in July.”

Although construction employment varies year to year depending on investment levels, labour market conditions in 2022 were particularly challenging in Prince Edward Island, Ontario, British Columbia, New Brunswick, Nova Scotia, and Saskatchewan. These provinces experienced investment increases in both residential and non-residential construction segments.

“Although market pressures should ease in the residential sector in 2023 and 2024 as demand for new housing contracts in response to interest rates, activity in most provinces’ non-residential sectors could remain elevated well into the middle years of our forecast period, given the high volume of large projects currently underway in many regions of the country,” says Bill Ferreira, Executive Director of BuildForce Canada.

Construction markets expected to remain strong, despite a near-term contraction
Across the Atlantic provinces, construction activity is either at, or will soon reach, near-term peaks. The provinces’ respective residential sectors will initially contract before returning to growth between 2024 and 2026, with demand for renovation activity projected to remain elevated. Activity in the non-residential sector will fluctuate in line with various large-scale projects such as the refurbishment of the Mactaquac Dam in New Brunswick, the West White Rose redevelopment in Newfoundland and Labrador, and several civil and health care projects. Only Nova Scotia and New Brunswick are expected to report employment growth across the forecast period.

Construction activity in Quebec will be affected by competing factors. After reporting a strong year in 2022, the province’s residential sector is expected to decline across the forecast period, in line with lowering demand for new construction. Its non-residential sector will be supported in the short term by work on major projects in Montreal and Quebec City. Growth will fluctuate in later years as these works conclude.

Ontario’s construction market enters the forecast period at a time of significant growth. Although the pace of residential activity in 2023 and 2024 is projected to moderate from previous record highs, it nonetheless remains elevated and returns to growth in 2025. The non-residential sector continues to be driven by a large inventory of major infrastructure projects and a projected recovery in commercial-building construction. Unemployment should remain at or near record-low levels.

In Manitoba, non-residential construction activity has been bolstered by work on a series of infrastructure projects. These projects cycle up and down across the forecast period, alongside strong government investment and a rebounding commercial sector. As housing starts recede from recent highs, the renovation and maintenance sector is poised to become the dominant driver of residential employment in the province.

Saskatchewan’s construction sector should rise to a peak in 2027, sustained by strong growth in its residential sector post-2023, and new and ongoing manufacturing, utility, mining, school, and health care projects. A younger demographic is well positioned to replace retiring workers.

Alberta’s construction outlook is driven by competing pressures. The residential sector, and particularly its new-housing segment, faces a series of contractions through 2032. Strong gains in renovation activity should help to partially offset the anticipated declines. The non-residential sector, on the other hand, is projected to rise to peak employment by 2030 on the strength of ongoing major road and highway, health, education, commercial, industrial, and public-transportation projects, as well as growth in the oil and gas sector.

The outlook for British Columbia’s construction sector sees varying trends. The residential sector is expected to recover swiftly after 2024 as interest rates ease and the renovation sector expands. Meanwhile, activity in the non-residential sector will fluctuate with the ebb and flow of work on several major projects and is underpinned by growth in maintenance work.  

“Labour markets in many provinces are experiencing tight conditions, so much so that it has become extremely challenging for companies to recruit workers from other regions or even from other provinces,” says Ferreira. “The situation is complicated by the anticipated retirement of older and experienced workers. Although younger workers are certainly capable and well trained, they lack the years of experience, skills, and knowledge of the older workers they are replacing.”

New recruitment strategies needed
The development of skilled tradespersons in the construction industry takes years, and often requires participation in a provincial apprenticeship program. Replacing retiring workers typically requires several years of pre-planning to avoid the creation of skills gaps. By 2032, overall hiring requirements in the industry are expected to exceed 299,000 due to the retirement of approximately 245,000 workers (20% of the 2022 labour force) and growth in worker demand of more than 54,000.

Based on historical trends, Canada’s construction industry is expected to draw an estimated 237,800 first-time entrants aged 30 and younger from the local population, leaving the industry with a possible retirement-recruitment gap of more than 61,000 workers. Clearly, an ongoing commitment to apprenticeship development in both compulsory and non-compulsory trades will be necessary to ensure there are sufficient numbers of qualified tradespeople to sustain a skilled labour force over the long term.

“The construction industry remains focused on building a more diverse and inclusive labour force. The industry has been working hard to enhance the recruitment of individuals from groups traditionally under-represented in the construction labour force, such as women, Indigenous People, and newcomers to Canada. Creating greater awareness of the tremendous career opportunities for these individuals within the construction sector will be critical to ensuring the sector is able to meet its future workforce needs,” says Sean Strickland, Vice-Chair of BuildForce Canada.

In 2021, there were approximately 199,600 women employed in Canada’s construction industry. Of them, 27% worked directly in on-site construction. However, as a share of the total 1.16 million tradespeople employed in the industry, women accounted for just 5% of the on-site construction workforce.

The Indigenous population is another under-represented group that presents recruitment opportunities for the construction industry. In 2021, Indigenous People accounted for 5.1% of Canada’s construction labour force, which is a slight decline from the share of 5.2% observed in 2016, but is notably higher than the share of Indigenous workers represented in the overall labour force (4.1%). As the Indigenous population is the fastest growing in Canada and Indigenous workers seem predisposed to the pursuit of careers within the sector, there may be scope to further increase the recruitment of Indigenous People into the construction workforce.

The construction industry may also leverage newcomers over the coming decade to meet anticipated labour market requirements. Canada is expected to welcome an average of more than 444,600 new international migrants each year between 2023 and 2032. This will make newcomers a growing segment of the overall labour force. The national construction labour force was comprised of approximately 18% newcomers in 2021. That figure is notably lower than the overall share of newcomers in the total labour force (27%).

Increasing the participation rate of women, Indigenous People, and newcomers could help Canada’s construction industry address its future labour force needs.