Canada is tripling down (quadrupling?) on its real estate-based economy. Statistics Canada (Stat Can) data shows the number of active businesses hit a new record in September. That’s the good news, which loses a little luster when examining the details. The country’s national statistics agency attributed most growth to just a handful of real estate-related industries. The record also appears to be in conflict with other economic indicators, such as falling payroll employees, rising unemployment, and lofty business insolvencies.
Canada Hits A New Record For Active Businesses
Seasonally adjusted Canadian active businesses.
Source: Stat Can; Better Dwelling.
Canada just saw the number of businesses in the country hit a new record, and it’s about time. The seasonally adjusted active business count rose 0.2% (+1.53k businesses) to 939.17k in September. This comes after 4 consecutive months of declines, and makes up more than a third of the 0.5% (+4.22k businesses) added over the past 12 months. A new record high sounds like great news, but the finer details dampen much of the enthusiasm.
Canadian Business Growth Is Tepid In Contrast With Population
Typically a population boom is the result of a booming economy, but growth remains tepid. Annual growth of 0.5% in September is almost a sixth of the population’s rate. By itself that shows a bit of a problem. It makes even less sense when the annual rate is half the size seen in 2019, before the record population started to flood in.
Canadian Businesses Concentrated Around Real Estate & State-Subsidized Industries
The agency notes that just a handful of industries were behind most of the growth. Construction (contributed 40%), followed by Administration and Support, Waste Management and Remediation Services (27.5%), and Real Estate, Rental & Leasing (17%). It’s worth noting that all three of these areas aren’t just overlapping; they’ve also seen significant state-supports in recent months. Most of the new business growth is apparently tied to accommodating the population growth.
The return of net positive business growth also struggles to make sense in the context of other data. Rising active businesses fits the narrative of rising GDP, especially with the revisions. However, it’s accompanied by the odd combination of falling payroll employment (-0.3%), a declining unemployment rate, and rising business insolvencies in September. More businesses with fewer employees isn’t exactly a neat picture of the economic landscape—but it’s the one being painted.
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