Understanding Demand and Supply in Retail, Manufacturing, Construction, and Hospitality
Ontario’s economy underwent significant change, both during and after the pandemic. While some sectors thrived and even experienced employment growth in the early days of COVID-19, public health protocols and changing consumer behaviour inevitably caused contraction. Manufacturing, construction, retail, and hospitality bore the brunt of this change, with all four sectors initially experiencing substantial decreases in employment. Deemed essential services early on, manufacturing and construction quickly recovered, while retail and hospitality took longer to balance.
Today, Ontario’s labour market has not only fully recovered but exceeds pre-pandemic levels. Total employment increased from approximately 7.3 million in February 2020 to 7.7 million in December 2022; the province added 388,000 jobs, and all four impacted sectors rebounded. Manufacturing and construction each employed more workers in 2022 than in 2019, and hospitality and retail made strides to close the gap; in December 2022, they were just 7% and 3% below pre-pandemic levels, respectively.
Changes in demand can be viewed from a dual lens: first, the “return to normal activities” seen in late 2021 and 2022—including increased spending, resumption of travel, continued booms in residential and commercial development, and growing demand for products combined with persisting supply chain bottlenecks—created what is referred to as “pent up demand.” Unusually strong demand for consumer products and services following a period of low activity also led to a boom in labour demand. While spending has somewhat stabilized and is likely to continue to cool as Canada officially enters a mild recession, employers in all affected sectors struggle to secure and retain workers.
Part of the demand challenge relates to sheer volume (i.e., insufficient number of workers available), whereas another part is tied to skill imbalances or mismatches. During the survival and recovery phases, all affected sectors underwent changes. Reacting to health policy conditions and shifting consumer demands, many businesses changed their business models, introduced new products and services, and looked to digitization and automation to fill gaps. Manufacturers, for example, invested in Industry 4.0 technologies like 3D printing or began experimenting with digital twinning; construction businesses ramped up Building Information Modeling (BIM) techniques to generate efficiencies in the built environment life cycle. Retailers leaned into intelligent retail, including e-commerce, augmented reality, and cashierless stores; and hospitality businesses developed or leveraged digital tools and platforms to create high quality but largely contactless guest experiences. These and other changes create an environment of evolving skill needs. Although workers with soft skills are in high demand across the board, digital and technical skills are increasingly sought, at least at a foundational level. This reality further highlights a need for new entrants with foundational digital skills and upskilled current workers— who, through lived experience, possess critical domain knowledge—to take on more advanced or leadership roles.
All four affected sectors face talent supply shortages, which are further exacerbated by existing barriers. Groups most impacted by the pandemic—namely women, newcomers to Canada, racialized people, and youth—tend to be overrepresented in these sectors, especially hospitality and retail. In contrast, women, in particular, are underrepresented in the manufacturing and construction sectors, signaling a gender diversity shortage and associated barriers, including pay equity. Racialized people face additional barriers to labour market participation. Recent research by Statistics Canada finds that newcomers to Canada are more likely to be subject to precarious employment.
Precarity can include factors such as unstable work and, in some cases, unsafe conditions. This became a clear concern early in the pandemic for essential workers. While, for the most part, essential workers were spared the brunt of job loss, other negative experiences caused some of them to rethink future employment in these fields and, in some cases, pivot their careers to other sectors. Challenges included chronic understaffing, uncertain work schedules, heightened exposure to the virus, and stressful engagements with customers. At the time, these realities were further compounded by the shutdown of community spaces, including community centres, places of worship, and libraries; the closure of educational institutions; and the curtailing or reduction of government services that many underrepresented groups rely on. Other core barriers articulated by workers in the affected sectors included the high cost of living in Ontario, reduction of public transit services, unclear information about career advancement opportunities and sectoral evolution, and challenges in accessing the training and upskilling needed to advance. Although some barriers are systemic in nature and will take time to fully correct, timely and granular labour market information, clear career pathways, and impactful upskilling programs are essential to bolster the talent pipeline and retain skilled workers.
Henningsmoen, E., Legere, T., McGeer, H., Ratcliffe, J., April 2023. Equitable Recovery and New Frontiers: Understanding Demand and Supply in Manufacturing, Construction, Retail, and Hospitality. Information and Communications Technology Council (ICTC). Ottawa, Canada.