The world’s economies have seen hard times over the last two years as areas such as retail and tourism were hit hard during the pandemic. Even since restrictions began to ease, employers were finding it difficult to find workers to fill vacancies, as many people looked to change direction in terms of career opportunities. Overall, Canadians are facing rising costs in energy, housing, and food. In January, 2022, inflation in Canada rose above 5% for the first time since 1991, up from 4.8% the month before.
Of all of these costs, housing rose most, an increase in housing costs, year over year, of 6.2% in January, and prices for goods generally saw an increase in January of 7.2%, once again, higher than the December, 2021 increase of 6.8%. The increasing cost of homes, which rose faster than at any time since 1990, also adds to the cost of maintaining, heating, and the costs of mortgages and rents.
We have all seen the rapid rise in gas prices, which rose as high as $2 a litre in places around the country. The uncertainty regarding supplies has been reflected in the range of prices being charged at the pumps. Last week, gas prices in North Grenville were a full 10¢ a litre cheaper than in Ottawa. The problems with supply chains for all areas of the economy is causing shortage of some goods in supermarkets. For example, there it has not been possible to find a basic item like corn starch on the shelves for weeks now.
However, the most recent Economic Update to be released by the Office of Economic Policy for the Ontario Government shows some signs of improvement in the overall picture. The unemployment rate in Ontario, which had risen considerably during the pandemic, has begun to drop slightly. In January of this year, the rate stood at 7.3%, and this has since dropped to around 5.5%. But the average weekly wage in Ontario has still not recovered from the shocks of the last two years, averaging a monthly increase of around 3.3% over the last four months.
In a global economy, there are limits to what federal and provincial governments can do to control supply chains, energy prices, and balance of payments. The long-term costs of government supports for the economy during the pandemic will take some time to calculate, and the debt load taken on as a result of initiatives such as CERB will have an impact for the foreseeable future.
The impact of external factors, most recently the war in Ukraine and its effects on energy supply and prices, can leave governments looking for alternatives. On one hand, higher costs for energy and transport, as well as food and housing, may have to be accepted, at least in the medium term. On the other hand, there seems to be some sign that the energy issue is forcing governments and business to take another, more positive look at alternative energy sources. This may well turn out to be a positive effect of recent crises.
One major realisation that has dawned on us all through the events of the pandemic and war is how integrated the world’s economies are now. Globalisation has always been seen as a potentially dangerous idea, and it has caused serious problems for developing nations. But now we have a better understanding of how much control over national economies has been lost in the past decades. But, perhaps, since, to use a phrase that has become common since covid, we’re all in this together, at least in theory, it may be possible for international organisations and free-trade partners to work together to soften the impact of debt loads and other results of pandemics and wars. The pressure on housing alone requires new and imaginative approaches to the challenges being faced because of rising costs in the residential market. Perhaps this time of transition and crisis can also be a moment of change in the way capitalism works internationally. Perhaps.
