Despite ongoing challenges like supply chain holdups, as well as disappointing economic news, Canadian promo firms say they’re still seeing healthy sales. How long that might last, however, is an open question.

The most recent Canadian jobs report, released on August 5 by Statistics Canada, found that the economy shed 30,600 positions in July, following a loss of 43,000 in June. Analysts had predicted that Canada would pick up 15,000 jobs last month.

The service sector, which includes industries such as retail, transportation, food services and professional services, led losses, as did healthcare due to burnout and turnover. According to Statistics Canada, the number of unfilled nursing jobs in early 2022 was three times what it was in 2017, leading in some instances to temporary ER closures.

There were some bright spots in the report – goods-producing industries, including logging, mining, oil and gas, utilities and manufacturing added 23,000 jobs. Representatives from the travel/tourism industry say they’re looking to hire about 1,000 people in anticipation of increased demand among travelers over the coming months.

The jobless rate stayed the same from June, at 4.9%, since fewer people of working age are even looking for employment. Over 200,000 people have left the job market since March; the workforce participation rate among working-age Canadians now stands at 64.7%.

“Rather than showing up in higher unemployment, the recent soft job numbers have shown up in declining labor force participation instead,” Brendon Bernard, an economist for job search site Indeed, told the CBC.

The Financial Post reports that a number of tech companies in Canada are beginning layoffs, including Vancouver-based Hootsuite, which announced this week that it’s shedding 30% of its staff; Amazon, which reduced its Canadian workforce by 100,000 jobs earlier in August; and Ottawa-based Shopify, which reduced staff by 10% in late July.

Meanwhile, one of the key indicators of economic health is showing cracks: after months of sky-high housing prices, particularly in metropolitan areas like Toronto and Vancouver, numbers are now dropping rapidly following the Bank of Canada increasing its key interest rate in an effort to tame inflation, most recently by 100 basis points (from 1.5% to 2.5%, the largest increase since 1998) in mid-July.

The inflation rate hit 7.7% in May, followed by 8.1% in June, the highest in nearly 40 years. Bank of Canada Governor Tiff Macklem says it’s likely to stay above 7% for the rest of the year.

Home sales in Toronto have fallen to their slowest pace in 13 years, according to Robert Hogue, assistant chief economist for the Royal Bank of Canada (RBC). Notably, the number of homes on the market in the city is up nearly 60% compared to a year ago.

“In the Toronto and Vancouver areas, the decline in activity is quickly becoming one of the deepest of the past half century,” wrote Hogue in the August RBC housing report. “Prices are sliding fast, and the exuberance that permeated these markets earlier this year is being replaced by fear.”

Toronto, Vancouver housing markets face deepest decline in 50 years, says RBC https://t.co/iWN6ziW7u4 #realestate #housingmarket

— Financial Post (@financialpost) August 8, 2022

David Rosenberg, founder of Toronto-based independent research firm Rosenberg Research & Associates, and Julia Wendling, an economist there, published a report in the Financial Post this week in which they warn of a major bear market coming, primarily due to a housing market in trouble.

As the Bank of Canada continues increasing interest rates, Canadians are contending with soaring household debt (including mortgages), while real estate as a share of disposable income now stands at a record 563%. Worryingly, 55% of Canadians’ mortgages have variable rates, which adds to uncertainty and volatility.

In the construction market in particular, say Rosenberg and Wendling, employment numbers have gradually risen from 5% of total employment in Canada in 1998 to 7.9% currently. But if a slowdown in activity causes a correction to a more normal 6.4% employment rate in that sector, that would equate to more than 280,000 layoffs, which would increase the country’s overall jobless rate from 4.9% to 6.3%.

Challenges Ahead for Promo?

Despite the mounting economic turmoil, promo product distributors say they’re still seeing high demand for branded items.

“It doesn’t seem like the job losses, particularly in healthcare, are due to an economic downturn yet,” says Ann Baiden, CEO and founder of Innovatex Solutions Inc. (asi/231194) in Richmond Hill, ON, “nor are we currently seeing an impact on sales.”

“Rising interest rates, recession confusion, inflationary factors and the rising cost of living will all have an economic impact. What we don’t know is exactly when it will happen.” Sam Singh, Full Line Specialties

Sam Singh, president and CEO of Full Line Specialties (asi/199688), in Surrey, BC, says numbers continue to be strong, but there’s been a noticeable slowdown in new construction projects in the province, due in large part to high interest rates and narrower margins for builders. That’s sure to affect the economy there, says Singh.

“Rising interest rates, confusion over a possible recession, inflationary factors and the rising cost of living will all have an economic impact,” he says. “What we don’t know is exactly when it will happen.”

July sales for Top 40 distributor BAMKO (asi/131431) in Canada were up year over year, though all eyes are trained on what may lie ahead.

“Our heads aren’t in the sand,” says Danny Braunstein, the Winnipeg-based director of client success for BAMKO in Canada. “We’ve been closely monitoring and discussing key global economic performance indicators, including job reports, in anticipation of a bear market. We expect to see a significant downturn in the economy that will make it very challenging for many in our industry and we’re planning accordingly. We’re well-positioned to continue growing in the last half of 2022 and into the New Year.”

Recently released State of the Industry data from ASI found that Canadian distributors are still concerned about operational challenges; 94% are worried about supply chain disruption this year and 43% don’t believe these issues will be resolved before 2023. On the personnel side, nearly half (49%) are apprehensive about finding qualified workers and 43% about retaining talent.

New data this week from ASI showed that distributors across North America increased sales by 13.5% in Q2 compared to the same quarter last year. However, the Counselor Confidence Index, which measures distributor financial health and optimism, fell five points between Q1 and Q2, to 103, indicating concern about the months ahead.