As the government cuts back the size of the public service, economists describe a “soft” and “sluggish” private job market in the National Capital Region, buoyed by a few bright spots.
Last week,
more than 10,000 public servants were told
their jobs may be affected by the government’s “comprehensive expenditure review.”
The government has been shedding jobs for months, as it
aims to trim the size of the public service
by nearly 40,000 workers from a peak of 368,000 in 2023-2024.
Although the government has said it intends to rely on attrition “to the greatest extent possible,” thousands of public sector workers will be leaving the labour force, one way or another.
Economists expect those losses to have a ripple effect in Ottawa-Gatineau.
“Overall, not a lot of strength at all in labour markets in the National Capital Region,” said Pedro Antunes, chief economist with Signal49 Research, formerly known as the Conference Board of Canada.
“I think this is due, in essence, to the knock-on effects from the public service cuts.”
Although economists caution local data is limited, they are nonetheless able to sketch a general outline of the economic situation in the city.
They describe a stagnant or low-growth job market hampered by the uncertainty of U.S. tariffs.
So where might public servants who lose their jobs be able to find new ones? Economists say key areas of opportunity will be in tech and defence.
‘Low end of a ramp up’
In some sectors, the outlook is rosier than others.
Although Antunes said the overall picture for Ottawa’s economy is “weak,” a few industries are projected to hold steady or even grow in the coming year.
The job market in health care and social assistance, for example, is doing well, and Antunes anticipates “fairly strong” job gains in the “professional, scientific and technical services” sector.
Increased military investment, he added, is likely to help bolster job growth in that area.
For its part, the City of Ottawa is betting on defence with a bid to become “Canada’s
Defence Innovation Hub
.”
Glenn
Cowan, an Ottawa-based venture capitalist, is bullish on the private job market.
“I think we are at the low end of a ramp up in terms of an exciting time for Ottawa private sector jobs,” he said.
Cowan, who is the founder and managing director of defence venture capital firm ONE9, said the previous Liberal government left the military in a state of decay, relegating Canada to the “kid’s table” on issues of international significance.
For Cowan, the
government’s current NATO commitment
to spend
five per cent of GDP on defence by 2035, comes “better late than never” — and will bring serious economic spinoffs.
“We’re seeing an incredible amount of capital flow towards technology startups, which employ engineers, business development, sales and marketing jobs,” he said.
Business leaders call for ‘transparent’ workforce strategy
Sueling Ching, President and CEO of the Ottawa Board of Trade, said she hopes to see the federal government act as any responsible “anchor employer” should: by supporting its workers as they transition elsewhere in the labour force.
“Any layoffs or downsizing have to be done very thoughtfully, because there will be a ripple effect to other sectors, and particularly impacting our downtown,” she said.
Last November, Liberal MP Mona Fortier
said a “transition plan” was in the works
for any public servants in the National Capital Region who lost their jobs, though
Fortier had no update
on that plan when asked earlier this month.
Ching said the city’s business community is looking for a “transparent workforce strategy” that outlines where the federal government plans to cut, when the cuts are going to happen, and how they will affect the city.
“Let’s have a transparent, data-based plan on what is actually happening, and how can we align the business community and government,” she said.
‘Sluggish’ and ‘weak’
Overall, economists were lukewarm on Ottawa’s short-term prospects, describing the economy as “sluggish,” though experts aren’t expecting a recession.
Shelly Kaushik, senior economist with BMO Canada, said federal job cuts have put Ottawa in a difficult economic spot, though the city remains in better shape overall than places, such as Windsor and Oshawa, Ont., where the automotive industry is a major employer and U.S. tariffs are wreaking havoc.
Joblessness in Ottawa-Gatineau is on a “significant” upward trend, Kaushik said, increasing from a low of between three and four per cent in 2022 to around seven per cent in the latest update.
The rest of Ontario followed a similar path, she said, due partly to an immigration boom coming out of the pandemic.
But Kaushik expects tariff-related job losses will soon be reflected in the data as well.
As for government layoffs, she said the impact of those may take “another few months” to appear.
In general, Kaushik described Ottawa’s economy as “soft,” meaning jobs are relatively scarce and workers are relatively plentiful.
“It is much tougher to find a job. It is much tougher to switch jobs,” she said. “There is relatively less bargaining power for workers and for job seekers.”
Kaushik said it’s too early to predict the potential knock-on effects of public service cuts but stressed the economy isn’t flashing “recession signals.”
Outlook ‘moderately positive’
Kevin Page, president and CEO of the University of Ottawa’s Institute of Fiscal Studies and Democracy, was more positive.
He called the present moment a “period of adjustment” for the federal public service.
Rather than the deep downsizing of the 1990s, he compared the scale of the ongoing cuts to those brought in under former prime minister Stephen Harper, which Page said amounted to “
bumps and bruises” for the region.
One key difference in this round of cuts, according to Page, is that net government spending is going up, due to increased investment in defence and technology.
On balance, Page said the outlook for Ottawa-Gatineau is “moderately positive,” with losses offset by investment in infrastructure, defence and technology.
“
I hope the freeze that exists in hiring will be short lived so we can continue to recruit young bright minds with high energy into the public service,” he wrote in an email.
“I hope the public servants getting notices can find timely work in other sectors.”
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