Governments can announce projects all they want. But without more workers and faster project approvals, economic growth is a pipe dream

Canada is likely to avoid a recession this year, but economic growth will remain weak. Labour shortages and lengthy approval processes for major projects will continue to limit growth, even as governments move ahead with new investments.

Gross domestic product grew by 0.5 per cent in April after inflation, more than offsetting the decline recorded in March. Mining and quarrying, oil and gas, manufacturing, construction and several other sectors all contributed to the increase.

The April figures also make it clear that Canada is not in a recession, as a recession requires two consecutive quarters of negative growth. But growth is already slowing. Statistics Canada’s preliminary estimate for May shows the economy expanding by 0.1 per cent.

One factor weighing on Canada is the slowing United States economy, especially the weakness in U.S. manufacturing. While manufacturing and goods production now represent a much smaller share of the U.S. economy than services, they remain important indicators of economic strength and continue to provide many of the better jobs for the U.S. middle class.

U.S. President Donald Trump has sought to restore manufacturing jobs through tariffs on imported manufactured goods and by pressuring trading partners to invest in factories in the United States. The results are not showing up where they matter most: employment. Manufacturing employment has fallen by 77,000 jobs since the beginning of Trump’s current term. Excluding the pandemic years, it is now declining at its fastest pace in more than 15 years. Only defence-related manufacturing and data centres are showing signs of growth, and there is little reason to expect a quick turnaround.

U.S. business surveys point in the same direction. Hiring intentions fell from 51.7 in May to 47 in June, signalling a shift from expanding employment to layoffs. Uncertainty over tariffs, supply chains and export markets is discouraging new investment, while one in five manufacturers report difficulty finding workers with the skills required.

A slowing U.S. economy is unlikely to provide much support for Canadian exports or growth. That makes it even more important for Canada to address the structural constraints holding back its own economy.

There are encouraging developments in Canada. The country is working to expand export markets beyond the U.S., and governments are planning major investments in infrastructure and defence. These initiatives should strengthen the economy over time.

Those investments, however, cannot by themselves overcome Canada’s constraints on growth. Major projects require years to complete. Before construction can begin, governments and businesses must work through increasingly lengthy negotiations, regulatory reviews and approval processes. These delays have become a significant obstacle to stronger economic growth.

The most significant of those constraints, however, is the workforce. Canada simply does not have enough workers to support the level of investment being planned. Our population and labour force are growing too slowly. Even where workers are available, they may not have the skills employers need or live where the work will be.

That problem cannot be solved quickly. Training skilled workers takes years. Yet we still do not know how many workers will be required, where they will be needed or which occupations will face the greatest shortages. Without that information, governments, educational institutions and employers cannot properly plan the education, training and immigration policies needed to close those gaps.

Investment alone is not enough to produce stronger growth. Roads, pipelines, ports, factories and defence projects all depend on people with the right skills in the right places at the right time. Until Canada addresses that reality, its long-term economic potential will continue to be constrained.

While Canada is unlikely to fall into recession this year, modest economic growth is likely to remain the norm. The real challenge to strengthening Canada’s long-term economic growth is strengthening the workforce and improving the approval process for major projects. Until Canada addresses those issues, stronger growth will remain out of reach.

Dr. Roslyn Kunin is a respected Canadian economist known for her extensive work in economic forecasting, public policy, and labour market analysis. She has held various prominent roles, including serving as the regional director for the federal government’s Department of Employment and Immigration in British Columbia and the Yukon and as an adjunct professor at the University of British Columbia. Dr. Kunin is also recognized for her contributions to economic development, particularly in Western Canada.