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Sturdy Service Sector Helping to Offset Manufacturing Weakness in Ontario, Says BMO Economics Province's unemployment rate higher than the rest of Canada for first time on record

A sturdy service sector is helping to buffer Ontario's economy during a challenging period for Canada's largest province, according to a provincial economics report from BMO Financial Group.

“Beneath the surface lies a great disparity between the crippled manufacturing and sturdy services sectors,” says Doug Porter, Deputy Chief Economist, BMO Capital Markets. “A rising employment share in the services sector has helped to lower the province's correlation with U.S. growth in recent years.”

Mr. Porter notes that the Ontario economy is struggling against the backdrop of a strong Canadian dollar, high energy costs, and a likely U.S. recession. “Ontario has a higher unemployment rate than the rest of Canada for the first time on record, while Toronto's jobless rate has been higher than St. John's, Newfoundland, although now it's slightly lower again.”

While commercial office properties are still sprouting, residential construction activity is cooling with a moderate slow down expected for Ontario's housing market in 2008 following a strong performance.

Highlights of the report include:

GDP growth likely remained at 2.1 per cent in 2007, but as the U.S. economy sputters, growth should fall to 0.9 per cent.
The jobless rate crossed above the national average for the first time on record last year, and should slacken further in 2008.
The manufacturing sector shed 55,000 jobs last year, while the service sector added 146,000
Program spending by the provincial government is expected to jump 6.3 per cent this year.

The complete report can be found at www.bmocm.com/economics.

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