CANADA - Tags: BUSINESS CITYSCAPE CONSTRUCTION
Condominiums are seen under construction in Toronto, July 10, 2011. Canada's condominium boom, which has filled the skylines of its biggest cities with cranes and prompted a warning from its central bank, may well avoid the type of crash that has hobbled the industry in the past. Picture taken July 10, 2011. REUTERS/Mark Blinch (CANADA - Tags: BUSINESS CITYSCAPE CONSTRUCTION) - RTR2ORE2 Mark Blinch/Reuters
Toronto Mayor Rob Ford says his city is “booming” since he took office and the number of construction cranes in the sky are the proof.
But is counting cranes really a solid method of evaluating a city’s economy?
Toronto currently has 147 high-rise buildings under construction, according the city’s chief planner, Jennifer Keesmaat. In an election year, Ford has latched onto a good campaign sound bite — construction cranes and new glass towers are a simple and evocative way to judge the city's economy.
“Go outside. Go look at the cranes," Ford recently told CBC Radio’s Metro Morning when asked to inspire voters.
“When you see 150 cranes in the sky, every crane is equivalent to 1,000 jobs,” said Ford.
The Building Industry and Land Development Association (BILD), which monitors developments across the GTA, has a different number.
“We like to say that one crane equals between 300 and 500 jobs,” said Andrei Zaretski, BILD’s media relations manager.
Economist Ian Nakamoto, a Toronto-based research director at wealth management firm MacDougall, MacDougall & MacTier Inc., said Ford's tower boasts are "somewhat fair," but said other factors should be considered when measuring the economy.
“I think a better measure is job growth,” he said.
While new building construction does employ people, Nakamoto said it’s hard to tell exactly what types of jobs they create — highly-skilled or low-skilled, permanent or part-time.
Toronto's economy solid but not booming: BMO economist
Robert Kavacic, a senior economist with BMO, said using cranes as an economic indicator “probably has some value,” but said it’s far from the “be all, end all.”
“The two most telling things would be population growth and the unemployment rate,” Kavacic said.
So how’s Toronto doing? Kavacic said he considers the city’s economy pretty solid, but not booming like Calgary and Edmonton. Toronto’s population is steadily climbing, Kavacic said, but the city's unemployment rate of about nine per cent is high compared to cities in Western Canada.
Still, there are plenty of reasons for Rob Ford to love cranes. Developers pay the city for permits for each new building. The people who eventually live in those condos pay property tax. And new buildings create new opportunities for nearby businesses.
Economists, however, prefer to work with the bigger picture.
Towers can mask real economic issues
Sean Geobey, a PhD candidate at the University of Waterloo’s Institute for Social Innovation and Resilience, said the number of new buildings can reflect several other aspects of Toronto.
“It tells us that there is a lot of speculative investment in real estate in the core,” he said.
“I think intensification is overall a positive,” Geobey said, “but it’s not necessarily balanced, equitable or sustainable growth.”
When you factor in Toronto’s soaring youth unemployment number — 23 per cent, according to the city's website — Geobey said he’s not so sure the city’s booming.
His preferred tools to measure a city: employment rate, median wages (average wage is skewed by what Geobey calls the “nosebleed” salaries of the super-rich) and gross domestic product (GDP).
Roger Martin, former dean of the Rotman School of Management and now the director of the Martin Prosperity Institute, recently contributed to the latest Toronto Board of Trade report, Toward a Toronto Region Economic Strategy, that cast doubt on the city’s economic success.
Martin pointed out Toronto’s productivity, based on GDP data from 2000 and 2010 (the latest available), was in decline.
“There are cranes. I can see lots of cranes from my office window. But to me, the real measure of the might of an economy … has to do with, are its people producing a lot of value-added or a little value-added?” he told the Globe and Mail.
Economics on the street
Economists say there are other indicators of how well a city is doing, that anyone can see.
Patricia Croft, an independent economist who spent 30 years working on Bay Street, said she can usually figure out how a city is doing by talking with cab drivers.
Nakamoto agreed talking to cab drivers, who spend all day interacting with people, can be incredibly valuable to an outsider, but added it can be hard to get a handle on whether a city is on its way up or down.
He said he also looks closely at stores, examining them to see how busy they are and what kind of discounts they're offering to get people in the door.
Geobey said he keeps an eye on storefronts that are for rent, which can give a hyperlocal view of how neighbourhoods are doing.
For those truly interested in the city's economy, Toronto (like many Canadian cities) frequently publishes an economic dashboard that's available to the public.
Or, you could keep your eyes peeled on the skyline until October's election.
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