The price of the pandemic on Montreal's economy

Six months into the crisis, it’s becoming clear what the city's economic strengths are — and why the weakest links have become so fragile.

MONTREAL, QUE.: MARCH 18, 2020 -- Tables are taped off in a Starbucks restaurant on Peel St. in Montreal Wednesday March 18, 2020 as the coffee chain is only providing take-out service. (John Mahoney / MONTREAL GAZETTE) ORG XMIT: 64121 - 5403

It’s been a rough year so far for the Montreal economy, but it could have been a lot worse.

Six months into the pandemic, it’s becoming clearer what the city’s economic strengths are — and why the weakest links have become so fragile.

Employment in the Montreal metropolitan area is down about 3 per cent from February levels through August, Statistics Canada data show. As of July, only Phoenix, Ariz., had done better in limiting COVID-19’s economic damage, according to jobs figures compiled by Montréal International, the city’s investment-promotion agency.

And with the city continuing to attract artificial intelligence and other tech jobs, some observers even see Montreal’s metropolitan area job market rising past its February levels by year-end — as long as health authorities manage to keep coronavirus cases from spiking. That would be quite an achievement for a city that’s both the cornerstone of the Quebec economy and the epicentre of the pandemic in Canada.

“We have one of the most diversified economies in North America,” said Christian Bernard, Montréal International, chief economist. “When some sectors do poorly because of social distancing, others pick up the slack.”

Who’s winning? While Statistics Canada doesn’t give industry-specific data, its numbers do provide an idea of the types of jobs that seem to have benefited from the pandemic.

Through August, employment in greater Montreal business, building and other support services was up 16.8 per cent compared with February, Statistics Canada data show. Other winners included construction jobs, up 9.6 per cent, and finance, insurance and real estate, up 1.7 per cent.

About 40 per cent of all jobs in greater Montreal lend themselves to teleworking, according to a recent study conducted by the Observatoire Grand Montréal statistical analysis agency. It’s “plausible” that up to 30 per cent of area workers will hold a job that incorporates teleworking in the next few years, probably as part of a hybrid model, the study also said.

Technology, it would seem, is enabling thousands of companies across the Montreal metropolitan area to operate almost as if nothing happened.

“It’s amazing to see how fast companies and employees have adapted to teleworking,” Hélène Bégin, senior economist at Mouvement Desjardins, the province’s biggest financial cooperative, said in an interview. “A lot of businesses discovered there were important efficiency gains to be had. Working remotely has allowed many employees to produce work without the stress and lost time associated with commuting.”

MONTREAL, QUE.: SEPTEMBER 17, 2019 -- Effenco CEO David Arsenault gets a last look at electric motors to be shipped to France at their Montreal plant on Tuesday September 17, 2019. (Pierre Obendrauf / MONTREAL GAZETTE) ORG XMIT: 63158 - 8288
“It’s one of the new realities of running a business during the pandemic,” Effenco Development founder David Arsenault said. “The investors were located a few blocks from us, but we did everything via Microsoft Teams.” Photo by Pierre Obendrauf /Montreal Gazette

New York-based data analytics company Behavox is one such convert to remote work.

Having agreed earlier this year to create an innovation and operations centre in Montreal, Behavox isn’t planning on recalling employees downtown for several months even though it just leased space at Maison Manuvie on de Maisonneuve Blvd. W. In the meantime, founder and chief executive officer Erkin Adylov says his company is continuing to hire “aggressively.”

“My expectation is we will go back to the office by the spring of 2021,” Adylov said in an interview this week. “Ninety-nine per cent of the company is working from home right now, and productivity is very good. We haven’t skipped a beat.”

Teleworking also hasn’t prevented Effenco Development Inc. founder David Arsenault from plotting the environmental technology company’s next phase of expansion.

Montreal-based Effenco said last week it raised $10 million in financing from a group of investors that includes the Business Development Bank of Canada, Investissement Québec and the Centre of Excellence in Energy Efficiency.

The cash injection will allow the company to hire about 25 people in engineering, sales, manufacturing and management over the next few months, mainly at its head office, Arsenault said. Effenco, which now has about 60 employees, will also open an office in Norway to increase European sales while continuing to look for business in Canada and the U.S.

Discussions over the financing began about one year ago, and the closing of the deal took place via videoconference, the CEO said.

“It’s one of the new realities of running a business during the pandemic,” Arsenault said. “The investors were located a few blocks from us, but we did everything via Microsoft Teams.”

Since Effenco counts customers in 10 countries, including France and the U.S., “not being able to travel is a bigger deal for us than teleworking,” Arsenault said. “With the pandemic we’ve had to rely on our foreign offices to bring in business. Teleworking itself has been no problem. The productivity is good. Many of our employees are happy to stay home when it rains.”

Teleworking “has helped to fuel the jobs recovery in greater Montreal,” says Montréal International’s Bernard. “Jobs have recovered much faster in the suburbs, and that’s due in large part to teleworking. Industries that rely on a physical proximity with the customer — lodging, restaurants, culture — aren’t bouncing back as fast in Montreal because the employees are not there.”

That, for downtown Montreal, is the main downside of teleworking’s popularity. As office workers stay home, demand for restaurants, retailers and other businesses in the central core plummets.

Downtown’s travails helps explain why employment on the island of Montreal itself is down 11.2 per cent since February — a net loss of about 124,900 jobs. To make matters worse, key industries such as aerospace have curtailed operations as a result of the plunge in air travel and a wave of aircraft order cancellations.

Across greater Montreal, employment in accommodation and food services has shrunk 22 per cent since February, Statistics Canada data show. For transportation and warehousing, the drop is 19 per cent.

(FILES) In this file photo taken on May 14, 2020 a man takes part in a video conference as he works from home, in Vertou, outside Nantes, as France eases lockdown measures taken to curb the spread of the COVID-19 pandemic, caused by the novel coronavirus. - Specialists warn that working from home, which has become a solution for millions during the coronavirus pandemic, can bear risks if it is not done in a moderate way. (Photo by Loic VENANCE / AFP) (Photo by LOIC VENANCE/AFP via Getty Images)
“It’s amazing to see how fast companies and employees have adapted to teleworking,” said Hélène Bégin, senior economist at Mouvement Desjardins, the province’s biggest financial cooperative. Photo by LOIC VENANCE /AFP via Getty Images

“What troubles me is that the sectors where remote work allows for the same efficiency are sectors that are generally located downtown,” Quebec Economy Minister Pierre Fitzgibbon said in an interview last week. “The No. 1, No. 2 and No. 3 problems for Montreal are that people no longer work downtown. As long as there is no one in the office towers, it will be very difficult for all the surrounding businesses to survive.”

While Quebec government ministries have begun bringing people back to the office and are now running at about 25 per cent workplace capacity since Aug. 1, many private companies are committed to teleworking for the foreseeable future. That’s why Bégin, the Desjardins economist, predicts a wave of restaurant closings and bankruptcies in central Montreal “as soon as the terrasses close” this fall.

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