Here are some new items that I found to be of interest with respect to the economy of northern Ontario over the last week or so. Some are not quite what they seem - North Bay (and Thunder Bay) do well by not making this list. Have a nice weekend. Livio.
FocusEconomics has put together its list of the Top Economics and Finance Blogs of 2017 and Worthwhile Canadian Initiative, where I blog with Stephen Gordon, Nick Rowe and Frances Woolley, has made the list. The list of 101 economics and finance blogs was compiled by the FocusEconomics team of economists. The criteria for inclusion in the list was simply that they had to have regularly blogged in 2016 and that they needed to be English-language blogs. The list is an eclectic mix of policy and economic viewpoints stretching from the Keynesian school to the Chicago school to the Austrian school and everything in between. Delighted at the recognition (as well as the additional link provided to Northern Economist!)
Municipalities in Ontario have been agitating for new revenues particularly given the sluggish growth in provincial government grants. Well, apparently at least one municipal councilor in Thunder
Bay also believes that cities need more revenue tools.This is in spite of the evidence that Ontario municipalities
have seen their revenues grow quite robustly over time.According to the Financial InformationReturns maintained by the Ontario Ministry of Municipal Affairs, between 2000
and 2015, total municipal revenues in Ontario more than doubled growing from
$22.7 billion to $47.8 billion.While
the growth rate has slowed somewhat since the 2009 recession, it remains that
since 2000 these revenues have grown at an annual average rate of 5.2 percent.This is much faster than either
Ontario’s population or GDP growth.
I will be visiting the Thunder Bay Campus of the Northern Ontario School of Medicine on January 26th to give a seminar in the Human Science Seminar Series. My talk will overview trends in health spending in Canada over the longer-term and provide some recent estimates of aggregate value for money from this spending. Looking forward to the visit.
Here is a listing of some stories around northern Ontario
over the last few days of economic significance for the region. Congratulations to Thunder Bay International Airport and Laurentian University for their milestones. Enjoy.
Employment is always an important indicator of economic
growth and success and the figure below provides a good perspective on how some
of Ontario’s major centers are doing when it comes to job creation.Employment data from Statistics Canada
is used to compare total employment growth between 2001 and 2016 for 15 major
CMAs.These major CMAs are ranked
from highest to lowest and their employment growth ranges from a high of 38.8
percent for Oshawa to a low of -2.4 percent for Thunder Bay.
This morning's Thunder Bay paper featured a municipal councilor lamenting that the new provincial cap-and-trade policy will add at least $375,000 to the City of Thunder Bay's energy bill. According to the councilor: “It’s very frustrating because we reduce consumption substantially and then bingo, it’s gone.” As the story notes, the city’s finance department in November
projected the legislation will lead to a $200,000 increase to natural
gas, $150,000 for diesel fuel and $25,000 to gasoline based on estimates
of 3.3 cents per cubic metre of natural gas, 4.7 cents per litre for
diesel and 4.3 cents per litre for gasoline.
Here is a listing of some stories out in the north over the last few days of economic significance for the economy of northern Ontario and its residents. Enjoy.
Statistics Canada has just released its building permit results for November of 2016 and the numbers are down overall largely as a result of a decline in construction intentions in Alberta. According to Statistics Canada:
In the residential sector, the value of building permits fell 1.6% to
$5.1 billion in November, following three consecutive monthly increases.
Declines were posted in four provinces, led by Alberta. The largest
gains were posted in British Columbia and Quebec. The value of non-residential building permits rose 3.0% to $2.6 billion
in November, the fourth increase in five months. Higher construction
intentions were registered in five provinces, led by Quebec and Ontario.
The largest decline was reported in Alberta.
The interesting results are for Census Metropolitan areas as the value of building permits was down in 16 of 34 census
metropolitan areas for the month of November. Both of the major northern Ontario CMAs - Greater Sudbury and Thunder Bay - registered decreases in November from October at 61.6 percent in Thunder Bay and 5.9 percent in Sudbury.
When November 2015 to November 2016 is examined, over the course of the year Moncton registered the
largest increase at 227 percent while Brantford saw the largest decrease (See Figure). Over this same period, Thunder Bay saw a 49 percent decrease while Greater Sudbury saw a 19 percent decrease.
Tbnewswatch
ran a story on Thunder Bay City Council meeting attendance halfway through the
2014 to 2018 term.There were a total of
147 open and closed meetings over a two year period and the number of meetings
missed ranged from a low of 0 for Councillor Hebert to a high of 28 for Councillor
McKinnon according to the numbers presented in a Table. Of course, comparisons are often more striking when made using a graph.
Budget deficits have once again reared their head as a major policy issue at the federal level which is somewhat amusing given that not too long ago, the projection was for a new age of persistent surpluses at the federal level. Not only did the incoming Liberal government immediately begin running large deficits expected to continue until the early 2020s, but the forecast has worsened to an even longer run of deficits. The most recent projection by the Federal Finance Department says we are looking at deficits at the federal level until about 2055. For my take on this, see here.
As for budgets, deficits and fiscal sustainability at the provincial level - well, Ontario is still not out of the woods yet. Health spending is a big factor. The province's Financial Accountability Office has just released a report on trends and outlook in the Ontario health sector. Ontario is restraining health sector expense growth in an effort to balance its budget by 2017-18 but according to the FAO's review of the program changes introduced: "if the Province is to meet its 2016 Ontario Budget health sector expense
targets, the Province will need to implement additional program changes
that result in health sector expense savings of $0.4 billion in
2016-17, $0.9 billion in 2017-18 and $1.5 billion in 2018-19."
The FAO also notes that the continuation of 2% annual average growth in health spending - which is what the government is currently doing - may be difficult to sustain beyond 2018-19 if service quality and level are not to be compromised.
A key feature of housing markets in Canada over the last
decade is the sustained price increases particularly in larger urban
centers such as Vancouver and Toronto. Despite a relatively flat economy and stagnant population
growth, even northern Ontario has seen a price surge in its two largest urban
housing markets: Greater Sudbury and Thunder Bay.However, while Ontario’s housing price surge especially in the GTA shows little sign
of abating, it appears that economic reality may have finally caught up with
northern Ontario’s largest housing markets as prices appear set to level off.
Ontario has brought in its new cap and trade system as of January 1st. Northern Ontario is generally an energy intensive place in terms of its transportation needs as well as its industrial activity so one would expect some impact on costs. Business groups led by assorted Chambers of Commerce apparently would like to see the program delayed. In terms of the general impact on Ontario, I have a short piece here while Margaret Wente has another here. While dealing with climate change and saving the environment are important, doing it in a manner that causes more economic harm than good is not optimal policy but then Ontario has been raising the cost of doing business in the province for years and criticisms appear to be so much water off a duck's back. As for the specific effects on northern Ontario, you can check out this story on CBC regarding northeastern Ontario. Despite the optimism conveyed in this story there is a sense that there will not be a great deal of carbon emission reduction as a result. As for the northwest, another CBC story that also conveys a sense of opportunity despite the rise in costs that are anticipated given our colder winters and longer driving distances. It concludes with a quote from Chris Ragan at McGill that the impact will take a much larger bite out of lower income households.
Northern Ontario’s universities are proud of their research
intensiveness and success. Indeed, over the last decade they have made an
impressive effort to acquire the flagships of research intensity – the academic
research chair.Research chairs
highlight and foster a specific area of research importance by dedicating
specific resources to support the chair holder’s research.Along with budgets for research, these
chairs allow a professor to concentrate on research by reducing their teaching
load.
Many of the research chairs currently at northern Ontario
three largest universities - Laurentian, Lakehead, and Nipissing are funded by
the federal government via the Canada Research Chairs program.There are also other chairs that have
been funded with partnerships with other agencies and funding groups as well as
internal university resources.As
noted in a previous post there appear to be 17 such positions currently held at
Laurentian University, 16 at Lakehead University, 4 at Nipissing and one at
Algoma. Moreover, these
research chairs cover a wide range of topics stretching from applied
evolutionary ecology to indigenous health and aerial robotics.
However, there is a curious omission when it comes to these
many important topics – anything specifically to do with economics. Indeed, three important economic sub-fields
given northern Ontario’s economy are nowhere in sight: regional economics,
transportation economics and natural resource economics.Such an oversight is troubling
especially given the constant use by universities of the words “economic
development” or “economic impact” as background context whenever major research
projects or research chairs are announced.
Economic historians
will view the year 2016 as marking the end of the second great era of
globalization that began in the late 1970s and picked up speed after the fall
of the Berlin Wall.The year 2017
will usher in continuing significant economic and political change, tumult and
adjustment.The three seminal
signal events of 2016 - the Brexit vote, the election victory of Donald Trump
and the Italian referendum –herald the new era.Global economics and politics will be marked by
restraint of trade, reduced mobility, populist politics, more extremism and
continuing slow economic growth as a result.
The first great
globalization from 1870 to 1914 was marked by the spread of liberal economic
and political institutions, industrialization and rapid technological change
especially in transportation and communication. The prosperity of the pre-1914
era was marked by the centrality of Europe both economically and politically
and combined free markets and trade to create a world economy with liberal
legal and constitutional institutions in its primary economies and the British
pound as the international currency. Moreover, it was an age of free movement
not only for commodities but also in terms of labor with mass migration from
the old world to the new.
However, the pace of
rapid change and economic integration created strains in a world of nationalism
and imperial governments and the result was World War I.The years from 1914 to 1945 marked the
start of several traumatic decades in international economic and political
history that included revolutions, the rise of communism and fascism, two world
wars and the Great Depression.A
dominant feature of the period from 1914 to 1945 was reaction to a series of
major international economic and political shocks.We are embarking on a similar period – hopefully minus the
specter of global armed conflict.
Despite the 2009 Great Recession, the world economy has
grown dramatically over the last thirty years.The prosperity of the world economy that has been driven by
free markets, technological change and the global institutions led by post
World War II America and the US dollar as the international currency has given
way to an era of multi-polar economics and politics. The rise of China and
Russia led by its business oligarchs has been aided by the liberal economic
order, which has helped grow their economies and trade.Indeed, autocratic oligarchs do well in
a world of liberal economic and democratic rules that govern everyone's
behavior but their own. Russian and Chinese business oligarchs buying property
in Europe or North America to safeguard their wealth from their own capricious
government action is the most obvious example of such behavior.
The people of the United States have now put in place their
own set of oligarchs to counter a world that seems to be increasingly at odds
with their own interests. Along with Donald Trump’s own economic status, the
composition of his incoming cabinet leans toward ex-generals and billionaires –
not much different from say how countries are run in the Middle East, never
mind Russia or China. However, once everyone behaves like the oligarchs, growth
of the economic pie will suffer.Less liberal regimes in the rest of the world whose economies have
benefited from the economic environment maintained by the framework of American
diplomacy and power will definitely get more than they bargained for as trade
barriers rise.American
policy will become even more inward looking and more explicitly
self-interested.
The economic and technological progress of the last three
decades owes much to the economic policies of the post 1970s – liberal policies
ultimately rooted in the European Age of Enlightenment and the political
movements of the early nineteenth century.These liberal economic ideas include rule of law, free
speech, representative democracy, majority rule but respect for minority
positions, property and human rights, and the exchange of goods, capital and
labor in free markets.The result
was more trade agreements, deregulation and some effort at more efficient government.
While the results of liberal economic policies can be
imperfect and the benefits of trade and globalization unevenly spread, it
remains that a retreat into populism and tariff barriers will make us poorer in
the long run.It will take time
and tumult to illustrate the poverty of the road that the world is embarking
on.It will also take new ideas
and policies on the part of free market and liberal economic advocates on how
to better distribute the benefits of economic growth and deal with the labor
market trauma of technological and economic change that has stoked populism.
