In my
last post, I made mention of the recent Conference Board of Canada Reports that presented current evidence and forecasts of economic activity for the cities of Thunder Bay, Sudbury, Timmins and Sault Ste. Marie. The evidence suggested a rather sluggish economy though an upcoming
webinar by the Conference Board argues that resource dependent communities such as those in northern Ontario are starting to rebound from the two-year downturn sparked by the decline in commodity prices. This would certainly be the case in the more mining intensive northern Ontario communities.
However, based on the Conference Board Reports to date I think a more comparative analysis of some of the key indicators is useful particularly because of the story they seem to tell. Along with Thunder Bay, Sudbury, Sault Ste. Marie and Timmins, the numbers are also presented for Ontario and Canada.
First, there is Figure 1 which presents actual real GDP growth for 2015 and 2016 and then the forecasts for 2017 and 2018. All the northern Ontario cities are doing worse than Ontario as a whole and of the four cities, Timmins seems to be consistently doing the best. Sudbury was exceptionally hard hit by the downturn in 2015 and 2016 but is expected to pick up.
What is more interesting is Figure 2 especially for the Sault and Timmins which both saw large hits in employment in 2015. The Timmins numbers are especially odd given that its employment growth numbers for 2015 and 2016 do not seem to match up particularly well with its real GDP growth performance.
Then we come finally to Figure 3. Given the lower real GDP growth in these northern Ontario centers both in the past and as projected as well as the often negative employment, one might expect that personal incomes in these cities would also be taking a hit. They are ranked from highest to lowest based on performance in 2015. Timmins has the best personal per capita income performance beating out the other three northern cities as well as Canada and Ontario. Moreover, growth from 2015 to 2018 is expected to be 8.3 percent - just slightly below Ontario at 8.4 percent but exceeding Thunder Bay (7 percent), Canada (7 percent), Sudbury (6.4 percent) and Sault Ste. Marie (5.9 percent).
So here is the thing. Despite years in which employment and real GDP growth are negative, personal per capita income just keeps chugging along. Indeed, it does not seem to matter if people are losing jobs or the economy is sluggish in cities like Thunder Bay or Sault Ste. Marie because personal incomes keep rising. Northern Ontario seems to have made the transition to the 24th century of Star Trek - a future era where money and the economy does not really matter anymore.
I suppose these results should not be a surprise given that these cities have aging populations with substantial pension and transfer incomes. Moreover, all of these cities have economies that have large broader public sector employment shares - in the range of 30 to 35 percent - which provide extremely large stabilizers when it comes to economic fluctuations. Remember that for Canada as a whole, the public sector share of employment is closer to 20 percent.
I suppose one might for the sake of argument make the case that these northern Ontario cities actually have it made. Despite layoffs in their resource sectors or slow growth from lack of economic development, they are able to achieve a standard of living - as measured by personal per capita income - on par with the rest of the province and indeed the country. Their aging populations are retiring, stay in town (unlike the young) and generate spending flows from private and public pensions as well as other transfers. Moreover, the large broader public sector in these communities provides a substantial portion of employment that is relatively well-paid and stable further insulating their economies. Indeed, Figure 3 explains why cities in northern Ontario that are constantly lamenting the state of their economies nevertheless seem to be able to support numerous new restaurants, craft breweries and vibrant local arts scenes. The north has rising incomes and consumption despite the slings and arrows of a feeble economy. Who could ask for anything more?
The problem is this. First, aging populations eventually make the final transition to that great economic equilibrium in the sky and their income and spending flows dry up. Second, having your employment dependent on above average shares of public sector employment ultimately rests on the political good will of your own local citizens - who are supporting municipal government spending via property taxes - and of course citizens in the rest of Canada and Ontario who may eventually come to question the political benefits of providing the degree of federal and provincial services and spending that they do to depressed rural-remote regions. A one industry town is a one industry town whether it is a dependent on a pulp mill or on the government. The end result can be the same when change comes. Its not the 24th century yet. Money and the economy do still matter.
