Requiem for City Council

 

Thunder Bay City Council this week began to move into its “lame duck” period - which officially starts August 8^th - with its decision to hold off on advancing the Turf Facility project and essentially kicking it down the road to the next city council which will be elected in October.  While they still might revisit the project before the 8^th, it is unlikely and signals acceptance that this legacy project will not be the current council’s legacy.  Of course, key to the problem is the cost of the project and the lack of external funding which has made the project controversial in part because early on Council rejected a private plan for a bubble type project. And the failure to attract federal funding which instead has gone to the Art Gallery project and a new Science north Facility suggests there will not be any federal funding soon making the project reliant on municipal borrowing.

 

As to whether the next council will support another go at a municipal Turf Facility is a good question given there is going to likely be a major change in its composition given that several incumbents including the current mayor have decided not to seek re-election.  What seemed to be a dearth of candidates earlier on is now dissipating as there are quite a few candidates starting to declare.  There are now four candidates for mayor and nine candidates for the five At Large seats.  There are two candidates each in Red River, Westfort, and McKellar Wards and four in Northwood.  Current River is likely on the road towards acclamation as only the Incumbent has declared to date. Neebing Ward has three candidates.  Only McIntyre still has no declared candidates but that will likely change.  So, with the filing deadline being August 19^th, sufficient choice is on its way.

 

The more interesting question is why some of the incumbents have decided not to run – at least four so far and maybe more given that some still have not declared.  Part of the issue may be fatigue given the length of time many of these incumbents have served in local politics especially when combined with the events of the last four years.  Thunder Bay has been beset with numerous controversial issues – poverty crime, the opioid crisis, racism and of course the entire police department which essentially has come under external direction and scrutiny.  There is also the dismal state of road infrastructure and sinkholes popping up where they should not be.  All these issues have had to be dealt with during an unprecedented pandemic which along with the disruption also complicated the conduct of council business.  This conjunction of events would have taxed the stamina and patience of anyone.  Of course, add to this the presence of several class action lawsuits all dealing with municipal water issues including the leaky pipe fiasco and one can see the possibility of a lot of trouble coming down the pipeline over the next couple years on a wide range of issues – not least of which will be the police service.

 

And the kicker was of course that the current council signed off on pay increases of up to 12 percent for senior staff  - something that is definitely going to eat into the popularity of some of the more vocal incumbents. That this salary increase came on the heels of the announcement of a record budget surplus of 10.9 million dollars for 2021 did not help and neither did pronouncements by at least one incumbent that future tax increases should be kept in line with the rate of inflation -which incidentally is at about 8 percent.  And interestingly enough, the projection for 2022 is now that after years of surplus, there is a 5.3 million dollar deficit being forecast for 2022.  Who could have foreseen such a thing especially in the wake of the salary adjustment for staff?

 

And so, there is likely going to be quite a bit of turnover on Thunder Bay City Council this time around – perhaps a generational change – after which you can expect the same faces to remain in place for a decade or so as that is the nature of municipal politics.  Retiring incumbents already worn down by the pandemic have decided that they have run out of the political capital needed to easily gain re-election.  New candidates with political aspirations have decided now is the time to strike. Hope springs eternal in fresh candidates that with their skill set they will be able to make a difference in a role which is a difficult and thankless task.  The old city council is dead.  Long live city council.  Once again, the drama begins. 

 

 

 

Thunder Bay's Economy: Rebound in 2022 With Future Stable

 

The July 2022 Major City Insights Report for Thunder Bay has been released by the Conference Board of Canada and it paints a picture of major and broad based economic rebound that is “firing on all cylinders”. According to the Conference Board:

 

·      Thunder Bay’s economy will rebound again in 2022 as forestry, tourism, and transportation boost economic activity to pre-pandemic levels. Real GDP growth of 3.9 per cent is forecast this year, down slightly from our forecast at the beginning of the year.

·      The economy’s recovery is expected to continue into 2023, but risks are plentiful, especially if the Bank of Canada is unable to contain inflation.

·      Thunder Bay is lagging the economic recovery province-wide, as real GDP in Ontario is already back to pre-pandemic levels. On the other hand, the city’s labour market has tightened markedly, even more than the province’s.

·      Continued economic recovery, a tight labour market, and the possibility of teleworking should help improve the city’s attractiveness to migrants. This could be an opportunity for the city, especially as the federal government ramps up international immigration targets over the next few years.

·      Real GDP is forecast to grow 1.0 per cent annually on average over 2023–26, while the city’s population will remain flat at around 125,000

 

While generally an upbeat report, it does note that Thunder Bay is nevertheless lagging the province wide economy, and this is expected to persist.  While Thunder Bay’s real GDP growth in 2022 is ranked fifth amongst 11 comparator CMAs (including places like London or Sudbury) for the 2023-26 period it is forecast to remain at number 11.  Total employment will recover to about 65,000 jobs (up from 61,000 in 2021) but will essentially remain around there until 2026.  Housing starts will also recover and return to their annual figure of circa 200 starts a year.  These are ceilings that has not been breached since the end of the forest sector crisis.  It should be noted that while the unemployment rate is very low, the shrinking of the labour force has been a factor in that.

 

Until the forest sector crisis of the early 2000s, Thunder Bay’s employment would essentially range from about 65,000 to 70,000 jobs.  Since then, there has been a permanent downsizing of employment in the city and has ranged from about 60,000 to 65,000.  Over the long term, there have not been sufficient long-term and sustained economic opportunities to boost growth above that.  And, with slow in migration and an aging population, the paradox of a growing labour shortage at a time when there has been an economic rebound has driven costs and prices of skilled trades and many renovations upwards. As well, it remains that much of the recent growth remains in broader public sector activities such as health and education – indeed educational employment surged in 2021 according to the Conference Board.

 

At the same time, the report points out opportunities in tourism, transportation and manufacturing, and resources and while high inflation and rising interest rates are eroding household purchasing power, some of the city’s industries should see increased profitability form high resource prices. As noted, transportation will benefit as airport and port activity improves. Potash shipments are booming, while a rebound in western agriculture production will help lift grain shipments through the port this summer.  Overall, transportation and warehousing output is forecast to grow by 15.8 per cent in 2022 as the sector continues to recover from the hit it took during the pandemic.

 

Indeed, one point acknowledged by the Conference Board Report is that there is significant “upside” risk to these projections – that is, they could turn out to be better than expected.  As they note: “A significant upside risk to the forecast is the plan to spend as much as $1.2 billion over the next four years to build a new Thunder Bay Correctional Complex. The project will be funded by the province as part of an effort to modernize the correctional system.”  Indeed, this project based on some expectations could generate an additional 700-800 construction jobs though given the current labour shortages in the city this will either drive up local costs even more crowding out other local activity or require out of town temporary workers.  As well, there is future highway construction for the Thunder Bay to Nipigon corridor and numerous local road projects that will generate activity. 

 

So, 2022 appears to be a positive year.  Things are rebounding quite well to the point that there are local labour shortages and rising costs.  Once the rebound bump is complete however it would appear that the local economy will stabilize at its recent historical levels of employment.  Even projects like highway corridor upgrades and the new correctional center construction represent short term bursts of employment growth rather than a permanent long-term increase.  Indeed, Thunder Bay’s economy continues to grow at below the rate of most other Ontario cities.  What impact the rise in interest rates will have on planned or scheduled construction projects is of course a major downside risk on activity going into 2023.  However, if inflation peaks this summer and subsides in the fall, one can expect interest rate increases to level off and a slow decline begin.

 

 

The Shape of Labour Force Things to Come

 

If the June 2022 Labour Force Survey is part of a trend, Canada’s labour shortage issues are going to be getting worse.  On the positive side, the unemployment rate reached a new consecutive low of 4.9 percent in June and politicians with vested interests will no doubt seize on this as good news.  On the other hand, total employment fell in June by 43,000 jobs with the employment loss almost entirely due to a decrease in workers aged 55 years and older.  As well, the number of self-employed workers fell by 59,000 (2.2 percent) while the number of employees in both the public and private sectors held steady.  Dig deeper, and the long-term trend shows self-employment declining while public sector employment has grown over the last few years – not exactly good news for the health of the business sector.  And, as final points, the size of the labour force between May and June shrank by 97,500 while the participation rate in the economy shrank from 65.3 percent to 64.9 percent.  Remember that this is the start of summer, usually when things pick up.

 

So, what is going on here? I like to term this the Thunder Bayization of Canada’s economy.  For quite a few years now, Thunder Bay and indeed much of northern Ontario has seen low unemployment rates.  These are usually touted by local community leaders as good economic news.  After all, if the unemployment rate is low what could be better news than that?  Except, the problem is that in the case of Thunder Bay, both the labour force and total employment shrank permanently after the forest sector crisis nearly twenty years ago and has never really recovered.  Moreover, with the aging of its labour force, the local labour force has shrunk faster than employment hence resulting in a decline in unemployment rates.  Total employment has shrunk.  This continues as even the June 2022 labour force shows that in Thunder Bay since May the labour force and total employment both fell though this time employment fell a bit more than the labour force so that the unemployment rate rose slightly to 4.3 percent.  Think about it – a chronically depressed city-region with an unemployment rate below the national average of 4.9 percent.

 

There is a lot going on here but basically, the two-year pandemic hiatus of less work with substantial government benefits, the continuation of extended EI benefits and accumulated savings have caused a shrinking of people ready and willing to work.  Combine that with an aging labour force – about 20 percent of the labour force and employment is people aged 55 and over – and the start of retirements which has probably also been accentuated by the pandemic.  Indeed, one suspects that for some the CERB was a nice early retirement/buyout package courtesy of the government.  Then there is the pandemic toll on small business and the resulting shrinking of self-employment also.  Put it all together, and you have the start of a growing and continuing labour shortage in Canada. 

 

Thunder Bay can function in an economy where the number of people shrink, and inflows of assorted government transfers keep the economy going.  However, can this be a sustainable future for an entire country where more and more people simply withdraw or retire from the labour force and the number of people available for work and employed shrinks?  Can an economy where everyone wants to enjoy the consumption of goods and services exist alongside one where there are not enough people available to work?  In the absence of immigration, this would probably be worse.  Food for thought.