Maclean’s Charts 2017 and Some Implications for Northern Ontario’s Economy in 2017

Jason Kirby at MacLean’s Magazine has been putting together year-end chart extravaganzas for the last few years and his 2017 list of charts to watch has 75 contributions.  They are of course designed to help make sense of the Canadian economy in the year ahead but they also are useful in understanding regional economic performance. 

There are contributions dealing with trends in population aging, business investment, government debt, employment, housing markets, wage growth, export performance, trade, service sector growth, electricity prices, stock markets, environment, and manufacturing.  Indeed, my own contribution to this year’s chart collection  was a simple one showing Canada’s manufacturing to GDP ratio and the exchange rate since 1950. My point?  A low dollar may not help Canadian manufacturing and by extension what remains of the manufacturing sector in northern Ontario.

 

As I note in the write-up: “A high Canadian dollar is often blamed for Canada’s manufacturing malaise and with its recent depreciation there is hope that a renaissance will be sparked in Canadian manufacturing. The long-term evidence suggests otherwise. While Canada’s manufacturing output per capita has grown in the long term, manufacturing’s share of national output has fallen quite steadily from 27 per cent in 1950 to 11 per cent today. Our dollar in terms of its exchange rate with the U.S. dollar (our major trading partner) was relatively stable from 1950 to the late 1970s, and then began depreciating from the mid 1970s to the early 2000s.  It then appreciated again during the commodity boom of the 21^st century and has been depreciating recently. Fluctuations in our currency’s value (relative to the U.S. dollar) may have some short-term effects on manufacturing production.  The period from the late 1970s to the early 1990s does seem to have seen some stabilization of the share of manufacturing in our GDP. However, Canada’s manufacturing decline is rooted in long-term economic factors such as productivity growth—which slowed substantially after 2000—and the trend of developed economies around the world toward service production.”

In the case of northern Ontario, there has been some movement in our forest sector recently with a pick-up in sawmill and pulp sector activity.  However, despite a lower dollar, we should not expect a massive resurgence in this sector.  The fact remains that the sector was hit not only by a higher Canadian dollar during the forest sector crisis but also the effects of environmental priorities, higher electricity prices, weak business capital investment in an aging capital stock, and new and more productive competitors around the world.  As some of the other Maclean's charts show, electricity prices in Ontario are still an issue and business investment in Canada is still weak. Given the permanent shutdown of so much manufacturing capacity in Canada, a lower dollar now is not going to automatically re-ignite production in manufacturing, let along the forest products sector in northern Ontario.  The future of the northern Ontario economy, like the rest of Canada, is going to rely on services.

Recognition for Economic Blogging

Some news worth sharing.  As you know, I have been involved for a number of years now as a contributor to the economics blog  Worthwhile Canadian Initiative along with my colleagues Stephen Gordon, Nick Rowe and Frances Woolley.  I have always considered our mix of macro, finance, health, social policy and economic policy posts to be Canada's premier economics blog.  However, we also make a mark internationally.  Recently, Feedspot has announced that Worthwhile Canadian Initiative is one of its top 100 Economics Blogs!  We have also made the list of top 100 Economics Blogs for 2016 done by Intelligent Economist.  Moreover, global consulting firm Focus Economics has informed us that recognition is coming our way with their list of top economics blogs coming out in January 2017.  Congratulations to my colleagues on WCI and looking forward to another year of great posts in 2017.

Northern Ontario Employment Growth Lagging...And With Regional Differences

A new Fraser Institute report on recent economic and employment growth in Ontario noted
that it has been disproportionately concentrated in the Golden Horseshoe and Ottawa regions.  Meanwhile, southwestern, eastern and northern Ontario have lagged when it comes to employment growth.  Indeed, as the accompanying figure from the report below shows: “Average annual net employment growth has been negative in Eastern and Northern Ontario between 2010 and 2015. Average employment growth in Southwestern Ontario during this time has been positive, but only barely (0.4% annually)”.  

 

What is surprising is how relatively little attention the report received in northern Ontario from media outlets and local community economic and business leaders given the usual preoccupation with the northern Ontario economy.  The results of the report are more important than one might expect because the negative aggregate employment performance of northern Ontario is being driven largely by northwestern Ontario.  The two largest urban economies in northern Ontario are representative of this differential performance.

Figure 2 presents monthly seasonally adjusted employment for Thunder Bay (with fitted linear trend) for the period 2001 to 2016 while Figure 3 does the same for Greater Sudbury (Data source: Statistics Canada).   Over the long term, the two cities have travelled different roads with employment growing in Greater Sudbury while it has shrunk over time in Thunder Bay. While employment growth has slowed in Sudbury since 2010 while the decline appears to have flattened out in Thunder Bay, the long-term performance relative to Thunder Bay still stands out.  The long-term  effects of the forest sector crisis in Thunder Bay appear to have been a permanent downsizing of the employment base.

 

 

Of course, one might want to counter with the argument that unemployment rates in Thunder Bay and indeed the northwest are quite low but this is misleading.  The fact is that the labour force has been shrinking along with employment over the last decade in Thunder Bay hence improving the unemployment rate.  A shrinking employment base is not generally a cause for celebration even if it comes with falling unemployment rates.  More on this in posts to come.

The Northern Economy: More Evidence Based Work Needed

Well, it is probably time to resume the occasional post on aspects of northern Ontario's economy as well as broader economic issues from a northern Ontario perspective.  I will do it here on Northern Economist 2.0 to provide continuity with previous posts and material.  The advent of the Northern Policy Institute has provided a welcome supply of reports on northern Ontario issues and policy from a broad perspective but there is room I think for material focusing specifically on northern Ontario economic indicators.  This particularly struck me with the recent publication by the Fraser Institute of an excellent  report on differential economic performance across Ontario.  Needless to say, it appears that the economic situation in northern Ontario has not improved substantially in recent years and indeed the recent mining sector downturn appears to have dealt a blow to the region.  In the months to come, I will once again start providing the occasional post dealing with northern Ontario's economy using available data resources.  Blogging is of course time intensive so I do not plan to resume with the frequency of Northern Economist 1.0 but I will be addressing areas where I think an analytical gap exists.  To the future. Cheers. Livio.

Follow My Postings on Worthwhile Canadian Initiative

Thank you for your interest in Northern Economist 2.0.  I recently finished a sabbatical and have been directing my research activity more into my interests in economic history, health economics and public policy issues which leaves less time for analysis of the northern Ontario economy.  I have also been doing some public policy research on public finance issues with the Fraser Institute.  A visit to my Google Scholar page will provide you with background on the work I have been doing in areas like health expenditure determinants, wealth inequality and public policy in general.  You are also welcome to visit my department web page at Lakehead University where I post materials related to my presentations.  If you are interested in continuing to read my blog material on economic policy and analysis with a focus on Canadian public policy issues, please visit my postings on Worthwhile Canadian Initiative.  As well, my old Northern Economist postings are still currently available here on the old Shaw Webspace site until March 2017.  After that, the main content will still be avilable in an archive site I have set up which I am calling Northern Economist 1.0 (Archive).  All the best. Livio.