NORTHERN ECONOMIST 2.0

Saturday, 9 December 2017

Economic News Around the North, December 9th Edition

Winter finally arrived here in Thunder Bay this week with a plethora of snow, cold and ice. I left for a short trip to Montreal on Monday afternoon with rain and warm temperatures and returned the next evening to a winter wonderland. What better way to spend a cold Saturday here than by warming up the house with homemade pizza....

Without further ado, here are some of the stories making the economic news recently in northern Ontario.

Rising tourism boosts local economy. TBNewswatch, November 25th, 2017.

This is yet another positive economic impact story. However, tourism falls far short of the economic impact of Lakehead University as one recalls from this past story.

The Ring of Fire and its associated "production facility" have also been making the news again in the region.

Sault mayor confident in Ring of Fire Smelter pitch. Northern Ontario Business. November 21st, 2017.

Smelter won't go where it's not wanted, Noront. Northern Ontario Business, December 6th, 2017.

The smelter (or the "production facility") is seen as providing volume that would make the troubled Ontario Northern Railway more viable....

Noront facility could make ONR viable: Timmins councillor, Sudbury Star. December 9th, 2017.

Of course, if you don't get the smelter, there is always the option of storing nuclear waste. Ignace, Manitouwadge and Hornpayne are all still in the running along with two sites near the Bruce Reactor - South Bruce and Huron-Kinloss.

Nuclear fuel bunker shortlist includes 2 sites near Bruce reactor. CTV News Kitchener. December 6th, 2017.

Despite the allure of smelters and nuclear waste disposal sites, there is still a search for economic visions in the north. The Sault is obviously taking the lead in what is one of northern Ontario's booming sectors - economic development consultants.

Sault Ste. Marie seeks economic development vision. TheSudburyStar.com. December3rd, 2017.

And another economic development vision seems to be in the offing in Timmins....

Bolivian economic development group in Timmins. Timminspress.com. November 27th, 2017.

On a positive note....

Sudbury adds 600 jobs in November. TheSudburyStar.com. December 2nd, 2017.

However, Sudbury's unemployment rate edged up slightly to 6.2 percent from 6.1 percent. Meanwhile, Thunder Bay's rate also went up to 6.1 percent from 5.8 percent the previous month.

Another item of relevance to northern Ontario.

Indigenous youth key to Canada's economic growth. Business Vancouver. December 5th, 2017.

Have a great weekend! Its time to enjoy the pizza.

Tuesday, 5 December 2017

Recent Policy Posts: Employment, Currencies and Recessions

Along with Northern Economist, I also blog on the Fraser Institute website as well as Worthwhile Canadian Initiative and from time to time my thoughts also find their way to other sites. For my most recent contribution to the Fraser Institute on employment growth across Canadian CMAs over the last decade, take a look here. This post seems to have garnered a lot of interest on my LinkedIn page particularly from my Thunder Bay connections though there have been alot of Toronto visitors too. Then there is my contribution on digital currencies and bitcoin which was published on the Focus Economics Blog. I join a number of other economists and analysts in presenting our thoughts on what the future may hold for currencies and central banking as a result of developments such as Bitcoin. Then there is my most recent post on Worthwhile Canadian Initiative dealing with the ways in which we can deal with the next recession given current monetary and fiscal policy. Finally, my contribution to the 2018 compendium of economic charts put out by Maclean's - 91 charts in total this year - deals with the federal share of total government spending and can be found here. As always, enjoy!

Monday, 4 December 2017

So What Happened to Free Trade with China?

Well, the news this morning was that the anticipated start of free trade talks between Canada and China has now been put off and the two countries will continue to explore whether to launch negotiations. Given the hoopla that seemed to surround Prime Minister Trudeau's departure for China, it does seem a remarkable turn of events and somewhat of a loss of face. According to the Globe and Mail, Mr. Trudeau declined to say what had stalled the free trade talks but said that Canada was holding out for a better deal. Indeed, Canada may also be more wary in the light of reports that competition from Chinese manufacturing has had a negative effect on Canadian manufacturing employment and part of the delay is Trudeau playing to a domestic audience.

Of course, there is probably more to the story. On the one hand, this could be the Prime Minister once again demonstrating to the Americans on the eve of the NAFTA talks in Montreal that Canada is prepared to walk away from a trade deal if it does not get a good deal. Indeed, the Globe story noted that Canada wants a broader deal with China whereas China seems interested in a more "pared-down" deal. If this is the case, then China will no doubt not be amused by being used as a negotiating ploy thereby making future negotiations more prickly.

Still perhaps the stumbling point was more on China's side. From China's perspective, if they expect NAFTA to fall through then they may see it as improving their bargaining position with respect to Canada in any trade talks. Waiting out the NAFTA negotiations to see if they fall through is a prudent strategy from their perspective and swooping in afterwards when Canada "needs" the deal more can be to their advantage if indeed what they want is a pared-down deal.

In any event, Canada is a small open economy and quite dependent on international trade. Playing these type of negotiating tactics - if that is what they are - may actually make our life more difficult on the international stage. On the other hand, what is going on here may simply be beyond Canada's control and Trudeau is simply reacting as best he can to moves on the part of both China and the United States acting in their own perceived best interests.

Tuesday, 28 November 2017

Is Income Inequality Responsible for Thunder Bay's Deteriorating Social Fabric?

Thunder Bay has seen a number of deteriorating social indicators over the last few years which include rising homicide rates, tragic deaths of indigenous people and increasing use of foodbanks. In looking at the causes of what appear to be increased poverty and violence, one might consider that these trends are the result of rising income inequality. Income inequality in both Canada and the United States has been rising over the last few decades and researchers have been drawing links between health status and economic inequality as well as the role of inequality in fostering environments conducive to crime and violence.

We had a talk last week at Lakehead University from Martin Daly whose book Killing the Competition makes the case that most homicides are the result of competition between males over goods that are distributed inequitably. In other words, economic inequality drives the homicide rate and all things given one would expect more unequal societies to have higher crime and homicide rates. Of course, this raises the question as to what income inequality has been like in Thunder Bay over the last few years and whether it too has trended up.

Needless to say, information on income inequality at a CMA level is not easy to obtain or construct. However, there is tax filer data available from Statistics Canada obtained from Revenue Canada and it is possible to obtain annual data on median total tax filer incomes for the top 1 percent as well as the bottom 50 percent and construct a ratio. One can construct a simple dispersion or inequality measure by taking the ratio of the median income of the top 1 percent to the median income of the bottom 50 percent on the tax filer total income distribution. If this ratio goes up over time, it implies increasing income inequality while if it goes down it implies decreasing inequality.

The figure below plots this measure of income inequality for the period 1982 to 2015 for Thunder Bay as well as Greater Sudbury and Ontario. The results are intriguing. In 1982, the median total income of the top 1 percent of tax filers in Thunder Bay was 11.9 times that of the median for the bottom 50 percent - $78,200 versus $6,600. By 2015, the ratio was 12.34 - $236,900 versus $19,200. While income inequality in Thunder Bay has gone up somewhat over time, much of the increase was actually between 1982 and 2001 when the ratio rose from 11.9 to 14.2 and has actually moderated since.

Given that homicide rates in Thunder Bay trended downwards from the early 1980s to 2007 and surged since 2007, there does not seem to be much correlation here. Moreover, Figure 1 also plots the same inequality measure for Greater Sudbury as well as Ontario as a whole. Since the late 1990s, Greater Sudbury has actually been more unequal with respect to this inequality measure than Thunder Bay and yet its homicide rate is now lower. As well, both Thunder Bay and Sudbury have a much more equal distribution of tax filer income than Ontario as a whole which saw its ratio rise from 15.3 in 1982 to peak at 24.9 in 2006 before declining to 22.2 in 2015.

So whatever is disturbing the social fabric of Thunder Bay, income inequality does not appear to be the obvious culprit.

Thursday, 23 November 2017

Homicide Rate Up Again in Thunder Bay

Statistics Canada released its 2016 homicide statistics yesterday and for Canada as a whole, the total number of homicides actually declined slightly with the national homicide rate falling by 1 percent to 1.68 per 100,000 of population. Of course, when Canada's urban areas are examined, there is quite a bit of fluctuation around this national average. For Canada's CMAs, the homicide rate in 2016 ranged from a high of 6.64 per 100,000 of population in Thunder Bay to a low of 0 in three cities: Trois Rivieres, Kingston and Greater Sudbury (See Figure 1)

If you look at the percentage increase in the homicide rate, the rankings change somewhat. The largest percent increases in the homicide rate were in Ottawa, Gatineau and Thunder Bay. Fifteen CMAs saw an increases in their homicide rate, two saw no change (Brantford actually had zero murders in 2015 and 2016) while the remaining 17 CMAs saw declines in their homicide rates. (See Figure 2).

Thunder Bay is up again after a decline in the homicide rate in 2015. If you need a refresher on long-term trends in Thunder Bay's homicide rate, here it is down below. Thunder Bay's homicide rate trended downwards from 1981 to about 2008 and then began to trend up. For a local media take on this story, see here.