NORTHERN ECONOMIST 2.0

Thursday, 15 February 2018

Recent Labour Force Numbers for Northern Ontario Are Not Pretty

Last week’s labour force numbers for Canada from Statistics Canada were seen as a bit of a shock given that employment fell by 88,000 in January. Part-time employment declined (-137,000), while full-time employment was up (+49,000). At the same time, the unemployment rate increased by 0.1 percentage points to 5.9%. Ontario also declined by about 51,000 jobs and much of the loss was due to part-time work. So how does northern Ontario compare when recent labour force estimates are looked at?

The accompanying figure looks at employment growth for northeast and northwest Ontario compared to Ontario and Canada between December 2017 and January 2018. Whereas Ontario and Canada saw employment drop by just over one half of one percent, total employment in the northeast declined 2.4 percent while in the northwest it fell by 1.8 percent. As well, the losses were more driven by full-time employment as it dropped 2.5 percent in the northeast and 2.3 percent in the northwest. All one can hope is that the January numbers are a short-term aberration because northern Ontario saw its employment drop more than either Ontario or Canada and the northeast seems to have been hit harder.

Population Growth Results: Thunder Bay and Sudbury at the Bottom

Statistics Canada has released its recent sub-provincial population estimates for 2016/17 and the results find that population is still growing faster in the Prairies well as parts of Ontario but the two major northern Ontario CMAs are not in the pack. According the Statistics Canada, the 10 CMAs with the highest population growth in 2016/2017 were in either the Prairies or Ontario. In 2016/2017, the population growth rate was 2.0% or higher in four CMAs: Saskatoon (+2.8%), Regina (+2.4%), Guelph (+2.2%) and Ottawa–Gatineau (Ontario part) (+2.2 and were followed by Toronto (+1.9%), Oshawa, Winnipeg, Edmonton and Calgary (+1.8% each), and Kitchener–Cambridge–Waterloo (+1.7%). The figure below shows the picture pretty clearly.

At the bottom of the rankings are Sudbury, Thunder Bay and Saguenay. Sudbury is third from the bottom with a population increase of only 0.1 percent. The population decreased in the Saguenay (-0.2%) and Thunder Bay (-0.1%) CMAs for the fourth consecutive year with Saguenay’s population decrease partly attributable to out-migration of young adults aged 18 to live elsewhere in Quebec. In Thunder Bay, the number of deaths surpassed the number of births, and has done so since 2006/2007, contributing to its population decline.

Sunday, 11 February 2018

Economics News Around the North: February 11th Edition

Well, traveling in winter is never much fun and this weekend I was in Montreal for the Fraser Institute Student Seminar Series and my way back has been affected by snow and freezing rain and assorted other things. Still, there is always time to blog so here are the economic news stories that have caught my attention over the last little while with respect to northern Ontario economic affairs.

“Drop CN bridge appeal, Fort William First Nation chief tells Thunder Bay city council.” CBC News Thunder Bay, Feb. 8^th, 2018.

Well, this makes a lot of sense. I recall speaking on a Thunder Bay Chamber of Commerce panel last spring where I made a similar remark that it was time to plan for a new span across the Kam River. I suppose Thunder Bay City council is gambling that they can get something for nothing by getting CN to maintain the bridge but it would be forward looking to plan and line up the funding for a new modern bridge. Best case scenario – they could end up with two bridges. How’s that for infrastructure!

“Porter Airlines new crew base ‘good news’ for Thunder Bay Ontario” CBC News Thunder Bay, Feb. 2^nd, 2018.

This is a good news story not least of which is that 40 jobs from the crew base are coming to Thunder Bay but because it bodes well for the development of Porter’s air network. With a crew base in Thunder Bay, Porter can use Thunder Bay as a mini hub perhaps for an expansion west to Winnipeg or a link through Chicago as part of it existing network. Porter is innovative and service oriented and a great alternative to Pearson. They are also adding a 7^th daily flight out of Thunder Bay to Toronto. This weekend reminded me why I rarely fly out of Pearson.

In other transportation news, it would appear air travel is big in northern Ontario. North Bay is also getting some aviation jobs. I guess 40 is a magic number for airlines as it is expected that 40 jobs will be created here also.

“Voyageur Airways receives $2.7 million to expand,” North Bay Nugget.ca, Fe. 9, 2018.

In other news…

“Business confidence Drops in northeast: survey” Sudbury Star, Feb. 10^th, 2018.

Apparently, less than a fifth of businesses in northeastern Ontario are confident in Ontario’s economic future according to this Chamber of Commerce annual report. This was reinforced by regional data, as the Business Confidence Survey reveals that nearly half of northeastern Ontario businesses expect their organization’s revenue to stay the same over the next 12 months.

It could be that the Canadian economy is finally slowing down given the recent numbers from Statistics Canada.

“Canada’s volatile jobs survey posts biggest monthly drop since 2009” CTV News, Feb 9^th, 2018.

While Canada lost 88,000 jobs and Ontario and part time workers were heavily affected, it is only one month’s data – January – and you would need several months more before you could argue a trend was underway. However, Thunder Bay and Sudbury saw their unemployment rates remain pretty much the same with Sudbury remaining at 6.8 percent and Thunder Bay dropping slightly from 6.1 to 5.8 percent. However, as I have noted previously, the unemployment rate in northern Ontario is not the best indicator of job growth given the shrinking labour force. Indeed, even the Sudbury Star noted that while Sudbury’s unemployment rate stayed at 6.8 percent, it nevertheless shed 800 jobs.

In Ring of Fire news, the saga continues.

“Plan to develop Eagle's Nest site a step 'in positive direction' for Indigenous communities” CBC News Sudbury, Feb. 7^th, 2018.

Timmins is trying to boost tourism as is the Sault.

“Will thousands flock to Timmins to watch Bryan Adams?” Feb. 8^th, 2018. TVO.

“Minister Chagger promotes Sault Ste. Marie tourism at Bon Soo Winter Carnival”

As so economic life goes on in northern Ontario. Have a great week!

Monday, 5 February 2018

What a 2.4 Percent Municipal Tax Levy Increase Really Means

Thunder Bay City Council has voted to pass the 2018 municipal budget and will formally ratify it at a vote this evening. The Mayor and Council have of course been patting themselves on the back about how it is a “responsible budget” and how it keeps the tax levy increase in spending within the average of the last two terms of council. The tax levy increase is now coming in a 2.4 percent now – just above the rate of inflation - which is down from the 3.03 percent increase that was originally on the way after several weeks of deliberation and debate. This was managed by essentially taking out about $1 million from the city reserve fund to lower the levy against the advice of City administration it turns out who also noted that the reserves – used to cover unexpected costs or deficits throughout the year - have been declining since 2012

What this all really means is that this is an election year. The average municipal tax revenue increase over the period 2011 to 2018 has averaged 3.3 percent and ranged from a high of 5.7 percent in 2015 to a low of 2.2 percent in each of 2014 and 2016. The increase of 2.2 percent in 2014 was also during an election year and was followed by a 5.7 percent increase in 2015. Keeping the increase low this year can be interpreted as a deliberate political strategy to not raise the ire of ratepayers in the lead up to the October election and one can expect a hefty increase to make up lost ground when the 2019 budget comes in.

In the end, a tax levy increasing at just above the rate of inflation is not much of an accomplishment given that it was done by dipping into the reserve fund. While much was said during council debate about the hard decisions that have been made the fact remains that spending is going to go up by the amount originally agreed upon – just over 3 percent – but it is going to be subsidized by borrowing from the reserve fund.

But then, cost control is hard work and in the end some of the efforts at cost control have backfired. One need only look back at the attempt by Thunder Bay to reduce garbage collection costs in 2017 which were supposed to eliminate a truck and labour costs via attrition while at the same time reducing bag pick-up to two bags from three with additional bags requiring a tag. And what was the end result? After a period of chaos, the truck was reinstated but the three-bag limit was not and things have remained very quiet since. So, one has to conclude that costs have remained the same while less garbage is being collected and revenue is probably up for the City from the bag tags. It was certainly a win for the City of Thunder Bay but not for rate payers who altogether have to pay more but are getting less.

We can expect more of the same next year after the dust clears from the election. The current cast of councilors will largely be returned to office and the cycle will start anew. We will be paying more and getting less, and the debut will be a hefty tax levy increase to replenish the reserve fund as well as boost spending to make up for the previous year’s slowdown. There will be the usual grumbling and complaints, but they will be dismissed because after all Thunder Bay voters are the ones doing this to themselves by falling for the same thing election after election. Why would city politicians take them seriously when they complain?

Additional Note: February 6th - Well, the budget did pass last evening. Please note that the 2.4 percent levy increase coming in is "net" or after factoring in "new growth". The gross levy increase is actually 3.13 percent. Originally, the net increase was going to be close to 3 percent and the gross increase nearly 3.6 percent. So, total spending is still going up 3 percent and the net is 2.4 because of the use of projected surplus funds from 2017 budget away from the reserve fund and towards the tax bill. However, apparently there was an effort to move even more of the projected 2017 budget surplus away from the reserve but it did not succeed. Of course the 3.13 percent does not mean that everyone's tax bill will be going up 3.13 percent or 2.4 percent if you are an "existing" ratepayer. That is the total increase in tax financed expenditure. Much of the burden of the increase will go to residential ratepayers. See my post last month here for a more detailed discussion.

Thursday, 1 February 2018

Ontario's Fiscal Paradox

My latest on Ontario's public finances...

Ontario has wrapped up its 2018 pre-budget public consultations as it prepares to deliver its next provincial budget. Ontario Finance Minister Charles Sousa confirmed in the fall fiscal statement that Ontario’s 2018 budget will be balanced, as will budgets over the next two years. However, the average Ontarian may be confused by the fact that despite a future of projected balanced budgets, the provincial net debt will continue to increase.

Indeed, recent years have seen the provincial debt grow by amounts exceeding that year’s deficit. For example, in fiscal year 2014-15, Ontario’s budgetary deficit was $10.315 billion but the net debt rose by $17.386 billion. In 2015-16, the deficit was $3.515 billion but $10.796 billion was added to the net debt. In 2016-17, the deficit was $0.991 billion but $6.276 billion was added to the net debt.
So how can this happen? See here for the rest of the post on the Fraser Blog...