Thunder Bay's Employment Surge

Data from Statistics Canada on Thunder Bay's unemployment rate, employment and labour force suggest that its economy is experiencing a rebound after quite a few years of slow performance.  The most recent unemployment rate in Thunder Bay for May 2012 came in at 5.7 percent, which is well below the national and Ontario unemployment rates.  Of course, one of the reasons our unemployment rate is so low is that the labour force has not been growing as fast as employment but the last twelve months suggest that employment has actually begun to grow faster than the labour force.

Figure 1 shows unemployment rates (seasonally adjusted) for Canada, Ontario, Thunder Bay and Greater Sudbury for the 2009 to 2012 period on the left and total employment (seasonally adjusted)  for Thunder Bay over the same period on the right.  As can be seen, the period from June 2011 to January 2012 saw robust increases in employment followed by a decline since.  Overall, employment levels in Thunder Bay are the highest that they have been in the last three years.

Figure 1

The second figure shows annualized growth rates (May to May) for 2010, 2011 and 2012.  Thunder Bay's labour force actually shrank in both 2010 and 2011 but it grew substantially in 2012 - along with employment.  Employment in 2012 grew by 5.3 percent while the labour force grew by 3.8 percent.  As a result,  the unemployment rate dropped below 7 percent in 2011 and in 2012 has fallen below 6 percent.  However, the total level of employment in May 2012 is 61,500 - which is still down from the high of 67,400 reached in March 2003 but up from a low of 57,400 as recently as June 2011.

Thunder Bay's economy appears to have begun to recover from the forest sector collapse but still has ground to go.  Moreover, its employment still seems to be subject to somewhat erratic fluctuations.  While June 2011 to January 2012 saw a period of sustained increases, employment has declined since then.  Thunder Bay is still very much an economy in transition.

Figure 2

Northern Economist on Manufacturing Decline in the Financial Post

FP Comment 

Everybody’s Dutch

Special to Financial Post  May 29, 2012 – 7:51 PM ET

Developed nations in general have seen manufacturing declines
By Livio Di Matteo

The Great Canadian Angst over the decline of manufacturing must be tempered with evidence on two fronts. First, the decline as represented by Canada’s share of GDP in manufacturing has been in progress since the end of the Second World War. Second, when examined in an international context, Canada’s performance is not that different from the advanced economies that we usually compare ourselves with.

Manufacturing’s share of Canadian GDP rose from 20% in 1926 to a peak of nearly 30% during the Second World War. From an average of 26% during the 1940s, the manufacturing-to-GDP ratio dropped to 23% by the 1960s and reached 17% during the 1980s. The period from 1980 to 2000 saw a stabilization of that ratio at about 17%, with the decline resuming in the first decade of the 21st century. Between 2000 and 2010, the ratio averaged 14%.

Despite the long-term decline in the manufacturing-to-GDP ratio, the stabilization of the ratio between 1980 and 2000 has become the new “benchmark.” This stabilization occurred during a period of substantial currency depreciation against the U.S. dollar. From the end of the Second World War to the early 1970s, the value of the Canadian dollar relative to the U.S. dollar was close to par. The period from the 1970s to 2000 saw depreciation, but since 2000 the currency has appreciated and is back where it was for much of the 1945-75 period. The recent plunge in the manufacturing-to-GDP ratio is associated with this appreciation and the Western resource boom, but this “Dutch disease” relationship is at best a short-term correlation.

Manufacturing as a share of GDP in Canada has been in decline since the end of the Second World War from a peak generated by wartime-driven industry. Until the Second World War, the manufacturing-to-GDP ratio had ranged from 20% to 25% since the 1870s. Relative to the period from 1980 to 2000, the current manufacturing decline is understandably a cause for concern. However, viewed over a longer time span, it is a process much like agriculture’s decline as a share of employment and output as we moved from the 19th to the 20th century.

That this decline is part of a long-term process of economic change and development is evident with comparisons to other economies. The accompanying figure uses data from the United Nations for the period 1970 to 2010 to calculate the manufacturing-to-GDP ratios for Canada, the other six G7 countries as well as Brazil, China, India, Australia and the Netherlands, whose experience with North Sea oil in the 1970s led to the coining of the term “Dutch disease.”

Japan and Germany have traditionally had the highest G7 manufacturing-to-GDP shares, but nevertheless declined from 35% and 31% respectively in 1970 to 20% and 19% by 2010. Over the same period, Italy went from 25% to 15%, the United States from 24% to 13%, Great Britain from 29% to 10%, France from 22% to 10% and Canada from 19% to 11%. In 1970, Canada already had the lowest manufacturing-to-GDP ratio of the G7 countries. Manufacturing in Australia and the Netherlands had comparable performances to the G7.

As for advanced developing countries, Brazil paralleled the performance of the G7, going from a manufacturing-to-GDP ratio of 25% in 1970 to 13% by 2010. China and India, on the other hand, have maintained their manufacturing sectors relative to their GDP. However, India’s manufacturing-to-GDP share performance is exceptional at only 13% in 1970 and again in 2010. China is also an exceptional performer with a high manufacturing-to-GDP ratio of 37% in 1970 and a small decline to 33% by 2010.

The decline of Canada’s manufacturing sector parallels Australia, which can be viewed as a resource-exporting country, but it also parallels France, Great Britain and Italy, which are not viewed as natural resource-driven economies. Generally speaking, all developed economies have seen declines in their manufacturing sector’s share of GDP over time. A high manufacturing-to-GDP ratio is often more representative of an earlier stage of economic development — the transition from agricultural to industrial development. These changes are really better viewed as an economic evolution.

Financial Post

Livio Di Matteo is professor of ­economics at Lakehead University and a contributor to the economics blog Worthwhile Canadian Initiative.

The North and Population Aging

The 2011 Census results for population age are out from Statistics Canada today and Canada is indeed a much older place than the last census in 2006.  The proportion of population aged 65 and over is now 14.8 percent, up from 13.7 percent in 2006.  The results for Northern Ontario suggest that the North is older than Canada as a whole.  A ranking of Canadian CMAs (Census Metropolitan areas) and Northern Ontario CMAs and CAs (Census agglomerations) show the Sault is the oldest major city in the North with 19.3 percent of its population aged 65 years and older.  Thunder Bay is next at 17.2 percent followed by North Bay at 17 percent.  Sudbury is next at 16.1 percent with Timmins the youngest at only 13.8 percent.  For Canada's CMAs as a whole, the oldest is Peterborough at 19.5 percent and the youngest is Calgary at 9.8 percent.  Indeed, Calgary, Edmonton and Saskatoon, out in the booming west with its influx of young migrants - are the three CMAs with the lowest share of population aged 65 and over.  Additional note, I've left Elliot Lake (a northern CA) off of this graph.  Its proportion of population aged 65 and over is 35.1 percent but then it has become a retirement community.

Northern Economist on Canadian Trade, Manufacturing & Health Transfers!

You might want to check out some of these recent contributions to public policy.  I did a piece on federal health transfers that appeared in iPolitics in late April arguing that the Canada Health Transfer should be broken up into two separate components - a per capita amount and a needs based amount that takes factors like demographic differences into account.  I've been busy blogging on Worthwhile Canadian Initiative and there has been a spirited debate on the decline of manufacturing, natural resource exports and Dutch disease going on there that was recently picked up on by Maclean's magazine.  Finally, the Winnipeg Free Press just ran a piece on the prospects and impact of the free trade agreement Canada is currently negotiating with the European Union. You can continue to follow my posts on Worthwhile Canadian Initiative in one centralized location at uFollow.

Time for a Break

Well it has been a busy time for Northern Economist and getting busier all the time.  March always marks the onset of my busiest time of the year and this year along with finishing up supervising two honour's theses, teaching my courses, and being Department Chair, I am also involved in an undergraduate program evaluation for the Department of Economics at Lakehead and helping to draft our new Department academic plan.  I'm also on the university Promotion, Tenure and Renewal committee again in the spring.  In addition, I'm also committed to conference papers to present my research in April, May, June, July and September so as much as I enjoy blogging about northern Ontario's economy, I'm out of time. 

As my colleague Steve Gordon at Worthwhile Canadian Initiative has remarked, blogging is a lot like giving out free pizza.  However, the pizza is free only for those who choose to consume the product - I still have to do the baking.  We blog to contribute to debate and policy formation, to try and help make a difference, but in the end there is only so much time to go around.  This break may last a while as I'm also heading into a sabbatical and for academics, sabbaticals are generally breaks from your usual routine and investment of your time in professional development.  I will be spending mine on wealth research and analysis of health expenditure and health system sustainability along with some deepening on my econometric skills.  Sorry, but baking lots of free pizza is not the way I was planning to spend my sabbatical.

For those of you who like my stuff on northern Ontario, you can continue to access the past posts I've done both here and at at my original Northern Economist 1.0 site where there is a wealth of material dealing with the region's economy from a descriptive and analytical perspective.  Enjoy.  You can also check in at this site from time to time just in case an important topic grabs my attention.  As well, I will continue to post occasionally on more general economic topics as part of the team on Worthwhile Canadian Initiative, Canada's premier economics blog.  You can access all of my posts on Worthwhile Canadian Initiative in a convenient listing at Ufollow.

All the best and cheers! Livio.