March 28, 2010
By Dr. Roslyn Kunin
BC Business Columnist
VANCOUVER, BC, Mar. 28, 2010/ Troy Media/ — Where is the BC economy headed now that the 2009 recession is thankfully behind us?
There is a whole alphabet soup – L, V, U, W – to describe what an economy might do. We do know that BC did not have a V shaped recession. While it did have a dramatic falling off, the downward stroke in the V, which was also experienced in many other areas, only China seems to have enjoyed the fairly immediate and strong recovery that the V implies.
Some are still anticipating that BC will have a W recession and, after the first dip last year, are now awaiting a second dip or even a Volkswagen recession, that is VW with two more dips yet to come. But the number holding this view is in decline as BC continues to motor along. The real pessimists talk about an L recovery in which, once the economy has turned down, it just forgets to come up again. But even economists, those masters of the dismal science, are not that pessimistic.
Perhaps the letter that best outlines the current conditions in BC is U. Last year, the economy declined and this year will see nothing too dramatic in either an upward or a downward direction, with the province enjoying a recovery as we move into 2011.
Already in recovery
Technically, BC is already in a recovery. Itsr gross provincial product (GPP) is moving up, which means that it is now producing more goods and services as each month passes. Employment is increasing and jobs at both ends of the income spectrum are hard to fill. The talent shortage for people with high level skills and experience is not as extreme as it was two years ago; but good people are still hard to find. And ‘help wanted’ signs, at least in the major centres, indicate that the 8 per cent or so currently unemployed still feel sufficiently optimistic that they can get better than an entry level, minimum wage job.
The most recent labour force data showed that about half the job growth in Canada occurred in British Columbia. However, those results were for last February when the Winter Olympic Games were in full swing. We will have to wait for the March Labour Force Survey data to determine how much of the job growth was due to economic recovery and how much was temporary due to the Games.
Looking ahead to the coming 12 months, we do not see any further dramatic dips. We do see the economy continuing to grow and the two per cent to three per cent range used by the BC government in its recent budget describes the slow, but steady growth we can anticipate. However, the recovery will not feel much like a recovery for about a year because employment will likely follow its usual post-recession pattern and be the last variable to improve.
Where will the growth come from? First, construction: In spite of much anticipated falling housing prices, real estate values, especially in metro Vancouver, barely paused in their upward climb during the 2009 recession and bidding wars have now resumed for desirable properties. Rising prices, along with continuing international and interprovincial in-migration, mean that residential construction will remain strong in BC except, perhaps, in some of the smaller forest-based towns.
And, unlike what many feared, non-residential construction is not falling out of bed with the end of the Olympics. The BC Major Projects inventory included 50 new major projects worth $5.3 billion in the fourth quarter of 2009 and 20 major projects actually started construction in that quarter. Over all, capital spending on construction projects has remained at over 95 per cent of its pre-Games level.
Resource demand is healthy, with the woods sector no worse than it has been for some time, coal shipments showing strength and other resources facing growing global demand. Business people were attracted to BC by the Games and some plan to look at opportunities here. Games visitors and TV exposure should generate at least enough tourism to more than offset the strong Canadian dollar. Recovery, here we come.
Finally, what lessons have we learned from the 2009 recession? First, no tree grows to the sky. No matter how booming the boom, things will eventually turns down. On the other hand, even with pessimists prognosticating the end of the world as we know it, recessions will end – and most likely a lot sooner than did the Great Depression of the 1930’s to which invidious and invalid comparisons were made.
Second, don’t panic! Much of what we fear never happens. The turn of the century occurred without a hiccup in spite of frantic Y2K forecasts of chaos. The predicted H1N1pandemic quietly morphed into a very ordinary flu season. And the recession of 2009 has passed into history.
Roslyn Kunin is Director of the BC office for the Canada West Foundation.
Channels: The Vancouver Province, March 30, Prince Rupert Daily News, the Calgary Beacon, March 31, Nelson Daily News, April 12, the Trail Daily Times, April 16, 2010