BC’s economic crash and the looming election
Just in time for a heated election campaign, the latest unemployment numbers paint a grim picture for BC. Just a year ago, BC was coasting along with an unemployment rate of just over 4%. By the end of 2008 that had crept up to 5%. And now a truly brutal first quarter that saw the rate leap to 7.4% in March. That is a loss of 22,600 jobs, of which 9,900 were full-time jobs. If we go back to March 2008, total job losses are 76,600 jobs, although a larger number of full time job losses (-85,300) is offset by some modest part time job gains (+8,600). In percentage terms that is a drop of 3.3% overall from March 2008, with 4.6% fewer full-time jobs.
Looking forward there is no end in sight for unemployment increases. According to the Canada Housing and Mortgage Corporation (CMHC), housing starts in the first quarter of 2009 were down 70% from the same period in 2008. That means most of the construction jobs that are wrapping up in the next three to nine months will send workers right to the back of the unemployment lines. And, on average, for every primary job like construction we lose another gets shed somewhere else.
I have been speaking on the economy for a series by Metro Vancouver in four locations across town. In the first installment, a month ago, I was saying that unemployment would hit 8-9% by the end of 2008. After the February stats came out, I revised that to 9-10%. And now I am feeling like those numbers could surge even beyond that. If you are interested in the fourth installment, drop by the Wosk Centre next Wednesday at noon.
Speaking of people seeking jobs, as for the election, this takes away one of the key cards the Liberals would have played: that they are better stewards of the economy. March’s unemployment rate is higher than when the Liberals first took power in 2001, and the rate will be close to, perhaps even over 8%, when April’s results are announced just before the election on May 12. They still may be able to play the economic manager through tough times role to electoral success, but that is a tougher job.
Not that I believe the government in Victoria has much influence over the economy in BC. It is external factors that drive BC’s economy; mostly export markets, Bank of Canada interest rate policies, and federal fiscal policies, all of which have been powerful tailwinds for the BC economy, largely through the channels of high commodity prices and residential construction atop spectacular real estate price increase. The Premier and the Liberals have tried to take credit for the boom. If one wants to concur with that credit, however, one must also accept that the current collapse is their fault, too.
While the big picture is beyond the province’s control, what the BC government can do is be effective in its key jurisdictional role of providing social programs. Here the government has not done a great job, given the poverty and homelessness we saw during the boom, the shredding of social assistance, the end of new social housing construction, and now, the title of having the lowest minimum wage in Canada. During a recession it is essential that the BC government maintain public spending, and if anything, we need to plan for big increases in transfers to those shut out. Expenditures will naturally rise as more people go on social assistance (the rolls are up 37% over a year agao). But we also need to make the program more responsive to the needs out there by shoring up benefit levels and reducing barriers that prevent people from getting on welfare.
Secondly, the rapidly rising unemployment needs to be countered by infrastructure spending that takes up the slack in the labour market and puts it to good use. While there are some projects that have been announced, in total employment numbers they will not make a dent in the rapid rise of the ranks of the unemployed. Now is the time to rebuild public transit, develop high-speed inter-city transit, sharply increase energy efficiency through retrofits, and invest in alternative energy. These are no-brainer, green jobs that will help transition the economy onto a sustainable growth path. The dumbest investments would be ones that move us away from sustainability, like expanding highway capacity for suburban commuters or the oil and gas industry.
So, the writ is dropping. Parties, show us your strategies for fighting an increasingly ugly recession.
I predict it will be like last year’s federal election, during which the financial meltdown occurred. At the beginning of the election, party A said “we should adopt platform A.” Party B said “we should adopt platform B,” and so on. Then the meltdown occurred, and everyone responded very strongly. Party A said “because of the meltdown we must urgently adopt platform A” (which had not changed). Party B said “because of the meltdown we must urgently adopt platform B” (which had also not changed). And so on. In politics, the communications director always over-rides the research director, as shown on “The War Room.”
I believe in infrastructure but…..how many of these were construction Jobs?
Travis,
BC Stats just put out its provincial breakdowns, and it shows a large number of construction job losses. Construction employment was 180,200 in March, down from 192,700 in February, and 240,200 at its peak last August. There are job losses in most of the goods producing sector and in transportation. Services have held up reasonably well, with some modest gains to offset the losses in goods.
http://www.bcstats.gov.bc.ca/pubs/eet/eetdata.pdf
What besides Olympic infrastructure projects are currently planned and shovel ready?
I’m beginning to really loathe the term “shovel ready”.
But there’s always a backlog of projects that people have been doing studies on, trying to get funding, for years.
Just trying to make sure all the standard arguments against fiscal stimulus are well covered.
Purple, I agree. I am sure each municipality has at least one infrastructure project on the books which has already had all the assessments done and plans drawn up: i.e., “tender ready” if you prefer.
I’m all in favour of public spending and transfer payments to those left out but I’m wary of the notion of “stimulus” or “kick-starting” the economy. Therefore it is important that the spending and payments take place within a new framework (or an evolving new framework). To think that a bout of deficit spending, a few bailouts and some regulatory upgrades will get the private sector economy, as we have known it back on its feet and we can return to business as usual is delusional.
That’s not just my opinion. It’s the analysis of the UK government’s environmental watchdog, the Sustainable Development Commission. “Delusional” is the word they use. The commission’s report, Prosperity without Growth, released March 30, “challenges the assumption of continued economic expansion in rich countries and asks: is it possible to achieve prosperity without growth?”
The problem with that question, of course, is that a lot of people will assume they have the answer without wasting their time thinking about it: “HELL NO!”
So the fact that the report examines the assumptions underlying that preconceived answer might go unnoticed. Why should anyone be expected to read a report that questions their articles of faith? Prosperity without Growth thoughtfully examines issues that many people — and probably most people in the policy establishment — simply don’t want to think about.
There was an interview today on the CBC radio show, The Current, with Allan Thompson, a former Toronto Star reporter who has followed up on a news video from the Rwanda genocide 15 years ago. He argued that the video was clear evidence of a developing a genocide taking place but that viewers didn’t “get” what was happening.
What I’m afraid of is that the Sustainable Development Commission report has presented a clear, evidence-based case that people just won’t get. They won’t get it because they won’t try to get it (or they’ll try not to get it). They won’t try to get it because they won’t want to get it.
The rising unemployment is not strictly a “cyclical” phenomenon. A large chunk of the employment that existed before the credit collapse was directly due to the house-price bubble. That employment is not coming back. The credit collapse has destroyed the foundation for “doing another bubble”.
Even a return to normalcy will not mean a return to pre-collapse employment levels — it will only mean a return to pre-collapse levels MINUS the bubble dividend. Say if unemployment hits 11 or 12 percent by the end of the year (2009, not 2008!), “recovery” from the recession thus will bring us back to maybe about 7 or 8 percent unemployment. And, of course, that’s if everything goes right.
Of course, it’s easy to dismiss the Sustainable Development Commission as a bunch of kooks, cranks, quacks and charlatans. Lunatics, idealists and revolutionaries. It’s easier to do that than to read the Prosperity without Growth report and refute it.
By the way, Marc, there’s a BC and CCPA connection to the Prosperity without Growth report. Peter Victor of York University contributed the macro-economic model used by the SDC in developing their scenario forecasts. Some of the recommendations in Prosperity without Growth are similar to those Victor made in his recent book, Managing without Growth: Slower by Design, not Disaster. Victor’s PHD is from UBC and he collaborated with UBC professor emeritus and CCPA research associate Gideon Rosenbluth in developing the model.
Also, Peter Victor will be presenting at a PEF panel at the Canadian Economics Association meeting in Toronto May 29-31.
PEF III: Macroeconomic Policy Goals – Growth in GDP, Sustainability & Wellbeing
Friday, 16:00-17:30
Organizer: Tom Green (UBC)
Chair: TBD
Presentations:
-Peter Victor, York University
-Chris Barrington-Leigh, University of British Columbia
-John Gowdy, Rensselaer Polytechnic Institute
Victor presented the main argument and analysis at a PEF panel in 2005. As Marc pointed out previously, and a n earlier version of Victor and Rosenbluth’s model was published by CCPA in 2002. The 2008 version is quite a bit different than that earlier one and a key element in achieving employment stability in both Peter Victor’s book and the Prosperity without Growth report is the reduction of working time.
Thanks for the link, Tom. I look forward to reading the report.
As it turns out, I will be chairing that PEF panel, which looks to be a great one.
When will people become in sensed by liberal indifference? How many friends need to die in our privatized hospitals before we take action? How many fair paying jobs can they steal and turn into minimum wage, which they won’t raise? How out of touch can voters be to think that the liberal high handed, self serving attitude reflects the world we want to live in? Where will you be going for your medical recuperation? The doctors/nurses are great, but work in unclean conditions! Give us a leader that doesn’t believe their own press releases! He’s failing most of us!
It’s hard after 8 yrs of this arrogant government to not be upset! What’s more upsetting is the chance of another 4+ yrs of privatization! Don’t your social circles include people who’ve lost their long term jobs, people with hospital horror stories, friends of the environment, maybe just people who’ve lost their driver’s license for dui? Wouldn’t it be reassuring to have a premier who might actually mean what they say, instead of the self serving, say anything and do something else later?
There were no part time job gains what happened was many employees have also found their hours reduced instead of being laid off or pay cuts. Also companies especially smaller companies are making cuts where necessary and are forced to hire part-time. The economy is a national joke as watched Mercer show as nation gives BC’s economy the big ha ha.
Its not funny for sure as climate in non competitive as its the NO TAX and SPEND on the Rich party. While the rest are taxed to death especially the poor and the up and coming poor who pay GST+PST+Highest Rents,+Property tax+Highest Gas Taxes+Business Tax+Carbon Tax. As its clear that those who can’t afford to live can’t afford all these taxes. And give me a break as mom tells her hungry children after working all day, “I’m sorry kids mommies doesn’t have any money left to feed you as its all went all on the bills”, but Mommy I’m hungry and cold.” “I know sweetie,” as she breaks down sobbing. Should we tell them don’t worry if you can’t afford it today hang in there kids there is a gst and climate check coming in the mail in about three months time that should be good for a MacDonald’s dinner.
BC is going to be hit the Hardest its a guarantee as recipe for disaster in motion and just watch it unfold as its a genocide of the poor in BC as they are slashed to death, stabbed to death, burnt to death, frozen to death, rapped and left for dead, beaten to death, shot to death, mutilated to death, tasered to death, ticketed to death, as BC’s poor are left to die on Vancouver’s streets.