October 14, 2008

Troubled Times

Statistics Canada's latest Labour Force Survey showed BC lost 5,700 jobs in September. CTV reported that Finance Minister Colin Hansen reacted to the news by saying that the province is not heading into a recession.

Technically we would never know if any province is in recession since a recession is defined as two consecutive quarters of negative GDP growth, and Statistics Canada does not publish quarterly data for provincial GDP. That doesn't stop commentators from saying that some provincial economies are in recession, evidence the discussion of Ontario's economy. Comments on whether provincial economies are slowing or in recession are based on proxies that may be indirect indicators of GDP: declining employment over several months, housing starts, building permits, retail sales, export data and industry reports. For example, on September 25th BC Stats reported: "Sawmills and planing mills in the province produced 28.1% less lumber this June than in the same month last year. Mills in the Interior slowed their output by 25.5%, while production at coastal mills was down even more substantially (-44.9%)." By the time data is available that might suggest a slowdown, a short recession could be over. Unfortunately, many economists expect a global recession that will last through 2009.

Before the end of November, Hansen must release his Second Quarter Financial Report. Since Campbell came to power in 2001, quarterly financial reports have consistently under-estimated yearend results, but this time might be different. Falling natural gas prices, big drops in housing sales, US tourism down yet again and lower growth forecasts will have to moderate the grand plans the Finance Minister anticipated when he released his budget consultation paper. Instead of inviting ideas on how to spend a surplus, Hansen needs to focus on how to maintain a balanced budget without repeating the reckless across the board cuts to services that were the hallmark of the first years of the Campbell government. We can all hope that BC isn't too severely hurt by the global recession, while recognizing that BC is not immune to global economics. At least two more years of increases in Campbell's carbon tax will not help BC employers cope with the loss of their markets. BC may escape recession, but the Campbell government must learn that just as it tried to take credit for its good luck with the economy since 2001, now it will have to take responsibility for more troubled times.