December 4, 2009

Full-Time Jobs Lost,
Province Upgrades Economic Forecast

The latest Labour Force Survey contains both good and bad news for B.C. Employment in November was up by 9.9 thousand from October, but down by 40.3 thousand relative to November 2008. Unfortunately, all of B.C.'s November gain was in part-time employment. Full-time employment fell by 11.7 thousand from October and was down 74.5 thousand from a year earlier.

National employment rose by 79.1 thousand in November, including a 38.6 thousand gain in full-time employment. Canada has 309.1 thousand fewer full-time jobs than a year earlier. As of November 2009 B.C. represented 24% of the national full-time job losses over the last 12 months. Not only does B.C. represent a disproportional share of national job losses, while most of the rest of the country is recovering, B.C. is still bleeding full-time jobs.

The bad news from the Labour Force Survey comes on the heels of the November 27th release of the province's financial results for the first six months of its fiscal year (Second Quarter Report), April through September 2009. Hansen tried to be optimistic about the province's performance, claiming that the budget deficit is still forecast to be $2.8 billion (up from not a penny more than $495 million before the election). His Second Quarter Report projected a revenue decrease of $232 million compared to the September Budget Update. Holding the deficit to $2.8 billion meant using half of his budget's forecast allowance. Hansen's projections might not withstand further bad news before the fiscal year ends on March 31st.

More bad news is what the welfare statistics show. The temporary assistance caseload as of October 30, 2009 is up 54% relative to a year earlier, more than double the 2006 average (the low-point). Income assistance in all categories, including disability assistance, is up by 16.7% as of the end of October relative to 12 months earlier, and up 30% relative to the 2006 average. Those statistics indicate thousands of personal tragedies as well as "cost pressures" on Hansen's budget.

We are all in the lifeboat together and want to see economic recovery, but it doesn't help the spirits of people needing income assistance or families still receiving pink slips when they hear B.C.'s Minister of Finance understate the challenges. On the day we learned that B.C. lost 11.7 thousand full-time jobs, Hansen released an update from the province's Economic Forecast Council, made up of 14 economists. His news release reported: "On average, the council now expects B.C.'s economy to post 2.9 per cent growth in 2010, upgraded from the 2.5 per cent growth projected in the September Update this year." The economists might like to reconsider their estimates in light of today's Labour Force Survey, although many would say employment is a lagging indicator.

Optimism founded on a renewed real estate bubble or hopes about commodity prices appears premature. Some economists have argued that the Olympics will give B.C. a boost, but the PriceWaterHouseCoopers' report on the impact of the games between 2003 and 2008 estimated that 18,362 person years of employment were created (relative to over 2 million employed in BC); it also estimated that the real GDP impact was $788 million (relative to a $100 billion a year GDP). In other words, the pre-games economic impact was as small as the measurement error. The two weeks of the games may be fun for some, but the economic impact will be negligible for just that two week period. The lasting impact is expected to come from increased tourism, particularly from increased convention business in the new Convention Centre. That will be a testable theory; however, benefits attributed to the Convention Centre over the next 20 or 30 years will not be substantial in any one year, certainly not substantial enough to lift the GDP and employment growth figures for 2010.

Attention is paid to many economic forecasts, but little is said about how many miss their mark. This year is an exception due to the enormous error between what the BC Liberals said about the government deficit before and after the election. Some will be watching to see if their pattern of inaccurate predictions continues over the next few years.