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November 27, 2013

Balance Questionable

"Employment growth in BC has been nearly flat during the first ten months of 2013, as year-to-date data show a 0.1 per cent contraction compared to the same period last year. This decline translates into about 2,600 fewer jobs, as a loss of approximately 11,400 part-time jobs more than offset a gain of about 8,800 full-time jobs."
Second Quarterly Report p. 26
The Minister of Finance acknowledged what Jobs Minister Shirley Bond and Premier Clark seem reluctant to talk about. In BC job growth has come to a halt. He could have said that job growth has stalled for 16 months, since April 2012, not just the first 10 months of 2013. The Quarterly Report also drew attention to "nearly flat" retail sales growth. The June update (post-election budget) assumed nominal consumer expenditure would grow by 3.9% in 2013-14; in the first six months of the fiscal year it has grown by only 0.8%.

The Report showed that the predicted surplus, before subtracting the forecast allowance, was $303 million in the June update, $286 million in the First Quarterly Report and $265 million in the Second Quarterly Report. The Second Quarterly Report said that total revenue is expected to be $44.293 billion. That means the $265 million hoped for surplus is only 0.6% of total revenue. Most accountants would acknowledge that on a base in excess of $44 billion there is more than enough wiggle room with accrual assumptions to assure a surplus if the trial balance is in deficit by less than 1%. We’ll have to see what the experience is over the last six months of the fiscal year and what the Auditor General says before much credibility is placed in the Liberal's claim that the accounts are balanced at the end of the fiscal year.

Those listening carefully to the Premier's unbounded optimism for LNG realize that all of the government's eggs are in that basket and virtually none of the benefits flow for two or three more years. Even then the initial benefits will be limited to construction jobs, many for out of province workers only temporarily visiting BC. We won’t see another economic and financial update from the government until the 2014-15 budget and Third Quarterly Report for 2013-14 is tabled in the legislature in February. In the meantime keep an eye on the monthly employment and retail trade data from Statistics Canada. We can all hope they start to show an upturn.