Forecast for the east: Cool and overcast

The Atlantic Provinces Economic Council’s (APEC) outlook report for the region in 2017 calls for modest increases in wages, which will support consumer spending despite minimal job gains in the three Maritime provinces and net job losses in the region’s fourth province, Newfoundland and Labrador.

The APEC report does not hold out much hope for major projects, even with a helping hand from the federal government’s infrastructure initiative. Provincial spending restraint will also linger, according to APEC. However, as in other regions of the country, exporters generally should benefit from firmer U.S. growth.

One primary reason for the predicted lacklustre performance is the region’s aging population: 20% of Atlantic Canada residents are 65 years of age or older. Within two decades, that number will climb to more than 33%.

“Population growth is very slow or negative in these provinces and the working-age population is in decline, which makes for a dim outlook for employment,” says Walsh.

According to the most recent (2014) provincial reports from APEC, workers aged 50 to 59 are the largest segment of the Atlantic workforce, having overtaken those in the 40 to 49 age bracket.

The older workers now account for 24% of total employment, up from 17% in 2000. David Chaundy, senior economist with APEC and author of a report entitled Atlantic Canada Economic Outlook 2017: Slower for Longer and the Growing Atlantic Divide, points out that there is a wage differential for older individuals vs the younger cohort. In 2013, average earnings were $40,800 for workers aged 40 to 49, 15% higher than the average earnings for the next oldest age group.

There is some room for optimism, however. A report from The Conference Board of Canada (CBoC) forecasts GDP growth in the coming year for the three Maritime provinces. For Nova Scotia and Prince Edward Island, real gross domestic product (GDP) is expected to grow by 1.7% this year. The forecast for New Brunswick is 1.4% GDP growth.

As Marie-Christine Bernard, the CBoC‘s associate director, provincial forecast, in Ottawa notes: “This largely boils down to growth in the tourism, forestry, agriculture and fishing sectors, as well as increasing exports to the U.S. and abroad, boosted by a lower Canadian dollar and stronger growth south of the border.”

Newfoundland and Labrador is the exception to the upward trend. A volatile oil and gas industry has left the province without its major source of revenue, while debt and ongoing deficits demand severe fiscal restraint. RBC predicts no growth at all in the province’s economy for 2016 and a minus 2.2% decline in GDP in 2017.

The APEC report anticipates major project spending in the province will dip by 6% this year as work winds down on the $14-billion Hebron oil project. Other development work at existing oilfields remains weak due to low oil prices. However, says Chaundy, expenditures on the $9-billion Muskrat Falls project will remain elevated in 2017 before starting to slow in 2018.

Labour markets are expected to weaken further in 2017 – the fourth consecutive year of net job losses and rising unemployment in Newfoundland and Labrador, according to the APEC report. In addition, major project-related employment is expected to decrease by several thousand as work on the Hebron project winds down.

“Fiscal austerity will also take its toll,” says Chaundy. “The government estimates that by 2021, employment will be 15% lower than in 2015, with provincial deficit reduction measures accounting for up to half of this decline.”

In Nova Scotia, good economic news is emanating from the manufacturing sector, which the CBoC report projects will expand by 3.3% this year as Arctic patrol-ship building continues and foreign demand for the province’s exports remains healthy. Employment is also expected to grow, with an estimated 1,700 net new jobs in 2017 and more than double that in 2018.

Nova Scotia also has an important economic asset in its capital city, notes Walsh: “A bright spot in the region is the city of Halifax, where significant non-residential and residential investment is occurring.” Employment grew slightly in 2016 (by 0.5%) and unemployment is below the national average.

The provincial government forecasts a $19-million surplus in 2016-17.

Prince Edward Island is coming off a year marked by population growth and the domino effects of that growth. The residential housing sector has benefited from this increase, mostly fueled by immigrants. The new residents have also helped boost the financial services and insurance sectors.

In addition, food products exporters enjoyed a solid 11% increase in nominal export sales during the first nine months of 2016, although other P.E.I. exports fell by more than 18%.

The APEC report applauds P.E.I. BioAlliance Inc.’s strategic plan: the partnership of private- and public-sector interests has set a target to increase bioscience employment in P.E.I. by 600 jobs by 2020.

Over the past decade, bioscience employment in P.E.I. has tripled to more than 1,400 jobs in 2015, according to the APEC report.

In addition, the plan set targets to double annual revenue and increase research and development expenditures by $100 million during the same timeframe.

In New Brunswick, economic bright lights include the forestry industry, which the CBoC report predicts will experience healthy 8.2% growth this year in response to strong demand from the U.S. housing market. The province’s construction industry is also expected to see growth in 2017, with a gain of 6.2%.

New Brunswick’s government also announced in January that Sears Canada Inc., which has one the most extensive retail networks in Canada, including 140 corporate stores, 71 Hometown stores, and more than 900 pickup locations for merchandise ordered online, is making a major commitment to New Brunswick.

Sears is also opening a business services centre in Saint John this spring that will create 350 new jobs. A similar centre is opening at roughly the same time in Edmundston where more than 150 jobs will need to be filled.

Premier Brian Gallant lauded the development: “New Brunswick is a world leader in the business services centre sector. It is already an important industry for our economy, employing thousands of New Brunswickers and we see it as an opportunity for growth moving forward.”

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