The start of a new year is a good time to reflect on where we’ve come from, where we’re going, what we’ve learned and how it might apply in the year to come.
As Johnny Cash once said: “It’s important for me to look back from where I’ve been … so that I don’t lose track of where I’m tryin’ to go.”
In the provincial context, reflection means considering the economic and demographic dimensions that had an impact on the province in 2012 and the opportunities and challenges that might lie ahead in 2013.
The year that was
For the third year running, B.C. continued its “recovery” from the global economic crisis that began in 2008 and spilled into 2009 with provincewide employment growing by 1.3% in 2012 (year to date November 2012 compared with year to date November 2011). By November 2012 total employment in the province was 1.7% above peak employment seen before the crash in 2008. That said, to the extent that the most recent data on regional employment in B.C. (year-end 2011) indicates the pattern of change through 2012, not all regions in B.C. have shared in the recovery. Since 2008 employment grew in only two of B.C.’s seven development regions: the mainland southwest region and the Kootenays.
This trend was also reflected in B.C.’s interprovincial migration patterns: through 2012’s first three quarters, B.C. lost 6,423 people to other provinces, most notably to Alberta. More people have moved out of B.C. to other parts of Canada over the past five quarters (7,396) than in any five consecutive quarters dating back to 2001-02.
The past year has also refreshed memories about how variable commodity demand and prices can be, and the impact that they can have on both provincial government revenue and the broader provincial economy.
While discussions for 2012 tended to focus on plunging natural gas prices (from almost US$9 per million BTUs in 2008 to under US$3 today and the decline of hundreds of millions of dollars in gas royalties for the B.C. government), the same can be said for coal, metallic minerals and pulp prices. That being said, while still well below early-2000s highs, lumber prices have begun to increase over the past year.
The year that will be
These dimensions of change are worth keeping tabs on as we enter 2013, because they will affect, to a greater or lesser extent, our ability to improve our economic well-being. To the degree that we can do this, the most likely avenues will be:
•through productivity gains made across all sectors of the B.C. economy (particularly in our resource sectors);
•the deepening of our trade ties into existing markets (the U.S.) and expansion into new ones (the Asia Pacific); and
•our ability to continue to attract (and retain) skilled labour force migrants.
Whether we can achieve said gains is another story, and there are a number of trends to keep an eye on as we head into 2013. Over the coming year we expect commodity prices in general to moderate as the economies of B.C.’s major export markets show a firmer economic foothold on the challenges seen since 2008. One exception to this will likely be natural gas, where prices will likely continue to soften due to a growing amount of exploration south of the border.
Looking past next year, the U.S.A.’s quest for energy independence will have longer-term implications for energy prices in general as the U.S. is expected to become a net exporter of natural gas by 2020 – a recent development that B.C. and Alberta need to recognize.
With strong links to the U.S. housing market, it’s encouraging for B.C.’s forestry sector to see U.S. housing starts begin to recover from their 2009 lows. With a good portion of the oversupply cleared, housing starts are expected to be in range of 900,000 units in 2013. The real challenge facing B.C.’s forestry sector next year and beyond will not be on the demand side of the market but rather the ability of the province to address its supply constraints brought about by the pine beetle devastation. This will represent a significant shift for the industry, from chasing demand to managing supply.
Many changes within the province will also occur in 2013, namely the reversion of the HST to the GST/PST system in March and the provincial election in May.
While there appears to be no turning back from the former – which is unfortunate because it will make the province less competitive and less productive – the direction that B.C.’s leadership takes us in the second half of 2013 and beyond will establish the political and economic framework for the coming years.
Whoever forms the next government will have (hopefully) learned from the past couple of years; while it might be difficult to make things better on the economic front, it is really easy to make them much worse.