March 31, 2006

B.C.’s strong growth faces unique challenges

BRITISH COLUMBIA

The B.C. economy has convincingly shaken off the cobwebs of a long period of relative stagnation. Output, employment and investment are growing strongly, the unemployment rate is plumbing the depths of its lowest level in three decades and housing is booming.

In a report entitled, “British Columbia’s Golden Decade: Can this Period of Celebration Take on a Longer Life?”, TD Economics states some of the growth challenges B.C. will face are common across most jurisdictions. However, even in the case of the aging baby boomers, there is a particular B.C. angle because its median age is rising faster than in the rest of Canada.

Two particular B.C. growth challenges post-2010 will be:

• A slowdown in construction and tourism post-Olympics; and

• Inevitability that the current red hot construction boom will simmer down. Construction has accounted for one of every four jobs created in the province in the past four years.

The report states it has been anxious to analyse the B.C. economy because previous reports identified flagging productivity as the main culprit in holding Canada’s standard of living back. And B.C. has had one of the worst performances in Canada.

Derek Burleton, AVP and Senior Economist at TDBFG, noted that “the common explanation for B.C.’s poor productivity performance is the shift from highly-paid, productive resource jobs to lower value-added service sector employment. Yet productivity growth in almost all sectors lagged the Canadian average and the gap with the U.S. has been even wider. Clearly, broader forces have been at play and fundamental change was required to overcome past economic weakness.”

TD Economics predicts the current momentum will carry the B.C. economy with strong growth through the 2010 Winter Olympics. But even then, the scars from past economic stagnation will not have completely healed.

In 1981, B.C. enjoyed a 17 per cent advantage over Canada as a whole in real output per capita. By 2004, B.C. had slipped into a six per cent disadvantage relative to the Canadian average and even with strong growth over the remainder of this decade, that gap will not close.

The players in the B.C. economy have found the right paths in recent years, but they will have to play hard and long to keep the strong expansion going.

DCN NEWS SERVICES

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