What keeps Greg Byrne up at night?
Published Wednesday October 22nd, 2008
Last year was a good year for employment growth and economic activity in New Brunswick. According to Statistics Canada, the annual average employment level in New Brunswick grew by 2.1 per cent in 2007. Only Quebec, Alberta and British Columbia witnessed better employment growth last year. This year, however, is another matter. So far in 2008, New Brunswick has not witnessed any growth in its total employment and among the 10 provinces in Canada only Newfoundland and Labrador share this dubious distinction.
It is hard to say for sure why employment activity has levelled off in 2008. One gauge of the health of the private sector economy in the province is the data on company exports. If companies are exporting less, eventually they will begin to lay off staff or close facilities altogether. When conducting a serious review of New Brunswick's export activity, it is important to exclude the product coming out of the Irving Oil refinery in Saint John. The reason for this is simple. That one refinery accounted for 70 per cent of the total international exports from New Brunswick from January to August 2008. When you hear government officials or bank economists talk about the strong growth in exports from New Brunswick, take a second look (and so should they).
Let me be clear that I have nothing against exports from the Irving Oil refinery. The issue is the distortion that such a huge figure has on any serious analysis. In 2007, with something like 800 employees, the refinery generated almost $7 billion in international exports. It would take between 15,000 and 50,000 employees to generate $7 billion in exports from most other manufacturing sectors, so you can see why we need to exclude it from our review.
The reality is that the value of international exports from New Brunswick, not including refined oil products, is down nine per cent so far in 2008 (January to August). That is almost $300 million less in exports this year than the same period in 2007.
And this is not a short-term trend. Not including the Irving Oil refinery, the total value of international exports from New Brunswick has actually declined by six per cent over the past five years (2003-2007) and by one per cent in the past 10 years (1998-2007). By contrast, international exports from Canada rose by 41 per cent in the past 10 years. Even if you take out the oil exports from Alberta, exports from Canada are still up by 26 per cent. If you exclude each province's largest export industry, New Brunswick is the only province in Canada to register an exports decline over the 10 year period.
Which sectors are driving the decline in exports? Predictably, it is the forestry sector. In the first eight months of 2008, paper mill exports are down 43 per cent, sawmill exports are down 44 per cent and veneer, plywood and engineered wood product exports down 46 per cent, while paperboard exports are down 18 per cent. The five and 10 year export numbers for forest industry exports are also negative.
But it's not just forestry. New Brunswick's second-largest export category is seafood and while exports are up slightly in 2008, over the past five years they are down 20 per cent. Frozen food manufacturing exports are down 36 per cent in the past five years as well.
On the upside, some of the mineral export categories have been increasing, as well as several metal fabrication industries. But overall, the 2008 five-year and 10-year trends for non-oil refinery exports from New Brunswick are all downward.
This should be concerning to economic development and government officials. It is true that the New Brunswick economy has become much more of a services economy over the past 10 years. For example, we have seen a rapid rise in the number of people employed in customer contact centres. But manufactured products have been an important part of the New Brunswick economy, particularly the rural economy, for decades. I would hate to see our manufacturing sector continue its decline.
In fact, I would like to see New Brunswick become a manufacturing hub for North American markets. While it is true that much of the low value added manufacturing is migrating to China, there are many higher value manufacturing sectors that are growing in North America.
But if our manufacturing sector continues to decline and if our customer contact industry beings to plateau, what comes next? What industry sectors will not only offset the losses in manufacturing but put New Brunswick on the path to economic self-sufficiency?
That is likely what is keeping Business New Brunswick Minister Greg Byrne up at night.
David Campbell is an economic development consultant based in Moncton. He writes a daily blog, It's the Economy Stupid, at www.davidwcampbell.com. His column appears exclusively in the Telegraph-Journal every Wednesday.
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