The New Brunswick government took heart in a new Royal Bank of Canada (RBC) report that projected the provincial economy to grow by 1.1 percent this year because of trends that show the labour market is strengthening, what economist Gerard Walsh calls “a run of encouraging data.”
Walsh cites strong wage growth for giving a lift to the consumer service industry. “Total employee compensation rose nearly 4 [per cent] in 2016, the fastest pace east of Ontario, providing a tailwind for the province’s retail sales and service sector,” wrote Walsh in a brief for RBC.
He also says RBC is optimistic about the province’s prospects this year because the unemployment rate continues to fall, heading downwards toward 9 per cent – the lowest level since 2017.
Finance Minister Cathy Rogers says the recent stats and revised projects show that provincial government policies are having a positive effect on the economy.
“With RBC’s revision, the consensus forecast among private-sector economists for 2017 is now one per cent and is slightly above expectations from when our government released its budget in February,” said Rogers in a release about RBC’s new report.
“This is positive, and is further evidence that our government’s prudent, and balanced approach in terms of making strategic investments in the economy is working.”
The province’s GDP forecast is nonetheless on a downward trajectory, according to RBC’s analysis. Their numbers show the province falling from a growth rate of 2.3 percent in 2015, to 1.4 percent last year, 1.1 percent this year, and 0.8 percent next year.
Relative to the rest of the country, the province’s project growth rate is neither really good or bad. On the negative end, Newfoundland’s economic output is projected to shrink by 2.2 per cent, while B.C. is projected to have the largest growth rate at 3.3 per cent.
Walsh also says while current labour conditions in New Brunswick are good, the longterm outlook is uncertain. Like a lot of provinces, New Brunswick benefitted from an influx of Syrian refugees and he also noted that outmigration slowed.
“There’s growing evidence, however, that those trends were temporary and the rapid decline of the working-age population has resumed,” he wrote.
Walsh saw good news and bad news on the trade front. On the upside, Walsh noted that the province was “spared the brunt” of the recent tariffs imposed on the Canadian softwood industry, though this was the case only for J.D. Irving Limited, not smaller sawmill operators.
Nonetheless, Walsh says the province should benefit from a strong U.S. housing market because the Irving operations weren’t hit with large new tariffs.
But he doesn’t expect that positive development on trade to mean other industries will be spared in an export economy that relies heavily on the U.S. (92 per cent of our exports go there, the highest of any province).
“[A] measure of uncertainty exists for all export-oriented industries given the province’s high exposure to the U.S. market in the face of rising protectionist sentiments,” he wrote.