UNB Study Shows N.B. Needs More Private Sector Growth For True Recovery
FREDERICTON – A new University of New Brunswick study has found there’s a messier reality behind the rosy picture painted by comparing New Brunswick’s pandemic economic recovery to that of the rest of Canada.
“We just don’t know if we’ve really come through with the recovery, as everyone likes to say we have,” said Herb Emery, UNB professor of economics and Vaughan Chair in Regional Economics.
Tracking New Brunswick’s Economic Recovery from COVID-19, a study from UNB’s Atlantic Institute for Policy Research, explored the dimensions of New Brunswick’s steady recovery from the spring of 2020, when New Brunswick saw economic activity down 40 per cent from what it was before the pandemic.
The study found New Brunswick’s recovery to five percent more economic activity than pre-Covid levels (compared to the rest of Canada’s nine percent below pre-Covid levels) was largely driven by factors that include public sector hiring, housing prices and commodities like lumber – prices that can collapse, Emery noted.
Although that looks good, Emery said that’s more of a ”rebound” than a proper recovery based on consumption and employment.
Emery stressed that a stronger private sector – specifically business-sector hiring – is necessary for a stable economic recovery.
“It’s a really interesting time, because we now know in hindsight the federal government response was the right thing to do in the short run, but it also was an over-response in that it actually put a lot of money into people’s pockets,” he said.
That response has given New Brunswick households more spending power and savings, making debt appear to be going down. Emery stressed that the effect is temporary.
“People have the spending power to make things happen. The other side of it is that it just seems to be inflating a lot of prices, because you’ve got a lot of money chasing an increasingly restricted supply of goods,” he said.
When looking at export values, the study indicates New Brunswick’s recovery has been more apace with the rest of Canada – at 6 percent below pre-Covid-19 levels.
Mobility and transportation were found to be below pre-Covid-19 levels, with people taking flights at a rate more than 80 per cent less than in pre-pandemic times. The study reported transit and workplace traffic as still significantly below pre-Covid levels as well.
“Now, if it turns out your job doesn’t return like it did before with its hours and pay, you’re going to have to bridge yourself through,” he said.
“The question we have, and it’s even true for provincial governments that seem to have healthy balance sheets, is, ‘Are they in a good position to weather us through the next stage, which is when the tough times come back or is this is really going to be a bonus that’ll stimulate growth?’”
New Brunswick, situated better to weather a pandemic with stringent health protection measures that were at times stricter than harder-hit provinces, benefitted from lower population density and less international travel, compared to other provinces, Emery noted.
The study found those factors strained parts of the economy but also minimized case totals – paving the way for “a smooth transition to recovery.”
Emery said it’s a challenge to monitor the economy with limited data available on a monthly and provincial basis, long-term economic impacts not accounted for and with GDP and employment numbers only being a few months recent.
“We’re looking for something closer to real-time to understand how things were unfolding,” he said.
“So, we found Export Development Canada’s (Economic Recovery Tracker) approach and gave it a go.”
EDC’s Economic Recovery Tracker compares and indexes indicators such as stock and commodity values, transportation and mobility, business confidence and employment and housing, along with data on newly reported Covid-19 cases, to illustrate economic recovery in Canada.
Another problem the UNB study examines is the shortage of employees in New Brunswick. Emery noted there are jobs available in New Brunswick, but nobody is taking them – an observation echoed by Moncton Chamber of Commerce CEO John Wishart’s on Moncton’s ‘Circuit-Breaker’ measures.
Emery said that if people keep turning down work, that will cause an outmigration of businesses to other regions and a shortage of labour that will “hollow out our business sector even further.”
“Then, down the road, that will be some of what limits our ability to grow as a region, going forward,” he said.
Policy pointer
The UNB report concluded by saying that the economic performance and activity of New Brunswick “are largely fueled by human behaviour; we must wait to see how people act when their behaviour is no longer restricted by public health measures.”
Emery stressed the need for a solid fiscal and monetary policy to make sure New Brunswick’s economy can weather future pandemic disruptions.
“One interpretation is similar to that of the economic disruption we had in 2008, but we don’t have a lot of experience with recessions – particularly in the last 25 years. So, there’s a lot of uncertainty on how to manage it going forward,” Emery said.
Emery said that the province needs to adopt strategies, such as robust contact tracing and different organizations of care, to avoid compromising the health care system, adding, “We need a different strategy for infectious disease risk going forward. I think that’s the main lesson of this.”