N.B. Economic Recovery More Nuanced Than A Simple Bounce Back, Analyst Says
FREDERICTON – At a glance, New Brunswick’s economy bounced back dramatically compared to many other provinces. But economist Fred Bergman says the recovery was less simple and more uneven than that.
“We hit such a deep recession last year, there was a huge drop in GDP, the economy partly shut down, basically because of lockdowns and shutdowns. [But] we still had productive capacity [so] the minute those things started opening back up, the economy came roaring back pretty darn quick,” said Fred Bergman, a policy analyst with the Atlantic Provinces Economic Council (APEC).
Bergman gave that analysis on November 3 at APEC’s virtual Unmasking Atlantic Canada’s Economic Recovery conference. He said New Brunswick’s economy has already met or exceeded pre-pandemic levels of retail sales and exports – and is nearing a pre-pandemic GDP.
He said a bounce-back usually creates higher-than-average employment over the first couple of years of a recovery, but that will slow–and employment didn’t bounce back in 2021. Bergman said Statistics Canada’s Labour Force Survey shows 3,700 fewer jobs in New Brunswick than in February 2020. That’s proof New Brunswick’s industries haven’t recovered uniformly.
Sectors like accommodations and food services, manufacturing, health care, construction, business services lagged behind others and were down thousands of employees from February 2020 to September 2021.
In a survey during the conference, 72 percent of participants said labour and skill shortages were the factor that would hold back their business or industry the most in 2022.
“You don’t want to get into a situation where governments are constantly cutting checks. That’s not sustainable in the long run for any kind of debt,” Bergman said.
Bergman said small businesses, while mostly open, are at less than 50 percent of normal levels, with Atlantic Canadian small and medium enterprises averaging $75,000 in debt due to the pandemic.
“I think at a high level, the province’s economy is recovering,” Bergman told Huddle in an interview after the conference.
Bergman said New Brunswick’s economy is “on the mend,” dogged by labour shortages, a more than five percent inflation rate, and supply chain disruptions. That puts a ceiling on strong retail sales and housing starts in a time of heightened demand.
Bergman noted that interest rates are expected to increase in 2022, with the Bank of Canada expected to raise the overnight rate to between 1.50 percent and 2.25 percent by the end of 2023.
While fewer people were working, Bergman said pandemic income supports have driven up household incomes in New Brunswick. With higher savings, personal deposits rose 13 percent since the first quarter of 2020, Bergman said. Consumers reduced credit card debt by $236 million since the fourth quarter of 2019.
“There are a lot of savings, and some of that will go into current consumption to be spent on goods or services. But history also tells us people will do other things with that money as well, so some of that will be saved for future consumption,” said Bergman, referring to pensions, paying off debt savings, and stock investments as examples.
Bergman told conference delegates that New Brunswick’s $38 million 2021/2022 surplus is, in part, due to a spike in federal health care funding, adding that APEC anticipates growing deficits without policy changes.
Growth, Immigration, And The Housing Market
New Brunswick’s professional services and IT sectors have recovered well, with the pandemic ratcheting up demand for e-commerce, digitalization, and automation, noted Bergman.
New Brunswick also saw the highest net interprovincial migration since 1975 in 2021. Bergman said he expects immigration to recover to pre-pandemic levels and the housing market to cool in 2022, as high interprovincial migrations keep prices high, driving up housing starts.
Bergman noted rising interest, high prices, and mortgage rates also will help cool the housing market.
New Brunswick’s tourism sector jumped back from 2020 levels in 2021 and is expected to benefit from pent-up demand in 2022, and gain the most of all Atlantic provinces when the land border with the United States reopens, said Bergman.
Economic growth is expected to remain strong in New Brunswick’s export markets, though, with New Brunswick’s leading merchandise exports, including mineral fuels ($7.8 billion), forestry ($2.3 billion), fish and seafood ($2 billion), and machinery and equipment ($100 million).
Increased trade volume and increased aggregate export demand globally will bode well for New Brunswick’s export sector, Bergman noted.
Major provincial project investment jumped in 2021, owing to several delayed projects from 2020. Bergman noted energy-related projects could also drive investment in New Brunswick over the next decade.
Retail sales, housing and manufacturing have been strong, and Bergman said retail is going to tail off after growing by 10 percentage points next year, giving yield to more spending on services as the economy reopens.
Bergman said Port Saint John will contribute to the recovery. He noted thanks to ongoing modernization efforts that include rail infrastructure upgrades by Canadian-Pacific and Hapag-Lloyd launching container service at the port, cargo volumes jumped 19 percent in the first three quarters of 2021, with more cargo volume increases expected in the coming years.
Bergman said he expects to see professional services, construction, and delayed major projects carried over from 2020 as areas of improvement in 2022. He said he expects restaurants – a particularly hard-hit sector – to get close to pre-pandemic sales in 2022.
Sam Macdonald is a Huddle reporter in Moncton. Send him your feedback and story ideas: [email protected].