Entering the final quarter of the year, there are clear signs that the New Brunswick economy is being severely stressed. This observation is based in large part on the fact that year-to-date total employment in the province has declined by 5,200, due to the combined impact of a 2,100 drop in full-time employment and a 3,100 reduction in part-time employment.
Factors contributing to this weak job growth include a sharp 24.5% year-to-date decline in non-residential investment stemming primarily from a 35.7% drop in investment in institutional and government construction projects.
In addition, New Brunswick’s key exports of energy and industrial materials have contracted year to date largely due to the persisting pattern of weak U.S. economic growth.
As a result of this significant shrinkage in total employment and despite little change in the province’s labour force, the unemployment rate in the province now stands at 11.0%, its highest level since May of 2003.
Across major industrial sectors, employment in goods production has contracted by 2,800 since the beginning of the year largely on account of a 5,500 drop in the number of construction jobs, which more than offset modest gains in manufacturing and the resource sector.
The very weak pattern of year-to-date employment has clearly depressed both consumer spending and residential construction despite the fact that interest rates are near historically low levels.
With respect to spending, although retail sales are up by 1.1% year-to-date, this gain pales compared to the 3.3% increase recorded during the first seven months of 2011, and it is significantly slower than the 5.9% year-to-date data recorded in 2010. The weak pattern of job growth in the province has also contributed to softening in housing demand reflected by a 2% year-to-date decline in sales of existing homes and a cumulative drop of 12.3% in housing starts. A 28.5% year-to-date drop in starts of multiple units has more than offset a 12.1% year-to-date increase in starts of single family units.
Despite the dark clouds currently overshadowing the New Brunswick economy, there are a number of bright spots on the province’s economic horizon.
First, the opening of Potash Corp.’s soon to be completed Sussex Mine expansion will make a significant contribution to the province’s fertilizer exports. Also, although it has missed several completion deadlines, the Point Lepreau Nuclear Generation Plant should contribute to an increase in energy exports after it resumes production in 2013.
Finally, the gradual improvement in the U.S. housing market will give a significant boost to the province’s exports of forestry products. Collectively this improvement in exports of potash, electricity and lumber should contribute to gradual strengthening of employment, retail sales and investment over the course of 2013 and into 2014.
Gross Domestic Product (GDP) Growth – New Brunswick vs Total Canada