Scotiabank’s chief economist says in the midst of global economic turmoil, Newfoundland and Labrador “is about as good a place as you can be.”
Warren Jestin, speaking to the St. John’s Board of Trade luncheon Wednesday, said the province’s outlook is very good.
“We believe that B.C., Alberta, Saskatchewan and Newfoundland and Labrador will be leading the country in terms of economic performance over the next half-decade,” he told the audience at the Airport Comfort Inn, pointing to the province’s commodity riches in a commodity-short world and Canada’s general economic stability, especially when compared with the United States.
Even over the next couple of years, Jestin told The Telegram, a slowdown in growth due to decreasing oil production will be barely perceptible.
“In terms of outlook, (those four provinces are) certainly brightest. Now when you look at growth forecasts for next year, if you look at government’s growth forecast, they’re pretty modest over the next two to three years, because oil production is declining in the existing fields,” he said.
“But there’s so much investment going in, and so much more investment likely to go in, that it’s going to seem very buoyant, particularly in St. John’s.”
With familiar markets such as the U.S. eroding, the outlook is still good for a simple reason, Jestin said.
“We are betwixt and between the developed world and the emerging world,” he said, “and the emerging world is increasingly driving our economic opportunities.”
Particularly in commodities, much of the net demand — for oil, nickel, copper, zinc, iron ore, steel, potash, uranium and many agricultural products — will come from the emerging world, he said.
The greatest challenge over the next five years — as the local business community is aware — will be whether infrastructure and labour can meet the opportunities.
“In Fort McMurray they had to build a second bridge because they have such traffic congestion that they can’t get the 17,000 workers that are bused to work to their jobs,” he said, adding that temporary workers aren’t a long-term solution.
“What we have to do is be able to fill these skill requirements internally, over a longer term. Moreover, what that does is basically guarantee that more and more Canadians are able to share in the prosperity, because there’s a good chance that if we don’t do the skills training, there will be a lot of jobs without people, skilled jobs, but there will still be a lot of people without jobs.”
That labour problem is particularly acute in Newfoundland, said Jestin, because of Newfoundland’s aging population, which will add another challenge in the form of rising health care costs — but also opportunity.
“The demographics present the challenge in terms of health care and the like, but the challenge is the opportunity,” he said. “How do you offer more effective, lower-cost health care services to an older population? How do you service that population with the personal services that they will be requiring? It’s a huge opportunity in that. The personal service area can grow significantly.”
Newfoundland business groups like the St. John’s Board of Trade, the Newfoundland and Labrador Employers’ Council and the Newfoundland branch of the Canadian Federation of Independent Business have been sounding the alarm on the labour shortage, warning that the resulting wage inflation will squeeze some smaller companies out of business.
Nancy Healey, CEO of the board of trade, said Jestin’s rosy outlook confirms what their own member surveys have been saying about the St. John’s and provincial economies.
“When we speak to our members, they say they’re flat-out, that business hasn’t been better, so to hear that from an economist that Canada, and Newfoundland and Labrador in particular, is one of the best places economically to be right now is very reassuring to hear,” she said.
But the looming labour shortage still worries the board, she said.
“If you look at the St. John’s marketplace now … the employment rate is quite robust, and the biggest concern that I hear came up just networking with some of our members at the luncheon today, is recruiting and retaining workers. It’s a constant job right now. And before, you’d put a (career) ad in the Telegram and you’d have 80 resumés, and we’re only talking two, three years ago that you had that happen. You do that today … and you certainly don’t expect the same return. It’s becoming harder and harder to find the people with the skills.”
Jestin says businesses will also see lots of benefits from rising wages.
“Opportunity is a magnet for people, and as that attracts more people in, retail sales go up. Demand for housing goes up. A whole lot of things begin to happen. The economy inherently becomes stronger on its own basis,” he said. “You are going to find many businesses challenged in finding people, and it will lead to either higher wages, or a different delivery of the services. For some businesses, you just can’t figure another model that can get around this problem, and that’s going to be tough. It’s going to be very tough,” he acknowledged.
Healey admitted it can be difficult to campaign against wage inflation when it means more money for workers, but says there are downsides for the labour force as well.
“The costs of the things that you buy are going to go up,” she said. “How much are people willing to pay for things they expect to pay only so much for? How much are you willing to pay for a burger and fries or fish and chips or whatever if the cost of labour is so much? So there is that realization that has to come in there.”