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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

Province needs innovative response to reopen borders

Herb Emery

Since March, New Brunswick and the other Atlantic provinces successfully kept COVID-19 out of the region with tight border controls, social distancing and cautious approaches to re-opening businesses. But has our public health success had an economic dividend in terms of lower business impacts and a quicker return to normal? How has it compared to other provinces and countries still struggling to control COVID-19?

It turns out that even before the recent outbreaks in Moncton and Campbellton, our economy didn’t really recover any better than anywhere else. 

The Atlantic provinces appeared to be in an enviable situation at the end of the summer. The Globe and Mail reported in early October, “With few local infections, the economies of the Atlantic provinces are reopening at a faster rate than any other part of Canada.” The report quoted Université de Moncton political scientist Roger Ouellette: “Compared to the rest of Canada, we’re lucky. We have almost a normal life.”

Boosting the belief in New Brunswick’s economic advantages during COVID-19 is the fact that many New Brunswickers may have been better off while not working since March. CBC reporter Robert Jones suggested that the $300 million-per-month of federal relief spending in New Brunswick since March has boosted household incomes to record levels, leaving most households better off than before the pandemic. Earned wages in the province were down nearly $600 million in March through July, when employment recovered, but the Canada Emergency Response Benefit (CERB) paid close to $1.5 billion to more than 165,000 New Brunswick applicants by Sept. 27.

Jones argues that record retail sales are evidence of how well New Brunswick residents have fared financially during the pandemic: In June and July, “retail sales in the province hit a two month record $2.55 billion, $193 million more than was spent during the same period last year, long before the pandemic.” Adding to Jones’s case, the province has also been rumoured to have its hottest real estate market in years.

But have we rushed to the conclusion that our management of the pandemic has had an economic benefit relative to other provinces and countries? CBC’s Connell Smith recently reported that the state of Maine, with a population nearly twice the size of New Brunswick, has been impacted much more than our province. Maine has had nearly 6,000 cases and 146 deaths as of Oct. 19. At the same time, New Brunswick has had 313 cases and three deaths. The CBC report highlighted how hard the restaurants and bars in Maine had been hit by public health social distancing requirements. 

Based on the greater health impact of COVID-19 in Maine, one would expect that its economy would show a much greater negative impact from the pandemic, particularly given that Maine does not have the same level of public sector employment as the Atlantic provinces. Public sector employment in Maine is around 20 per cent of total employment, versus over 30 per cent in New Brunswick and Nova Scotia. In Canada, public sector workers did not see their employment fall as much as employment did in the private sector and in New Brunswick and Nova Scotia, public sector employment fully recovered by June. 

It turns out that New Brunswick and Nova Scotia’s economies have not fared any better than Maine. New Brunswick’s loss of employment after the March lockdown was not as severe as Nova Scotia or Canada overall, but matched Maine’s. New Brunswick’s employment recovered quickly compared to other provinces and Maine, reaching 98 per cent of pre-lockdown employment levels by June. Nova Scotia, Canada and (likely) Maine did not reach that level of employment recovery until September. So New Brunswick had an early lead in jobs recovery that it has since given up. 

Recovery of employment has been weaker in business sectors, where employment has only recovered to around 95 per cent of pre-lockdown employment levels by September 2019 in New Brunswick, Nova Scotia and Canada overall. But where Nova Scotia and Canada have experienced employment increases each month since March, New Brunswick had employment in the business sector nearly fully recovered by June. Since June, however, New Brunswick has had falling employment in the business sector. Gone are the giddy days when we believed that our low numbers of COVID-19 infections would attract business and remote workers to the province.

The Atlantic bubble has been good for flattening the COVID-19 infection curve, but closing the region off from the rest of Canada has not paid an economic dividend. The Atlantic Provinces Economic Council estimated that the revenue loss for the region due to the pandemic was $3 billion in tourism, $3.3 billion for major construction projects, $3 billion for manufacturing, $1.6 billion for retail and $700 million for restaurants. 

What’s more, we may have killed our airline service in New Brunswick and turned our previously thriving airports into “stranded assets.” WestJet’s announcement that it is suspending nearly all of its flights to the Atlantic region due to low number of travelers, which it attributed to the 14-day isolation requirement, suggests that our public health success has actually come with economic costs. I suppose for those who would like to see a movement to one airport for the region, we now have that: in Halifax.

It appears that our earlier recovery was fueled by federal COVID relief and public sector employment stability, but we have stalled. We are now more dependent on government employment and spending to maintain our employment and incomes, and with a weakening business sector.

A frequent criticism of my commentaries that I receive from readers is that I don’t offer solutions, or at least solutions that they like. And certainly the observation that our public health success at flattening COVID-19 has come with economic costs and has not generated the perceived economic advantages begs the question: what we need to do going forward? Do we remain in our regional bubble to prioritize public health objectives or try to move back toward “normal”? 

My interpretation of the region’s approach is that we will continue mandating 14-day quarantines until such time as there is an effective and available vaccine. The provincial and federal governments need to be aware that this public health prioritization requires ongoing government support for households and businesses, as we have seen with CERB and other relief efforts.

But with a weakening business sector, the pressure on publicly funded supports is going to increase. It will be critical that governments provide transparent signals of how much support they can provide and for how long, especially if an available and effective vaccine is years away.

There is an alternative course of action, and it is not abandoning our strong public health focus. If our goal is to remain COVID-19 free, then can we find innovative strategies that would allow us to open up our borders to the rest of Canada, if not beyond? Can we find smart approaches for controlling COVID-19 so that businesses at risk of shutdown because of our current blunt approach are able to invest in safe operations? For this course of action, we need effort and resources put toward solving these challenges. It needs to be similar to what we saw from the provincial governments in the spring, rather than the policy adopted since then of simply waiting COVID-19 out.

We are only six months from the start of the 2021 tourist season. With a continuation of the Atlantic bubble, next season’s tourism revenues are at risk if we can’t use information, innovation and entrepreneurial effort to control COVID-19.

Herb Emery is a Brunswick News columnist and the Vaughan Chair in Regional Economics at the University of New Brunswick.

This article first appeared in a Brunswick News publication - Oct. 21, 2020

The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.