N.B. doesn’t have a single economy story | JDI Roundtable | UNB

Global Site Navigation (use tab and down arrow)

JDI Roundtable on Manufacturing Competitiveness in New Brunswick

N.B. doesn’t have a single economy story

Herb Emery

In 2016 Maclean’s magazine notoriously asked “Can anything save New Brunswick”?

The negative article asserted that Miramichi was a microcosm for the province’s “myriad of social and demographic challenges” following “the closure of most of its mines, lumber and pulp and paper mills.” The article also ridiculed New Brunswick as being the “drive-through” province “thanks to successive governments and their vote-friendly promises of building roads, it is now possible to drive from the border of Quebec to Nova Scotia on a single tank of gas.”

That article really got it wrong. The challenges of Miramichi and the northeast of the province are not representative of the state of the provincial economy. And to the contrary, four-lane highways have proven to be an axis of economic development.    

The well-established story for the New Brunswick economy is that after a pretty solid decade of growth, the 2008 financial crisis clobbered our exports and knocked the stuffing out of industrial base. Where other provinces showed some recovery after 2008, New Brunswick stopped growing and appears to have suffered more than other provinces.

It’s a simple but misleading story that may be discouraging investment and leading to ineffective and costly approaches to economic development.

At the risk of over-simplification, there were two economic drivers for the pre-2008 economy that failed after the recession: mining and pulp and paper. But what isn’t recognized is that the economic engine that blew out was largely in the northeast of the province, where pulp mills ceased operation and the mining and downstream industries around Bathurst shut down.

Yet in the rest of the province, mining was not so prominent and the forest-based industries have continued to thrive.

Gross Domestic Product measures the size of the economy and the growth rate of GDP is interpreted as a measure of economic performance. Typically these measures are available at the level of province, but not for sub-geographies of a province.

To gain some idea of what was happening in the northeast and the rest of the province, I apportioned provincial GDP to those two geographies. Basically, I assigned all mining-based GDP to the northeast (except for oil and gas). I assigned 40 per cent of GDP from pulp and paper to the northeast from 1997 to 2008 and none after when the mills in the region were gone.

I also assigned 10 per cent of GDP from electricity generation to the northeast for the asset at Dalhousie until it closed in 2012. Finally, I divided GDP from all other industries to the northeast and the rest of the province according to the share of the population in that geography.

What we learn from this exercise is that GDP in the northeast is likely lower today than it was in 1997. The region’s economy started to experience negative growth after 2004, well before the financial crisis, and has contracted in almost every year since. Since 2008, its GDP has contracted by 2.2 per cent per year, whereas it grew on average by 1.6 per cent per year in the decade prior.

All the gains in the size of the economy prior to 2004 are now gone. Unemployment rates are persistently, around 13 per cent or higher. The region’s share of the provincial population has fallen from around 25 per cent to 20 per cent.

But the rest of the province has a very different story to tell. Essentially, outside of the northeast, the economy has never stopped growing, other than briefly after 2010. Growth rates of GDP since 2015 have been closer to two per cent per year. Unemployment rates are historically low and employment is growing.

In other words, if you have not been living in the northeast, then you have not been living in a struggling economy - or at least one struggling any more than elsewhere in Canada.

But what about Saint John and its trials, or the southwest, or down in the southeast where populations are falling and aging and the economy does not seem to be booming?

In all likelihood, these struggles are real but they are less severe than those in the northeast.  Population size in the southwest of the province is stagnant, rather than declining, and unemployment rates are around half of those in the northeast. In the southeast, the loss of potash and the shale gas moratorium has likely produced a similar economic malaise to the loss of mining in the northeast.

The collapse of the northeast and stagnation of the southeast and southwest of New Brunswick suggests that the robust growth of the province is a corridor phenomenon where economic activity is strong along Highway 2. Cities and towns along Highway 2 from the Quebec border to Nova Scotia are growing and unemployment rates are low because the province is easier to drive through.

It seems that many New Brunswickers really don’t know what it is like to live in a struggling economy, which may explain why they don’t know how, or even feel a pressing need, to save the province. 

Governments of New Brunswick have used borrowing and spending to stimulate growth in an economy that they believed was struggling. This attempt to reinvigorate the New Brunswick economy, as opposed to regions of the province which are actually struggling, may have done little to stimulate already strong GDP growth where much of the spending was occurring. This also may have been a contributing factor to the perceived labour shortages in the province.

The Maclean’s mistake was to believe that New Brunswick needed to be saved, where we really should be asking, “Can anything save the northeast of New Brunswick?” To answer that question we likely need to be more regionally targeted with economic development initiatives.

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 Brunswick News publications – Feb. 13, 2019

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.