Whither manufacturing in New Brunswick?

One of the least talked about economic trends in New Brunswick but the one with probably the most impact on the economy has been the shift in manufacturing over the past decade or more.  As shown in the first table, the province’s economy (real GDP, expressed in 2012 chained dollars) expanded by a fairly strong 26.1% between 1997 and 2004.  One of the main drivers of this growth was the performance of the manufacturing sector which saw its GDP contribution rise by over 38% in this time frame.

Most of that manufacturing GDP growth came from New Brunswick based firms, there wasn’t much investment from foreign firms with some notable exceptions such as AV Birla.

But from 2004 to 2017, real GDP growth across all industries only grew by 8% while manufacturing GDP declined by 14%.  In fact, if manufacturing GDP had followed a similar growth rate as the 1997 to 2004, the overall economy would have growth by more than 20 percent over the 2004 to 2017 period.

So, what happened?   Food manufacturing is actually a bright spot growing robustly in the 2004 to 2017 driven by growth in almost all subsectors (French Fries, dairy, seafood).  Beverage manufacturing, led by beer, saw a decline in its GDP contribution after growing strongly from 1997 to 204.

In most other segments of the manufacturing industry, New Brunswick took a hit.  Textile manufacturing GDP down 90%.  Wood manufacturing GDP down slightly, paper manufacturing GDP down 41%.  Chemical manufacturing GDP down 68%.  Computer equipment products down 83% (likely Speilo/Gtech effect).  There a few bright spots.  Plastic and rubber GDP up, primary metal manufacturing GDP up (likely the Belledune smelter) and fabricated metal GDP up as well.

Now, you might be tempted to think this is a wider problem in Canada but you would be wrong.  Manufacturing GDP since 2004 is up in five Canadian provinces.  Excluding the turbulence in the auto sector, Ontario has done quite well.

Prince Edward Island has been a bright spot with 28% manufacturing GDP growth since 2004 – second best among the provinces.  As shown below, strong growth in many of its targeted sectors including aerospace, pharmaceuticals and chemicals.

So, what’s next for manufacturing in New Brunswick?   There are a number of issues impacting the sector including a tightening labour market, productivity problems in some sub-sectors, rising operating costs, heightening competition and a lack of scale in many of the sub-sectors.

Ignoring the problem won’t make it go away.  We probably should have a conversation about manufacturing – with manufacturers – maybe we can learn a thing or two from PEI.

*All data taken from Statistics Canada Table 36-10-0402-01.

Posted in Uncategorized | Leave a comment

Oh where, oh where are the entrepreneurs going?

One of my big themes lately is that we should think more about where the next round of entrepreneurs will come from rather than which funding programs/cash we are going to give the ones coming through the door.  My concern has to do with the aging entrepreneurs (over 40% are over 55) and the fact we are seeing few scaling up to become larger, export-focused firms (we seem to be seeing some scaling among national service industries such as insurance brokerages and funeral homes but increasingly the head office for these consolidated firms is not in New Brunswick).

The latest LFS numbers show the six straight year of falling self-employment in New Brunswick.  Since March 2014, self-employment is down by 15% (while it is up nationally by 6%).

If you look at employment by firm size, you see zero growth in payroll employees between 2013 and 2018 but a 4% decline in employment among the smallest firms (0-4 workers) and no growth among the 5-19 worker sized firm.  There is some growth among the 20-49 employees cohort, which is good, but I think this may have something to do with the consolidation we are seeing across multiple sectors in New Brunswick.  I’m okay with the funeral homes, insurance brokers and optometrist offices consolidating for scale but we should be seeing a new wave of entrepreneurs starting up – not just in tech but across the economy.  If you look nationally there has been employment growth among both the 0-4 and 5-19 worker cohorts.

We are getting older. So are the entrepreneurs.  We need to think about the role of public policy to foster a new generation of entrepreneurs.  This has something to do with tax policy.  It has something to do with immigration.  It something to do with the business conditions in the province and, it might, have something to do with access to financing (where government automatically focuses).

Posted in Uncategorized | Comments Off on Oh where, oh where are the entrepreneurs going?

ROI on public investment into economic development

Geez, folks.

In just the past three days I have read three economic impact reports showing the ‘return’ on government investment as a multiple of either output/spending or GDP.  This is at best bad economics and at worst purposely misleading.

If governments puts tax dollars into an activity such as a tourism event or an effort to attract a firm to the jurisdiction, the only ‘ROI’ that matters is the incremental tax dollars from that tourism event or business expansion.

It may be accurate but it is highly  misleading to say “every $1 put in by government generated $10 in new spending”.  Even if that is true it is not the ROI.  The return on investment must be incremental tax dollars.

For every $1 tax dollar the government puts in, they get $2 in new taxes as a result of the project.  Therefore, the project has generated an ROI of $1 additional dollar for every dollar they invested.  That addition dollar can be invested in health care, education, etc.

In two of the three reports I reviewed, using a tax-based analysis, the ROI was negative.  To be blunt, for every tax dollar put in, they got less than one tax dollar out – meaning they had to reduce spending on health care, education, etc. to spend on the tourism event, business attracted, etc.

The main purpose of economic development is to help foster a strong economy that is generating enough tax revenue to fund good quality public services and public infrastructure.

If we put taxpayer money into projects that do not generate more new tax revenue that the amount put in, why make the investment?  There may be cases where ‘strategically’ you may want to subsidize something but this should be rare.

And all you consultants out there – the folks doing economic analysis – think about the potential impacts of your faulty economics.  If you convince governments they are getting “$10 for every $1 they put in” – they will be tempted to put in $2 and $3 and maybe even $5 – because they are still getting $10 back.  But they aren’t.    In that case they are getting hosed.  And you are getting paid to abet this hosing.

Posted in Uncategorized | Comments Off on ROI on public investment into economic development

Building on Renous’ newfound fame as Hockeyville 2019

It’s interesting what kinds of things can motivate a population to mobilize.   The Miramichi is an interesting example.  Back in the 1990s when someone really wanted a Walmart they started a petition and got thousands of signatures which they promptly gave to Walmart and, in due course, the retail behemoth came.   Proposing changes to health care services or EI can also get you a rapid and large scale response.  The latest example was Renous’ bid to be Hockeyville 2019.  A tiny hamlet on the periphery of the ‘Chi gets so much public support that it wins the Hockeyville and was trending nationally on Twitter the moment it happened.

I am thrilled for Renous, of course, but is there anyway we could harness this public involvement and excitement for actual economic development in the region?   The population in Renous is dropping like a stone – the LSD shed 13% of its population between 2011 and 2016 and it is facing an uncertain economic future.

Why not develop a plan for the expansion of the Renous prison and gather thousands of signatures and petition Ottawa?  Imagine another 100+ great paying jobs in the area?  Or how about a deep dive into the potential of attracting tourism entrepreneurs into the region?  Are there mining opportunities out the Renous-Plaster Rock highway?  Could we get the populace engaged and excited?  How about a rally with thousands of people waving placards in favour of some new forests products operation in the region?  Or can we use all that Crown Land near pristine rivers to attract people to build hundreds of high end cottages and bulk up the seasonal tourist population?   Or, potentially hundreds of other ideas that might work taking advantage of the assets and attributes in the area?

The public will get really jazzed about Hockeyville but Sawmillville or FreeCrownLandleaseifyoubuilda$200kcottageville doesn’t really get people too excited.

It’s even hard to get government folks interested in economic development in the greater Miramichi so how can we expect to get the public at large engaged?  As far as I can tell there might be 1-2 people paid to do economic development in the Miramichi area.  Almost all the resources are dedicated to matching entrepreneurs and current employers to government funding programs with very little focused on actually figuring out how to leverage local assets and attributes for economic development.   In fact, as a little piece of irony, the ACOA advertisement right below an aging Gary Bettman announcing Hockeyville 2019 above, takes you to a link for the Atlantic Growth Strategy where you will find a long list of various government funding programs meant to help all kinds of existing businesses and people looking to start a business but you will have to look long and hard if you want funding to explore the Renous-Plaster Rock highway to see if there are new economic opportunities that could be exploited out there – matched to new entrepreneurs or existing firms.

We seem to have lost our appetite for economic development.  I’m sure even some of you, dear readers, think we shouldn’t put a nickel in rural areas.  Let them slowly die and focus on large urban areas only.   I’m not of this view.  I’m against structural subsidies to prop up smaller areas but if there are genuine economic opportunities in these areas that could attract investment and entrepreneurs – I’m all in.

Or maybe I should say, I’m all alone.

Posted in Uncategorized | Comments Off on Building on Renous’ newfound fame as Hockeyville 2019

On labour shortages in NB: Our EI problem has not gone away

As I have said on these pages many times, Dr. Herb Emery was a huge pickup when he agreed to come to UNB and take on the Vaughan Chair in Regional Economics.  He has churned out impressive research and insight since including in his weekly TJ column.   You will learn something every week – you may not always agree with him – but you will learn.

I was surprised that he didn’t mention Employment Insurance in his latest column on the labour shortage.  To me this is one of the most obvious drivers of our challenge in New Brunswick.

In 2016, there were 104,000 people who collected EI income at some point during the year or 27% of all wage and salary earners (this does include those taking paternity and maternity but that number is likely only 5-7% of the total).  There were actually more on EI in 2016 than back in 2008 and the share of wage earners has remained fairly consistent going back 20 years (between 27%-30%).  Of course not all of these people go on EI every year.  The structural users of EI – those that go on EI every year is closer to 40,000.

If you look on a regional basis, nearly 40% of every wage and salary earner in non CMA-CA areas (the population outside the urban centres) collected EI or nearly 56,000 people in 2016.  Studies from a few years ago found individual communities in New Brunswick with 70% to 80% EI usage.

How does this contribute to the labour shortage?   As the poet Elizabeth Barrett Browning says “let me count the ways”.

1. Moderate wage raises, advocated by economists, would not entice those earning EI every year as part of their annual income.   They have already made the choice to engage in seasonal work and take a large portion of the year off.  A couple of bucks an hour isn’t going to entice them back into year round work.

2. The areas that use EI the most benefit from a high unemployment rate – it’s actually a benefit. So there is a perverse incentive to accept and even embrace high unemployment – to the point that EI users elsewhere in New Brunswick grumble about the fact they have to work more each year – it’s not fair we are told – even as the Walmart down the street is struggling to find workers.

3. The ‘high’ unemployment rate has led to a tepid response from government when pushed to allow  more immigrants.  This seems to have changed somewhat but it is still very common to hear politicians and bureaucrats question the need for immigrants in New Brunswick because of our ‘high’ unemployment.  They will, like many economists, blame low wages and tell employers to raise them.  The problem?  See Point #1 above.  In fairness to the politicians and bureaucrats, it is a little strange to visit a small community in New Brunswick with unemployment ‘rates’ of 20% or more and see the entire Subway restaurant filled with immigrant workers.

What’s the solution?  There has been more written on this subject than just about any other subject in New Brunswick.  You will have 25-30% EI usage in this province – and in some communities 40-50% usage – in perpetuity until the federal government changes the program.  That’s it.

And government is incredibly loathe to do it because there are dozens and dozens of ridings in Atlantic Canada, Quebec and a few elsewhere – that are heavily reliant on EI.  Not just the ‘voter’, the voter’s spouse, kids, parents and neighbours.

I have called for grandfathering older workers and for phasing in changes over a 5 or even 10 year period.  But if we don’t change the program, nothing will change.  It will continue to depress local economies and create labour market distortions.

And in this case, we work around around it.  Flood immigrants into these communities to work the jobs and hope they don’t adopt the EI lifestyle.  We may be too late on this as I have already heard anecdotally of immigrants starting to use EI as an annual income supplement.

Posted in Uncategorized | Comments Off on On labour shortages in NB: Our EI problem has not gone away

Getting to know New Brunswickers: Our household spending priorities

For your viewing pleasure, I have compiled a list of the household spending categories where New Brunswick ranks #1 among the 10 provinces (i.e. the highest share of household income going to the expenditure compared to other provinces) and the ones where we rank 10th.

Use this at parties.  Impress your friends.  No attribution required (but the data is from Statistics Canada’s Annual Survey of Household Spending).

Without further ado, the data awaits (with my comments in brackets).

New Brunswickers spend the highest in Canada among the 10 provinces (as a share of total household spending)
Cereal grains and cereal products (I hope Tony the Tiger appreciates this)
Electricity for principal accommodation (not because rates are higher but because we are far more reliant on electricity – politicians forget this at their peril)
Pet expenses and pet food (less kids, more pets – the perfect metaphor for our demographics right now)
Washers and dryers
Clothing accessories (women and girls aged 4 years and over)
Gas and other fuels (all vehicles and tools) – Very little public transportation and a dispersed population.  If you want to go to Costco and you live in Neguac?  Stop at the local Irving first.
Private health insurance plan premiums – interesting one – would require more work to understand why
Cigarettes – over use or taxes or combination?
Charitable contributions – generally NBers are good folks.  A lot of this goes to churches.

New Brunswickers spend the lowest in Canada among the 10 provinces (as a share of total household spending)
Mortgage paid for owned living quarters – nice.  Use this in your promotional materials
Purchase of telephones and equipment – lower cost? or lower usage?
Household furnishings – take a look around your house, it may be time for an upgrade
Rugs, mats and underpadding – maybe allergies are a bigger deal here?
Dishwashers – we spend the least on dishwashers but the most on clothing washers? – makes sense to me.
Children’s wear (children under 4 years) – strange given the demographics – maybe granny ponying up for the grandkids?
Clothing and cloth diapers (children under 4 years)
Public transportation – see #1 in spending on gasoline above
Taxi (including tips) – see #1 in spending on gasoline above
Airplane – not because of lower prices, less usage.  NBers need to see the world more.  It might help us with perspective.
Dental plan premiums.  Hmm, the most on health plans but the least on dental plans.   You tell me.
Home entertainment equipment – maybe it’s time upgrade your 1972 hi-fidelity system.
Televisions and other video equipment and accessories
Education – hmm.  Not one we should be proud of unless it is because government and employers pay a larger share.
Tuition fees – ditto.
Alcoholic beverages – this one is strange to me – must be more beer and less hard stuff
Contributions and dues for social clubs and other organizations
Government services – this makes sense to me but it also annoys me.  I’m a believer in direct pay where it makes sense.

Any of these  surprise you?

Posted in Uncategorized | Comments Off on Getting to know New Brunswickers: Our household spending priorities

Economics for dummies: Debt to GDP ratio

I get asked once in a while why I don’t talk about ‘economics’ in a blog called It’s the economy, stupid!”.   It is true that mostly I talk about economic development – but truth be told “It’s the economic development, stupid!”  doesn’t have a nice ring to it.  Plus I stole the title (to be more accurate David Jonah stole the title) from Bill Clinton’s advisor James Carville from a long time ago.

But just to ensure my bona fides, here is a purely economics concept.   There has been a lot of debate recently about the federal debt (and provincial for that matter) and it usually involves debt hawks decrying “no serious plan to eliminate the deficit for years!”.  The other school of thought (adopted by Trudeau and Morneau) is that as long as your GDP growth is faster than your debt growth, it doesn’t really matter.

For example, think about your household debt.  If your household income is $100,000 per year and you have $1 million in household debt you will be crumbling under the weight of interest (even at today’s rates) and principal payments.  But if you earn $1 million per year and you have $1 million in household debt – it’s of very little consequence (except, the debt hawks would say, for the reasons below).

So, consider the following simple chart.  It is based on an annual GDP growth rate of 2% and an annual growth in the federal debt by 1%.  Let’s not quibble about real versus nominal prices, this is a thought experiment.  You can clearly see in the chart that the federal debt grows every year.  The government hasn’t balanced the budget once in 80 years and yet the amount of government debt as a share of GDP is cut by more than half.  To be more specific, the government’s ability to service the debt is improving every single year even though debt is rising.   The Trudeau/Morneau team will point to long term GDP growth rates and say this is not unrealistic.

Now, of course, the debt hawks will say we can’t be sure that GDP growth will rise in the future as in the past.  And, this doesn’t take into account recessions or depressions where governments have to run huge deficits (or feel they have to).  If you are running deficits in the good years, you lose your wiggle room in the bad years.  And, they say, even if you can run structural deficits every year, wouldn’t it be better to cut taxes, etc.?

Quite frankly, on a personal basis, I am more concerned with the growth side of the equation.  In New Brunswick we were running significant deficits with no real GDP growth so the provincial debt to GDP ratio rose from a low of 25% in 2009 to 38.6% in 2018.  In absolute terms the net provincial government debt more than doubled.

Governments are not passive bystanders when it comes to economic development.   They need to work on the numerator of that equation – public debt – but they can’t ignore the denominator – GDP.

Without at least modest economic growth, the province will struggle to provide good quality public services and infrastructure (the one-time federal transfers boosts are nice but not guaranteed).

Posted in Uncategorized | Comments Off on Economics for dummies: Debt to GDP ratio

OECD principles on effective rural economic development

The OECD has published a list of principles to guide effective rural development.   There are at least three interesting things about these principles – two good and one curious.  The first is the focus on leveraging local competitive advantages.  Somehow this most basic of economic development concepts – going back hundreds of years – has gotten lost or at least minimized in the developed world.  At a very fundamental level, long term economic development has a lot to do with the assets and attributes of the local community.

The second interesting thing is the idea of “adapt and respond to emerging mega-trends (digitalisation, globalisation and trade, climate change, population ageing, and urbanisation)”.  Again, I wonder just how much serious thinking in New Brunswick is focused on the impact of these mega-trends.  There are some things going on – to be sure – but a focused effort to see how these can be leveraged to support longer term growth?  Not much, IMO.

The third, and most curious, is the lack of any mention of the the shrinking labour force, immigration – or anything related to attracting people.   This may be deliberate – maybe the OECD wants to encourage urbanization in the advanced countries so it doesn’t want to espouse principles that would counter this.k  I would argue this is a curious and strange omission.

I’m a big fan of urbanization.  Read my stuff.  But hollowing out smaller communities to the point there is nothing left is not a good economic development policy.  Even smaller communities need to think about the population growth policies needed to ensure they can survive and thrive into the future.   Places like Sussex, or Chipman, or Neguac should have a future.  Fifty years from now those communities should be relatively small, but thriving local economies.

Posted in Uncategorized | Comments Off on OECD principles on effective rural economic development

You are entitled to your own opinion, not your own facts: Calgary redux

I got a few sharp comments on the Calgary post from a few days ago (comments on LinkedIn and direct messages). The gist is that Calgary is in deep economic trouble and I am cherry picking my facts.

Let me restate. Alberta is in a challenging time. There are two main facets: 1) a government fiscal crisis due to the price of oil and resulting less royalties (and other knock on effects) and 2) an investment crisis because that sector is the main driver of investment in the province. These are impacting Calgary and a main reason for some of the issues such as the office space vacancy rate.

But, one person suggested there was a vast outmigration of people from Calgary.

Not true.

In 2017, Calgary had the 4th highest immigration rate among the 33 CMAs across Canada at 144 immigrants per 10,000 population. It had the second highest five year population growth rate between 2012 and 2017 at 14.1%. In fact, you could easily argue the reason why Calgary’s unemployment rate remains quite high is because it has been attracting a lot of folks. Not as many as when its economy was firing on all cylinders but, again, compared to other urban centres in Canada, it is doing quite well.

My main point is that I don’t see the value in making the economic situation in Calgary seem worse than it is. I understand why politicians talk in these terms – that is how they get elected -but for pundits, economists, journalists, etc., they should be focusing on facts and the facts are that Calgary has a higher than desireable unemployment rate and is feeling the effects of the low price of oil on public services, spending and investment. But it remains a growing economy with significant inflow of population and growth in the labour market and in total employment.

Posted in Uncategorized | Comments Off on You are entitled to your own opinion, not your own facts: Calgary redux

Putting the ‘development’ in economic development

I got a few comments on the recent post about focusing economic development and strengthening the value proposition for economic opportunities where your community or province has some core attributes.   The comments fall into two camps: 1) business incentives are good and necessary; and 2) how (and who) decides what is an opportunity?

Good questions.  To the first I will reiterate my longstanding view that I am not opposed to governments and communities provide relatively small scale incentives to attract industry if they are required to be competitive.  I just don’t think they should dominate the value proposition.

To the second, I will reintroduce a concept I have put forward on multiple occasions.  As far as I know not a single economic development organization has taken up my idea which could mean it is a terrible idea or it could mean that it’s an idea whose time has not come.

There are over 400 distinct NAICS industries and those can be even subdivided again.  I have suggested in the past that economic development organizations should go through all of the industries in a systematic way and determine if there is potential for development in the jurisdiction.  This potential can be based on a local attribute (s), market trends, existing cluster of activity,  etc. or a combination of these.  If the first cut indicates potential, then we determine how much potential and whether or not it is worth to pursue as an economic development opportunity.  Even small opportunities can be important if the relative cost of their development is low.

The following shows a few examples – not necessarily real examples – but to illustrate the point.  I have lifted a few NAICS industries as examples.





I am told that Quebec loggers are doing a lot of work in northwestern NB because it is hard to find local loggers (this is anecdotal).  If true, they take their labour income back to Quebec and we lose the economic benefit.  Why not attract international loggers to move to the region and keep the high value economic benefit in New Brunswick?



Why does Nova Scotia have nearly three times as many people in this category?  Is the scenery better?  Is the food better?  Are there stronger institutions?



Okay. Not really interested here but it is curious and, in fact, there are a number of countries for which flowers are a major export.  Globally the exportation of flowers is a billion dollar industry.  Just not sure how it applies to us.



This is an ongoing trend.  Are we okay with it or should we pitch a place like Moncton to the firms shipping in pastries from Quebec?





This is not necessarily true I just wanted to point out that the construction workforce can be an ‘export’ opportunity.  As far as I know we have never even considered this as a province.




One of a few sectors where traditionally NB has been very strong.  Are we going to let it wither away because of a lack of truckers?



This one is pretty straight forward.  I would also say that our nuclear energy plant needs molybdenum and if we are to develop SMRs in this province – maybe our molybdenum deposits become a little more interesting.




This is interesting.  NB has a far larger forest products industry but on the wholesale side Nova Scotia is killing it.  Why?  Who cares?  I care.  This could be 400-500 good paying jobs.





I guess we are just giving up on this sector.  Maybe for good reason (?).  I’d like to at least have a clear answer as to why.


If you have survived this blog to this point, I hope I have presented this idea clearly.  The problem is there is no private sector player or firm that has an interest in doing this work.  Individual firms or entrepreneurs may spot an opportunity (remember my blog about VistaPrint and business cards being exported across North America from  small town in the midwest US) but no one really has an interest in the big picture.

Except, government funded economic development agencies.

Posted in Uncategorized | Comments Off on Putting the ‘development’ in economic development