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Debate over 'Sizzle' in B.C.'s Economy

Employment and savings stats fuel doubts about latest optimistic claims.

Marco Procaccini 14 Jul 2004TheTyee.ca
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The major media may call it sizzling, but the latest Statistics Canada report once again shows B.C.'s economy falling behind the rest of the country.The report says the unemployment rate in B.C. kept rising to 7.8 per cent in May, up from 7.7 per cent in April-an overall continued increase since 2002. In the spring, when summer hiring often causes a brief jump in new jobs, it says B.C. suffered a net loss of over 15,000  jobs.Statscan also says while consumer spending, which dropped substantially in 2003, has improved slightly since the beginning of the year, the increase is minimal and the economy remains, overall, stagnant. It also reports that overall consumer savings in B.C. have now dropped to the lowest in the country."Working people know that relying on a "Visa" economy is no way to rebuild our province's economic footing," Sinclair said, pointing out that average weekly wage rates for the first quarter of 2004 had decreased when compared to 2003. "Real spending power is on the decline."In 2003, B.C.'s personal savings rate as a percentage of disposable income was the worst in the country at negative 8.2 percent, he said.Behind the construction and real estate surgeThe report did note the two sectors of positive activity-construction and real estate-remain highly active due to prolonged low interest rates. But most of this activity remains confined to the lower mainland and southern Vancouver Island.But Sinclair and some economists warn that much of this is based on heavy borrowing of money, due to the decline in consumer savings and spending power."People aren't buying houses because they have more money," said David Fairey, senior economist and director of the Vancouver-based Trade Union Research Bureau, in a recent interview. "Rather they are taking advantage of the lower interest rate to buy homes now before they go up again."Fairey says it is no coincidence that increasing housing sales and residential construction across the country, and especially in BC, are accompanied by skyrocketing consumer debt loads due to mortgages. "Personal consumer debt is at an all-time high," he said. "People are trying to buy houses and condominiums with less money in their pockets. Right now, lending institutions are happy to accommodate this because of the low interest rates of the Bank of Canada. That will change when they start to rise again."He added consumer desperation is the main cause of the buying spurt, as people try to take advantage of the low interest rates and resulting favourable mortgages to buy a home before they go up again, putting home ownership out of reach once more.Economic pessimists on par with optimistsThere are signs the fear of rising interest rates may begun to have an effect on consumers across the country.The May edition of the Canadian Monthly Economic Confidence Monitor, published by the national polling firm Ipsos-Reid, reports that, other than a majority of positive house-buying intentions, most people it polled have negative predictions about interest rates, major purchases and especially their personal economic outlook."It would appear that concerns about potential rising interest rates is dampening Canadians' confidence in the national economy, the report said. "(It) finds that the proportion of Canadians who describe the current economy as "good" has dropped to 66 per cent from 74 per cent at our last sounding in late February 2004.Furthermore, it adds, the percentage of the population that believes the national economy will improve over the next year has dropped from 34 per cent to 27 per cent, while the proportion who think it will get worse has increased to the same proportion (from 18 per cent in February to 26 per cent today).Martin hoped to catch economic waveThese new reports may also spell more trouble for embattled Prime Minister Paul Martin and his Liberal Party, who locked in a dead-heat federal election battle with the Conservatives and the New Democrats.Martin and numerous Liberal candidates have referred to what they say is Canada's "strong economy" as an example of their effective leadership.Although Statistics Canada did report the national jobless rate fell slightly in May from 7.3 per cent to 7.2 per cent, most critics agree it is still too high to indicate that the economy is "strong." The addition of declining consumer spending and savings, along with the resulting lack of confidence, creates a dangerous situation for the economy, Fairey said.Meanwhile, back in BC, there is additional concern that the new Statscan report shows the latest jobless rise is focused in the Lower Mainland, instead of the Interior and rural communities, which have borne more of the hardship so far.Sinclair highlighted increasing energy costs and B.C.'s growing trade deficit as issues that needed immediate attention if B.C. is to achieve any real, sustained economic growth. Sinclair also commented on the B.C. Liberal's failing privatization strategy, calling it a sad effort to attract private investment to our province.He re-iterated his call for a summit on jobs and the economy. "We can create economic growth in our province, but that means including working people in those discussions, and ensuring that every British Columbian benefits from our economy," concluded Sinclair.Campbell expresses faith in economyBut the B.C. Liberal government insists, despite more economic bad news, the economy overall is still strong and that there is no need at this point for any type of summit like Sinclair proposes.In spite of declining capital investment and consumer spending, along with rising unemployment, since the Liberals took office, Premier Gordon Campbell says the overall economy remains strong and things are looking up."We have a strong economy and a healthy investment climate," he said in the latest release of the New Era in Review earlier this month. "We have set rules in place to streamline development projects.and our tax cuts have given consumer more money to invest in our economy."The premier insists that the provincial government's 2004-05 budget is balanced, despite what critics have slammed as overly optimistic economic projections.Marco Procaccini is a contributor to the Columbia Journal, for which he wrote this article.  [Tyee]

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