The mid-Island’s economic forecast for the next year is about as bleak as the recent weather – mostly grey with some sunny spots.
Woody Hayes, of Hayes Stewart Little & Co., said a number of factors have combined to drag the economy down, notably job reduction, slow population growth, and a decrease in housing starts.
A recent study indicates the Vancouver Island-Sunshine Coast region lost 16,700 jobs last year, with 92 per cent of those outside the Victoria Census Metropolitan Area. The industries that suffered the largest losses were health care, social assistance and trades, which combined for 12,600 job losses.
“The economic recovery we started to see in 2010 gained little momentum last year,” said Hayes. “Population growth, which has been the engine for much of the region’s economic growth over recent years, was at a 10-year low. Housing starts and residential building permits were also down, as were property re-sales.”
According to Vancouver Island Real Estate Board statistics, re-sales across the region were down four per cent in May 2012 from May 2011, and average sale prices in Nanaimo dropped eight per cent from $379,410 in May 2011 to $349,554 in May 2012.
The area’s unemployment rate currently resides just above six per cent, one per cent below the national average. Students under 25 are having a harder time finding work — their unemployment rate is 10.5 per cent in B.C.
Resource industries made nominal job gains, however, with forestry, fisheries, mining and oil and gas increasing by about 2,400 jobs.
Forestry, while still lagging well below pre-recession standards, was propped up slightly due to Asian demand for pulp and lumber said the study, released by the Institute of Chartered Accountants of B.C. That demand prompted some mill reopenings, including Western Forest Products’ Ladysmith sawmill, while Catalyst added recent hires in Port Alberni and Powell River.
Raimo Marttala, an economics professor at Vancouver Island University, said global uncertainty, which is evident in the markets, has a big effect on the local economy, as do provincial cutbacks.
“Two of the major job losses, in health care and social assistance, are provincial government responsibilities and with their cutbacks and reductions in funding it’s not a surprise,” said Marttala. “The bigger picture, though, is the uncertainty, especially in the U.S. and the Eurozone, where problems are really coming to a head. Those all impact Canada.”
The economic decline in the mid-Island area, however, bucks the trend of other areas in B.C., which have seen improvement in various sectors.
Hayes said reasons why other parts of B.C. are experiencing economic growth while the Island stagnates is foreign investment and a sunny outlook for oil and gas.
“The Lower Mainland has a huge influence from offshore investment and we don’t see that on the Island, at least not to the same extent,” said Hayes. “That is largely driven by immigration settlement in areas like Richmond and Vancouver, and those immigrants come with money. In the north we’re seeing the oil patch doing well, a lot of activity. Again, we don’t have a lot of that going on on the Island.”
Marttala added he feels the grey outlook for the region will brighten.
“It’s’ very cyclical, but in the long term I think we’ll be OK. I don’t see this a permanent feature of our local economy,” he said.
Hayes added he is cautiously optimistic 2012’s outlook will improve.