15 March 2010

Inherent weakness: a public sector-driven recovery

Newfoundland and Labrador showed weak job growth in February with an increase of a mere two tenths of one percent compared to January 2010 and 1.5% compared to February 2009.

Nationally, the job growth in February was driven almost entirely by the public sector.

That matches rather nicely with the experience in Newfoundland and Labrador where private sector job creation has been trailing off for a couple of years. As usual you can find great details on this at labradore: One, Two, Three, Four, Five, Six.

Here’s a chart – h/t  labradore – that should help you get a clear picture of what has been going on.

Three things to take away from this:

1.  What you just saw is absolutely, categorically NOT what you are hearing from the mainstream media, political circles and people in the local business community.  But it is real. The happy-crappy-talk coming from places like the Board of Trade demonstrates the extent to which the Board has its head up its collective backside or can’t understand simple numbers.

2.  The corollary to the private sector jobs-slide is that the jobs growth that has taken place – akin to the boom on the northeast Avalon – has been fuelled almost entirely by the public sector.  Since public sector spending is – as regular SRBP readers have known for years – unsustainable the whole thing is built on very shaky foundations.

It can’t last.


3.  Stand by for some serious adjustments.  The reckoning may not come in the next few months but it will have to come.

Of course, you will hear nothing but happy-crappy-talk from politicians who are looking to get re-elected in two years.  The pre-election campaign has already started.  What’s more, in a worst case scenario, some of those politicians may be looking to become Premier in a Tory leadership fight before then. Either way, there’s little hope that any political party in the province will be able to come to grips with the real economic issues and start taking action to set the right course for the future.

To steal the words of the Lucides:

Those who deny there is any danger are blinded by the climate of prosperity that has prevailed in … recent years. … That’s the peculiarity of the current situation: the danger does not appear imminent but rather as a long slow decline. At first glance, there doesn’t seem to be any risk. But once it begins, the downward slide will be inexorable.