07 July 2010

Economic recovery – not exactly as illustrated, part two

cbc.ca/nl is reporting an economic miracle in Grand Falls-Windsor.

That’s the town where the major private sector employer closed its doors and where the provincial government expropriated the mill and hydroelectric assets.

When AbitibiBowater stopped production at the mill in early 2009 there were concerns the town's economy would tank, but that hasn't happened.

This time last year, construction was started on 16 houses in Grand Falls-Windsor, but by this June, work had begun on 60 new homes in the town.

There’s even a comment in the electronic version of the story, the one that aired on the supper hour news, to the effect that uncertainty about the mill kept a lid on development.  Now that things are resolved, as it were, then people are now spending freely.

Well, that’s exactly the same sort of story the Telegram carried back in February;  but then, as now, the story looks more like a contrived bit of nonsense rather than a factual appraisal.

Take for example, the thing about housing and a supposed dampening effect before the mill close din early 2009.

As the Telly reported in February,  there were 118 housing starts in Grand Falls-Windsor in 2008, but only 50 in all of 2009.  You can get links to the Telly story and other details in the Bond Papers post from February.

Based on that, the current number of housing starts in 2010 is only 20% above the 2009 level. And even if the housing starts continued at the same pace and there were another 60 houses built in the second half of the year, that would only match the last year the mill operated.

That wouldn’t be too bad, if it turns out to be correct.  But it sure as heck is a far cry from the idea that people are thinking differently now that the fate of the mill is known.

The potential cause for the resurgence  - such as it is -  can be found in the sources of cash identified in the CBC story:

The town's hospital — the Central Newfoundland Regional Health Centre — is the community's largest employer. It serves people from dozens of communities in central Newfoundland who spend money in Grand Falls-Windsor when they come for health care.

You can add to that a bunch of other government offices moved into to the town under Brian Tobin’s administration and more recently by the Williams’ one.  In other words, the town is now dependent on government spending for its major economic activity. 

And what isn’t coming from government is coming from migrant labour.  That would be former mill workers who are commuting to places like Alberta.

And lastly there’s another source of growth:  retirees flocking home after a lifetime spent working on the mainland.  Nice as that is, those retirees only add to the burden of an economy where there are fewer and fewer people earning a wage compared to those in the so-called dependent portion of the population.

If you look at it, what you see in Grand Falls-Windsor is not the picture of some sort of miracle but rather of the increasingly fragile nature of the Newfoundland and Labrador economy. No amount of spin from a local car salesman can cover over the very real problems that fragility brings for a beautiful community and for the province as a whole.

- srbp -

Audio Update:  CBC Central Morning Show.  Look at around 6:54 for the start.  The intro to one section repeats the “housing boom” – complete with the 16 to 59 numbers -  evidently because someone forgot to do a simple check of the facts.