High oil prices threaten economic recovery

Via the Globe and Mail:

"Oil prices are entering a dangerous zone for the global economy," the IEA's chief economist, Faith Birol, told The Financial Times. "The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers.

This warning, the newspaper said, will ramp up pressure on OPEC countries to boost their production.

The strength in oil, chief economist David Rosenberg of Gluskin Sheff + Associates said today, does not reflect stronger consumer demand in the United States, but rather external forces and heightened investor demand.

Wow.

Who knew?

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Drop-out drop detail

The 2008 report on schools from the provincial education department is a wealth of useful information on one of the most important government service areas.

Chapter 10 is about school leavers.  In light of the Statistics Canada report on drop-outs, it’s worth taking a closer look at the way the drop-out rate dropped in this province.

As we know from the Statistics Canada report, 19.9% of young people dropped out of school in Newfoundland and Labrador, on average, in the three years 1991-1993.  By 1996, that figure had declined to 16.7%.

By 2006, that number was down to 8.9%. The rate was lower in 2003, continued downward for the next two years and then jumped up in 2006. The current rate  - 7.4%  - is actually about what the rate was in 2005. The table is taken from the provincial government report.

Media reports indicate that a higher percentage of males than females dropped out in this province in 2009 (103% versus 6.6%). That’s a change from a decade and more ago when the male rate was dramatically higher.  According to CBC, “while rates have declined for both sexes, the rate of decrease was faster for men, narrowing the gap between the two.”

The provincial education department has another statistic, though.  It compares rural versus urban rates of school-leaving.  Here’s the provincial government table comparing the rates for all provinces and for the country as a whole.

This sort of statistic doesn’t bode well for economic development in rural Newfoundland and Labrador. And it doesn’t get any better when one considers the trend in the Eastern district, for example, that shows those graduating high school in rural areas are more likely than urban students to leave with a general pass.  n other words, they aren’t necessarily more likely to enter post-secondary education or training.

If a provincial government could only focus on one area in order to produce economic and social benefits to individuals and to the community as a whole, improving educational performance would be it.

Now it is interesting to pick up on comments on the other post on this report.  Both noted the possible influence of the cod moratorium in 1992 on the decline.  On the face of it, the answer seems to be that the moratorium did influence the rate.  Young people in rural areas, especially males, tended to leave school since they could make a living in the fishery or other similar work with a limited education.  Without the cod fishery they might have stayed in school.

Maybe.

The idea is worth exploring but the answer is likely to be more complex. Don’t forget that about 70,000 left Newfoundland and Labrador in the aftermath of the moratorium.  While the drop-out rate declined dramatically in the period between 1993 and 2005, the persistence of a high drop-out rate in rural Newfoundland  suggests there might be other factors at work.

Still, these numbers bear further consideration.

Especially considering the literacy and numeracy rates in the province.

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NL population drops in Q2 #cdnpoli

Newfoundland and Labrador was the only province to experience a population loss in the second quarter of 2010, according to figures released Wednesday by Statistics Canada. The cause is primarily net interprovincial outflows, in other words outmigration. That’s also the first drop since 2008.

While the provincial government issued a news released last quarter trumpeting the gain of a mere 96 people, you are unlikely to see a release like it this month talking about a drop three times the size.

Here’s what the past five years looks like, by quarter.

Now it could be nothing at all but a blip.  Then again, it could be a sign of things to come.  Note that for the last three quarters the rate of growth has dropped dramatically.  That suggests the steam was going out of things and that the Q1 results were the peak of the curve.

You can see that more clearly if you look at this chart:

In less than a year, the province went from gaining 130 people in a quarter to losing 300.

And actually, this could also mean that the North American economy is on solid footing.  The change in migration patterns for Newfoundland and Labrador in Q3 2007 actually heralded the onset of the recession.  A long-term analysis of provincial population suggests that the population grows shortly before major recession.  Those are all people working elsewhere with relatively weak ties to the community who opt to come back to the province to weather the economic storm.  When things pick up, they head off again.

And as much as the province’s finance minister may like to believe otherwise, odds are that is what’s going on again.

Great news, wot?

Well, not really. The longer term demographic problems that come with that aren’t ones the current administration and its unsound financial and economic management are not ready to cope with.   Not by a long shot.

Don’t forget that in this pre-election and pre-leadership period, you can bet the government won’t be willing or able to do much to start adjusting to cope with the harsh reality of the economy and demographics.  In fact, the next 18 months are basically a write-off for serious government decisions to deal with the problem. 

On top of that you can forget the period between the election and whenever the new Premier arrives to replace the Old Man. And if that doesn’t wind up happening happen until a couple of years before the 2015 election you can almost write off dramatic policy shifts until that election is history as well.

Wow.

Not to worry sez you.  There’s oil.

Sure there is.

Unfortunately, production and royalties won’t be able to cope with the demand for added revenue.  There’s not much else going on to take up the slack and for good measure, the current administration plans to use oil money to fuel increases for education and health care and use exactly the same money to build the $14 billion Lower Churchill project.

Here’s lookin’ at you, kid…

…as you leave the province again.

At least we’ll always have Ottawa.

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Housing bubble bursts – Conference Board

The hyperactive St. John’s housing market will be slipping back toward demographic requirements in the second half of 2010, according to the Conference Board of Canada.

“We had that little bubble in the first few months of this year, which means that moving forward, we’re going to move back more toward the demographic requirements,”

according to the board’s senior economist Jane McIntyre.

Meanwhile, Deer Lake is experiencing a mini boom of its own, according to the Western Star. The town council issued 30 building permits in May.  On top of that there’s a new 31 unit apartment building going up.

But it gets interesting if you look at the source of the growth in town:

With new homes come new residents, and local real estate agent Carol Anstey of Remax Realty Professionals Ltd., said the clients she deals with cover a broad spectrum.

“There’s a certain percentage of people whose husbands are flying back and forth to Fort McMurray who live on the Northern Peninsula.  We’ve had a few of those families relocate here because the airport is here and they don’t have to do the drive up the coast,” she said.

Anstey said some customers are moving from other parts of the country to Deer Lake to retire, while other younger families are growing out of their starter homes and looking for newer and bigger.

People from the Great Northern Peninsula are relocating to Deer Lake because someone in the family is actually a migrant labourer working in Alberta. It’s easier to live In Deer Lake because that’s where the airport is.  Meanwhile another bunch of people are actually retired from working somewhere else – not in the province either – who have decided, quite rightly, that Deer Lake is a beautiful place to retire.

Nowhere in there did anyone mention that the town is growing because the local economy is booming with new manufacturing or service businesses.

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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.

Therefore…

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.

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The Recession in pictures

Via John Gushue who got it from Business Insider who got it from Calculated Risk, a chart comparing job loss as a share of peak employment in every American recession since the end of the Second World War.

Yes Virginia, this is still the worst recession bar none. And as John Gushue points out in different words, those in the province who deal with the United States marketplace have got to be hurting.

There is more detail at Calculated Risk on this chart which is derived from the most recent employment numbers coming from the US federal government.

When you are finished digesting that bit of information take a look at this related chart which shows the percentage of American workers who have been out of a job for 27 weeks or more.  More people are out of work and they’ve been out of work longer than  in any previous recession.

Again you’ll find more on this at CR.

Three things to take away from all this:

1.  Two days left: If you haven’t voted for John Gushue over at the NL Blogroll yet, go do it now.  No fooling around.  You can come back in a minute when you’ve finished voting AND leaving a comment.  That gets him three votes in total.  Oh yes and tell your friends. And make sure you vote tomorrow too for John – you can do that under the rules of this contest. You already click out to John more than any other link at SRBP so the least you can do is vote for him.

2. The American recession is having an effect on this province and will continue to do so.  Anyone who tells you otherwise deserves a sharp jab to the throat to get them to stop fibbing.

3.  Stand by for some additional work along these lines on the local economy.  What’s actually been going on is more than a little at odds with what you’ve been told elsewhere.

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The Spin Economy

Spin is bullshit.

Plain and simple.

In this Canadian Press story, much is made of the fact that 29% of employers in a survey by careerbuilder.ca said they planned to hire next year.

Logically, that means that the overwhelming majority – 71% – planned to keep things just as they are or reduce staff.  And since the story says only nine percent of those surveyed planned to decrease their staff levels, that means that – you guessed it - twice as many of those surveyed weren’t planning to do anything with their staffing at all next year as indicated they’d be hiring.

So where in the name of merciful heavens did Canadian Press get the idea this means the survey is “adding optimism” that the year-long job doldrums are over?

They got it from the news release, of course written by a company which has a vested interest in hyping the crap out of expectations for a boost in hiring.

And Canadian Press isn’t alone.  Others have picked up the pure, undiluted bullshit from careerbuilder.ca and its American parent.  It’s all in line with the line coming from different sources for about a year now that the recession was over and the recovery was underway.  Unfortunately for the purveyors of all this nonsense, repeating the same crap over and over doesn’t actually do anything least of all make the untrue suddenly and miraculously true.

What’s really more interesting in all this is not that organizations with a vested interest in hyping the crap out of something – like government for example – actually hypes the crap out of something.  Nope.  Notice instead that even the venerated Canadian Press  is now being affected by the same problems that have afflicted other news outlets.  Reporters and editors aren’t suddenly innumerate. They just don’t have the ability any more to weed out bullshit, even when the bullshit is so patently obvious as in this news release.

If only 29% of employers plan to hire next year – or 20% in the United States version of the survey – rest assured of one thing: the recession ain’t over.

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Yipppeee! Bring on those higher energy prices

From the New York Times:

In 2009, some 31,000 households in Rhode Island will have their utilities shut off, and the effort to juggle energy bills and mortgages is helping push some homeowners into foreclosure, said Henry Shelton, director of the George Wiley Center, a consumer advocacy group here. (Here, as in many states, utilities may not disconnect the poor in the winter.)

Since 2000, the cost of heating a home with fuel oil has more than doubled and the cost of heating a home with electricity has risen by one third, outpacing many incomes. The recent surge in unemployment has thrown even more people into energy debt.

High energy prices will hamper any recovery in the United States.

Hindering a recovery of the American economy will screw everyone who depends on exports into the Untied States as a staple of their own economy.

Like say Canada generally and Newfoundland and Labrador in particular.

Any fiscal plan built on perpetually high energy prices is inherently flawed and prone to failure.

Catastrophic failure.

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