Winnipeg Free Press - PRINT EDITION
By: Liveo Di Matteo
Last year, when the provincial GDP growth numbers were released for 2009, Manitobans basked in the news that despite the storm of the great recession, Manitoba was Canada's economic growth leader. Of course, the Manitoba economy did not grow at all in 2009 but then everyone else's economy shrank.
When it comes to economic performance, everything is relative. Statistics Canada has released the preliminary provincial growth numbers for 2010 but the news has been buried by the fascination with royal wedding as well as the federal election.
It is probably just as well. The results are not as favourable for Manitoba this year.
While Manitoba led the country during the economic downturn, it is lagging the country when it comes to the recovery's upturn. While Canada's real GDP growth for 2010 is estimated to be about 3.3 per cent, Manitoba's comes in at two per cent, which places it at the bottom tied with Prince Edward Island -- also at two per cent -- and just behind Nova Scotia at 2.1 per cent.
While Manitoba's performance is steady, the fact is being a leader when times are bad and growth low but a follower when times are good and growth high is not the best recipe for long-run economic performance.
The explanations for this performance vary. One explanation, as put forward by the Manitoba Bureau of Statistics, is the number is simply an underestimate and when the final numbers are in, the growth rate will be revised upwards.
Indeed, the Manitoba government forecasts the economy in 2011 is expected to grow at a more respectable 2.7 per cent and 2010 should come in at 2.5 per cent.
If that is the case, however, Manitoba will still rank at the bottom because every province's numbers are going to be revised. This explanation only works if there is something systematically different about how Statistics Canada estimates Manitoba's GDP and that is not likely.
Is there something different about Manitoba's economy? Manitoba and Saskatchewan are still highly dependent on agriculture. One of the reasons both their performances were weaker in 2010 was due to a fall in crop production as a result of bad weather.
This in turn can also especially affect manufacturing in Manitoba as much of the manufacturing sector is tied to food processing and agricultural equipment.
The weather has also affected economic growth in the United States recently as the winter storms in the first quarter of 2011 helped slow economic growth there to 1.8 per cent.
If one compares Manitoba's economic growth in 2010 with that of nearby North Dakota, however, one finds North Dakota grew at 3.5 per cent, more than twice the rate of Manitoba's economy.
One can point to the fact that despite the lower GDP growth rate, Manitoba's employment is up and employment and labour-force growth is ranked fifth- and second-best among the provinces respectively.
Weekly earnings in 2010, however, were up only two per cent and below Canada's increase of 3.6 per cent. Having superior growth in employment but not in earnings suggests the labour force may be lagging in terms of its productivity.
So what is happening in Manitoba? Several things.
First, productivity in Manitoba is lagging other parts of the country and while more jobs are being created, their productivity contribution is not robust. This is a long-term problem best dealt with over the long run with improved investment in human capital and training.
Second, Manitoba's economy is still very dependent on agriculture both as a primary production sector as well as an input into manufacturing. Bad weather in 2010 helped slow that sector down and with the flooding of 2011, the new crop year is probably not getting off to the best start.
The economic impact of weather is more problematic as government policy cannot change the weather. One solution may be to encourage more agricultural production in products that are less affected by the weather. Apparently, wheat has not done as well recently whereas receipts for hog production are up.
Another solution is to further diversify the manufacturing sector into non-agriculturally related production and further diversify the economy into service and knowledge-sector activities.
This, however, is where the private sector also needs to take a leadership role as wealth creation is ultimately a private-sector activity and government incentives can only follow where the private sector sees opportunity.
Livio Di Matteo is a professor of economics at Lakehead University.
Republished from the Winnipeg Free Press print edition May 17, 2011 A10
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