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Interior economy remained stable in 2018

BY STAN MITCHELL

Chartered Professional Accountants Association of B.C.

Over the past two years, the Cariboo has endured two of the most devastating wildfires our region has ever seen. The fires not only affected our supply of lumber, but also reduced tourism and associated activity, as well as destroyed homes and businesses. Despite this, our region’s economy, and by extent the labour market, remained relatively stable, as construction activity and pulp and wood products manufacturing continued.

Increased demand from Asian countries kept the pulp manufacturing industry active throughout 2018. High demand and prices also increased demand from the region’s wood product manufacturers for most of the year. As a result, the manufacturing industry expanded by 1,100 jobs, reaching its highest point in five years.

According to CPABC’s Regional Check-Up report, both Prince George and Williams Lake experienced a construction boom due to residential, industrial, and government projects. The value of our region’s building permits increased by 45.8 per cent. In addition, construction at BC Hydro’s Site C project picked up. Increased construction activity led to the addition of 1,200 jobs in 2018.

In contrast, our region’s mining industry faced some challenges, and the mining and oil and gas sector lost 400 jobs in 2018. Volatile copper prices and below normal water levels affected operations. Production at the Gibraltar copper-molybdenum mine decreased by 11 per cent. At Mount Polley, copper and gold production fell by 22 and 23 per cent respectively. Copper and gold production at Mount Milligan were also down 12 per cent.

While gains were made, overall, the Cariboo’s total labour market shrank in 2018. This was due to a reduction of 2,000 jobs across four service industries. After two years of solid growth, the trade industry lost 1,500 jobs. The transportation and warehousing industry also shrank considerably, and lost 1,100 jobs. The job losses in these areas were offset by small gains in most other major service sector areas which resulted in the net loss of 2,000 service sector jobs.

The loss of these jobs could be attributed to growing labour market shortages. There were 2,100 individuals who left the labour force, and our region’s unemployment rate fell by 1.8 percentage points to 5.6 per cent in 2018. When an unemployment rate falls under five per cent, it is a sign that the labour market is near capacity, which is likely the case in Cariboo. With fewer people in the labour force, the labour market is tighter, leading to shortages in some industries and leaving fewer people unemployed. In fact, the number of Employment Insurance recipients in the region fell by a quarter in 2018, indicating more employment opportunities.

Looking forward, what could we expect for our region? Prospects for 2019 seemed mixed. The outlook for our construction sector remains positive and large development projects, such as Site C and LNG Canada, will likely create employment and business opportunities. The reduced timber supply and tumbling lumber prices in the last quarter of 2018 pushed major manufacturers to either temporarily or permanently halt production. This resulted in a 4.6 per cent overall reduction in lumber production in 2018. While lumber prices recovered slightly in early 2019, continued negotiations with the U.S. over softwood lumber and shrinking supply is impacting production as evidenced by recent announcements of sawmill closures and curtailments. In addition, the outlook for our mining industry is also uncertain – with Mount Polley expecting to be placed on care and maintenance until copper prices improve.


Stan Mitchell, CPA, CA is a partner at KPMG LLP in Prince George.