Economic boom is not as simple as it seems
4 May 2013
REGINA — Saskatchewan economy watchers got some good news and some bad news this week.
The good news is that Saskatchewan will continue to ride the commodity wave for the foreseeable future. That’s also the bad news.
According to Mario Lefebvre, the affable director of municipal studies with the Conference Board of Canada, who spoke to the Saskatchewan Real Estate Forum in Regina this week, the province is smack dab in the middle of the sweet spot of the Canadian economy.
“Saskatchewan is enjoying a period of solid economic prosperity,” Lefebvre told about 500 delegates at the forum. And that prosperity should continue for the short to medium term, or for as long as the commodity boom lasts.
Lefebvre listed a litany of positive economic indicators: Population growth (averaging 1.5 per cent year, versus one per cent nationally). job growth (averaging 1.5 to two per cent in recent years) and economic growth (which has been running ahead of the national average at two to three per cent for the last three years).
And the future looks like more of the same. “This is the new normal,” Lefebvre said.
The Conference Board is forecasting economic growth to average about three per cent, employment growth between two and 2.5 per cent, and disposable income growth of three to four per cent this year and next. Population growth — the sine qua non of a healthy economy — is expected to remain in the range of 1.5 to two per cent from 2013 to 2018. What’s not to like?
Nothing, except that unemployment is too low. Yes, that’s right. Too low. In fact, Lefebvre would like to see the unemployment rate closer to 4.5 per cent rather than below four per cent where it’s been lately because the labour shortage is starting to impede economic growth.
Why is Lefebvre so bullish about the Saskatchewan economy? Because the province produces what the world needs, namely food and fuel. In other words, as long as people need to eat, heat and electrify their homes and workplaces and get from one place to another, Saskatchewan’s economy will do fine, thanks very much.
In Lefebvre’s view, Next Year Country has finally arrived. “You’re there. It’s happening. It’s now and it’s your new reality,” he told the forum on Tuesday.
The next day at the Williston Basin Petroleum Conference, keynote speaker, economist and author Jeff Rubin was singing a somewhat different tune, or more accurately, the same tune in a different key.
While Lefebvre was all sweetness and light, Rubin was acerbic and dark. Channelling Jack Nicholson as Col. Nathan Jessup in A Few Good Men (you know, the guy who told the Tom Cruise character, “You can’t handle the truth!”), Rubin was the prophet of doom, preaching to a room full of people who make their living in the oil business.
Rubin, the best-selling author of The End of Growth, told the conference that “triple-digit” oil prices and technological innovations, like hydraulic fracturing, were making the concept of “peak oil” — the notion that we’re running out of oil — obsolete. Moreover, Rubin said the U.S. could become energy self-sufficient in 20 years, thanks in part to the Bakken light oil play that has turned North Dakota from a sleepy rural backwater to the second-biggest oil producing state in the country.
But Rubin said the real danger isn’t running out of oil or being dependent on foreign oil. The real question is: Are we going to produce oil at a price we can afford and grow at the kinds of growth rates that we’ve seen in the last 30 or 40 years? And the answer to that is, in Rubin’s view, no.
The global economy, which can motor along at five, six or higher rates of growth at $20 US a barrel oil, will limp along at one and two per cent rates of growth with triple-digit oil prices, Rubin says. In other words, the thing that makes the oil industry — and the Saskatchewan economy — go like stink is the same thing that will grind the global economy to halt.
The irony is the good news/bad news commodities boom story is just two sides of the same coin.
via Prosperity Saskatchewan http://prosperitysaskatchewan.wordpress.com/2013/05/06/economic-boom-is-not-as-simple-as-it-seems/