I moved here in 2006, a clueless CFA. The economy was picking up and the bars were full of young people who had just moved back after a decade away.
It was great, but there was an uneasiness I didn’t really get. A lot of my friends looked at the busy streets and freshly painted houses with reservation, like they were waiting for the other shoe to drop.
If you read the province’s 2016 Economic Review, released in October, it feels like that shoe is dropping. The report forecasts a 14 per cent decrease in employment, and an unemployment rate of 19.6 per cent by 2019. Yeah. In four years, one in five people in this province will be unemployed.
The last time unemployment was that high was in 1992, after the cod moratorium was announced.
Doug May is an economics professor at MUN. He helped develop the Newfoundland and Labrador Econometric Model, which is used to make these forecasts. He says the future might not be as bleak as the report predicts.
“There’s more subjectiveness than you might think,” he says.
The dive in employment numbers is the result of two bad situations. “One is the layoffs in the construction projects, or the winding up of the construction projects, like Hebron and eventually Muskrat Falls,” he says. “The other thing which I think was built into those April budget figures, and into the economic review, was the layoffs in the public sector.”
“I don’t think the government layoffs will be as severe as they might have intended.”
We’ve already seen evidence of this. When the government dropped their budget this spring, they said there’d be another mini-budget in October. That mini-budget was expected to include sweeping layoffs for government workers. But instead of a mini-budget, we got a fall fiscal update and those layoffs didn’t happen. “And partially there is a little bit of a cushion there because oil prices have come up,” says May.
But let’s say those jobs are cut.
“Let’s go to a place like Bonavista or Lewisporte and one of you loses your job, then what do you do?” asks May. “Newfoundlanders have never stuck around. They just move.”
10 years after the cod moratorium, the province’s population dropped by 10 per cent. May estimates outmigration will outpace unemployment, and we won’t hit 20 per cent because the people without jobs will pack up and move away. “Talking to my students, the vast majority — well, 80 to 85 per cent — don’t see any future here,” he says.
The Economic Review forecasts a population drop from just under 530,000 to 514,000 by 2019. May thinks it might be more realistic to anticipate a lower unemployment rate and a population below the half-million mark.
It’s a bad situation, yes. But we’re in the best possible version of that terrible situation, says May. “The long run is going to be fairly bright because you have all these resources available,” he says. “It’s not as though you’ve got an exploding population here. You’ve got people who are going to be retiring. A lot of them. And you don’t have the young people around them to take over these positions. So you’ve got this period of adjustment.”
It’s going to be a rough five years. A lot of people are going to leave. But in ten years, there will be lots of jobs. So they can come back. Again. “To use a British expression,” he says, “mind the gap.”