Volume Nine, Number Four   September 2004    www.columbiajournal.ca

BC’s economy still lagging


Marco Procaccini

Despite a recent slight drop in BC’s climbing jobless rate, and media hype over predictions of an upcoming turn-around, the province’s economy continues to stagnate, as wage rates fall and the consumer-price index widens, according to recent statistics Canada reports.

The BC Statistics web site says the unemployment rate in B.C. fell slightly in July 7.5 per cent, down from a high of 7.8 per cent in May. But it warns this may not be enough to off-set the overall rise in unemployment since 2002. In the spring, when summer hiring often causes a brief jump in new jobs, it says BC suffered a net loss of over 15,000 jobs.

Statscan also says while consumer spending, which dropped substantially in 2003, has improved slightly since the beginning of the year, it is minimal and the economy remains overall stagnant. It also reports that overall consumer savings in BC have now dropped to the lowest in the country. The consumer price index, the measure of consumer spending power relative to prices, widened again over the summer.

Also, it reports that the average wage rate in BC has fallen to  the $16 an hour $17.80 an hour reported in 2000. That was just behind Alberta, which averaged $18.04 an hour,

"Working people know that relying on a "Visa" economy is no way to rebuild our province's economic footing," Sinclair said, pointing out that average weekly wage rates for the first quarter of 2004 had decreased when compared to 2003. "Real spending power is on the decline."

In 2003, BC's personal savings rate as a percentage of disposable income was the worst in the country at negative 8.2 percent, he said.

Construction and real estate remain highly active due to prolonged low interest rates. But most of this activity remains confined to the lower mainland and southern Vancouver Island.

But both Sinclair and numerous economists warn that much of this is based on heavy borrowing of money, due to the decline in consumer savings and spending power.

“People aren’t buying houses because they have more money,” said David Fairey, senior economist and director of the Vancouver-based Trade Union Research Bureau, in a recent interview. “Rather they are taking advantage of the lower interest rate to buy homes now before they go up again.”

Fairey says it is no coincidence that increasing housing sales and residential construction across the country, and especially in BC, are accompanied by skyrocketing consumer debt loads due to mortgages. “Personal consumer debt is at an all-time high,” he said. “People are trying to buy houses and condominiums with less money in their pockets. Right now, lending institutions are happy to accommodate this because of the low interest rates of the Bank of Canada. That will change when they start to rise again.”

He added consumer desperation is the main cause of the buying spurt, as people try to take advantage of the low interest rates and resulting favourable mortgages to buy a home before they go up again, putting home ownership out of reach once more.

Sinclair highlighted increasing energy costs and BC's growing trade deficit as issues that needed immediate attention if BC is to achieve any real, sustained economic growth. Sinclair also commented on the BC Liberal's failing privatization strategy, calling it a sad effort to attract private investment to our province.

In spite of declining capital investment and consumer spending, along with rising unemployment, since the Liberals took office, Premier Gordon Campbell says the overall economy remains strong and things are looking up.

“We have a strong economy and a healthy investment climate,” he said in the latest release of the New Era in Review last month month. “We have set rules in place to streamline development projects…and our tax cuts have given consumer more money to invest in our economy.”

The government is celebrating its legacy of lowering employment, human rights and environmental standards and its overriding of municipal powers as “as cutting red tape,” “increasing workplace flexibility” and “creating investment opportunities.”

Campbell says the government’s progress board, made up exclusively of executives and senior bureaucrats of large corporations and elite investment agencies, is sufficient in assessing the state of the economy. Labour or community participation is not required.

The premier insists that the provincial government’s 2004-05 budget is balanced, despite what critics have slammed as overly optimistic economic projections.