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The Maritimes’ challenge: jobs vs. productivity

The Maritime Forces Dockyard and downtown Halifax.

Andrew Vaughan/THE CANADIAN PRESS

This month's Labour Force Survey brought more bad news for the Maritime Provinces. The unemployment rate in the region is up in all three provinces over August of last year. New Brunswick and Nova Scotia have been particularly challenged in the area of job growth since the end of the recession.

From August, 2009, to August, 2012, the Canadian economy added more than 740,000 new jobs (on a seasonally adjusted basis) – a solid growth rate of 4.4 per cent. Nova Scotia, by contrast, has added a net 5,300 jobs or a growth rate of only 1.2 per cent.

New Brunswick has the weakest labour market of all 10 provinces since the end of the recession. Since August, 2009, the number of total employed persons has dropped by an estimated 7,700 or a decline of 2.1 per cent.

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For New Brunswick and Nova Scotia, the weak employment growth goes back to the mid-2000s. The inability of the provincial economies to foster job growth is a serious concern for policy makers and business leaders in the region.

Or is it?

Going back decades, one of the reasons cited for the lack of economic prosperity in the Maritimes has been the relatively low level of labour productivity. The amount of gross domestic product (GDP) per worker (or per hour worked) has been well below the national average.

The silver lining (if you can call it that) from the tepid employment situation in New Brunswick and Nova Scotia has been the increase in labour productivity. The economy (adjusted for inflation) in the region continues to grow slowly even as the total number of jobs has stagnated (in the case of Nova Scotia) and declined (New Brunswick).

In 2004, New Brunswick's real GDP per employed person was 82 per cent of the 10-province average. By 2011, it had increased to 86 per cent of the 10-province average. Only Manitoba had a faster growth rate in labour productivity as measured by provincial GDP per employed person.

Ontario, Alberta and Quebec have all witnessed a decline in labour productivity over this period as the growth rate in total employment in those provinces has outpaced the growth in real GDP.

New Brunswick has witnessed labour productivity gains in both the public and private sectors. Real GDP per worker in manufacturing increased by 11 per cent from 2004 to 2011. In the health care and social assistance sector, real GDP per worker increased by 11 per cent – faster than all other provinces in Canada. New Brunswick's education sector is getting more productive too. Over the seven year period, real GDP per worker grew by 12 per cent – second only to Saskatchewan.

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The truth is that provinces like New Brunswick, Nova Scotia and Prince Edward Island need to have their cake and eat it too. They need to foster more job creation and increased labour productivity.

The 2,000 people that waited in long lines in Fredericton recently to get a chance to work in Alberta's oil and gas industry are a stark example of why the region needs more good paying jobs. The unemployment rate in New Brunswick is now 10.4 per cent and more than 19 per cent among young people.

At the same time, increasing labour productivity is important as it will help the region become more competitive and should spark wage gains in the future.

And there is a third dynamic at play in the Maritimes. The provinces have doubled and even tripled the number of annual immigrants in an effort to address medium and long term demographic challenges. In the short term, this is exacerbating the unemployment problem and leading to increased inter-provincial migration.

The Maritime Provinces can learn from Newfoundland and Labrador which has been among the top performers for economic growth, labour productivity improvement and even job creation in recent years. Since August 2009, employment in Newfoundland and Labrador has grown by nearly eight per cent.

What the Maritime Provinces need is a prolonged period of solid economic growth. This would allow for labour productivity gains, a moderate level of job creation and better integration of new immigrants into the labour market. Importantly, it would also help strengthen the three provinces' public finances.

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Given the region's history, this will be no easy task.

David Campbell is the president of Jupia Consultants Inc., an economic development consulting firm based in Moncton, N.B. He is a research fellow with the Canadian Institute for Research on Public Policy and Public Administration at the Université de Moncton. He also authors a daily blog on economic issues in Atlantic Canada, which can be found at www.davidwcampbell.com.

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