Randy McDonald (rfmcdpei) wrote,
Randy McDonald

[LINK] "Few bumps in la belle province's recession ride"

Heather Scofield's Globe and Mail article may advance some controversial claims. about the regional structures of the Canadian economy. Ontario has traditionally done better than Québec, during good times and bad. It's starting to be the other way around.

For the country's second most populous province, it could have been a lot worse, even though the global crisis has struck hard at manufacturing and exports – two areas core to Quebec's economy.

Thanks to export diversification, a real estate market that didn't overheat and sheer luck, the province that makes up 20 per cent of Canada's economic heft has fared much better than in past recessions.

“The main industries of Quebec are not in restructuring mode. This is just a cyclical downturn,” said Sébastien Lavoie, economist at Laurentian Bank of Canada in Montreal.

The most obvious example of the mild nature of the recession in Quebec is in the labour market.

The 0.7-per-cent drop in employment in the past year compares with a 1.8-per-cent contraction nationally, and much larger declines in the other major provinces.

Compared with previous recessions, Quebec workers have had it easy this time. The 1990s recession cut the provincial work force by 2.9 per cent, while the 1980s recession destroyed 7.4 per cent of jobs.

Quebec's unemployment rate, now 8.8 per cent, is slightly above the national average (8.6 per cent), which is usual. But it is significantly below Ontario's 9.6 per cent. And most of Ontario's job losses have been full-time positions, while Quebec's are mainly part-time.

Overall growth in Quebec contracted sharply in the first quarter, but, again, not as sharply as the country as a whole, nor as Ontario in particular. Indeed, Quebec's growth has outpaced Ontario since 2006 – a trend that is expected to persist into next year, and something that has not happened in decades.

Why is this the case?

“Quebec has gone through a transformation,” said John Baldwin, director of the economic analysis division at Statistics Canada and one of Canada's top authorities on productivity.

Free trade with the United States encouraged all of North America to shift from the manufacturing of non-durable goods to durable goods, to take advantage of economies of scale and growing global markets, according to a new paper by Mr. Baldwin.

But Ontario's manufacturing and exports had always been concentrated in durable manufacturing – steel, cars, machinery and equipment.

Quebec, on the other hand, was the centre of non-durable manufacturing for Canada, with its textiles and shoes.

During the 1990s and especially in the past decade, Mr. Baldwin said, Quebec switched over, but expanded into areas where Ontario was not as dominant – aerospace and pharmaceuticals.

Quebec had a painful adjustment, scaling back its textile sector and shutting down large parts of its pulp and paper industry in the past decade.

But that restructuring is largely over, economists say.

In this recession, like recessions of the past, manufacturing has suffered more than other sectors. But since Quebec does not have Ontario's dependence on U.S. consumption of cars, and is not as dependent on energy exports as the West, it has not been as vulnerable.

Exports have also surged in areas like pharmaceuticals, the government was already investing heavily in infrastructure before the recession's arrival, and Québec avoided a real estate bubble. Against this is the high Canadian dollar and the delayed effect of the recession on exports.

Might it be possible that for the next little while Québec will be central Canada's economic motor while Ontario deals with its growing rustbelt economy? Or are the analyses of Scofield and Baldwin misguided?
Tags: canada, economics, links, ontario, québec
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