As 2012 dawns, Ontario’s Northwest begins another year of change

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THUNDER BAY – Analysis – As 2012 dawns, Ontario’s Northwest begins another year of change and anticipation of change. On the economic front, the slow process of stabilization and renewal will continue. There is substantial construction activity underway in the region and particularly in Thunder Bay driven to a large extent by the public sector. There is also continuing activity in mining and resources but a broad-based employment recovery has yet to emerge. The region appears to have settled into a lower employment equilibrium level of just over 100,000 jobs, which is down substantially from its peak of 117,000 in 2003.

Using Ontario ministry of finance numbers, a comparison of Northwestern Ontario’s employment distribution with Ontario’s in 2003 and 2010 (See Figures 1 & 2) shows the Northwest has become even more dependent on employment in retail and health and social assistance as the share of employment in manufacturing dropped from 13 to 6 percent. While total employment in Ontario has recovered from the recent recession and is about 6 percent above where it was in 2003, employment in the Northwest is still about 10 percent lower than 2003. Much work remains to be done.

graphic one

graphic 2

There are a number of things to watch for in 2012:

First, is Thunder Bay’s continued growth and evolution as a center for northwestern regional government. While formal regional government status and political autonomy has been continually dismissed as an option by the provincial government, it would appear that regional government is coming about by stealth. As a result of the Northern Growth Plan, there is now planning underway for a regional economic development zone pilot project. The regional economic development area’s organizational structure and functional authority bears a lot of resemblance to the Northwestern Ontario Regional Development Authority Plan from 2007 which morphed into the Common Voice initiative as it became apparent the provincial government was not interested in more regional autonomy– and quite frankly, neither was the north’s political leadership. One of the key initiatives of that plan – the Northwestern Ontario Policy Research Institute – survived into the Northern Growth Plan but since the announcement of its approval in Spring 2011 there has been silence.

Nevertheless, there is a growing web of regional and district services ranging from the District Social Services Administrative Board, the Regional Food Distribution Network and the Superior North Emergency Medical Service (EMS). These are currently operated with a patchwork of overlapping mandates centered on shared arrangements between the City of Thunder Bay and assorted provincial government ministries. As well, there is Tbaytel which is providing telecommunications services on a regional level. As the number of these arrangements continue to grow, it is only a matter of time before there will be an attempt at consolidation into a more formal regional government apparatus.

Second, the Northwest will invariably need to keep an eye on the world economy and in particular, international commodity and resource prices. The volatility of the international situation means that the only reliable economic prediction will be that the economy will be uncertain. The forest sector in the region suffered additional setbacks in 2011 with the shutdown at the restarted mill in Terrace Bay as well as the shutdown at Global Sticks in Thunder Bay. While newsprint and pulp prices rose in the wake of the 2008 recession, they were relatively flat in 2010 and have been showing signs of weakening in 2011 despite the massive restructuring, which reduced capacity. As for oil prices, if they remain high, they will continue to generate activity out west for regional machinery and construction workers in the oil sands. As well, there is oil development in North Dakota, which may also be a source of opportunity for regional firms. Finally, metal and mineral prices will also be crucial. Copper and gold have been exhibiting a mixture of stability and strength and healthy mineral prices will be crucial to continued prospecting and development in the Northwest’s mining sector. Despite the new knowledge economy, rocks and trees will still be important to the regional economy in 2012. However, despite the promise of the Ring of Fire, nothing substantial will happen without the cooperation of the First Nations, competitive energy prices and new transportation infrastructure.

Third, the region will be affected by whatever steps the provincial government takes to reduce its deficit. Ontario faces a 16 billion dollar deficit, credit rating warnings and a debt of almost 250 billion dollars. The spring budget will use the advice of economist Don Drummond’s government spending review report to attempt a restructuring of government services that the Ontario government thinks will modernize delivery, save billions of dollars, and even improve public services. Dwight Duncan will eventually discover that only Harry Potter has magical powers and will be forced to revert to the fundamental deficit fighting tools of either cutting spending or raising revenues. Government spending cuts will be especially significant to Thunder Bay’s economy, which has been buoyed by public spending on infrastructure, education, health and research.

Evaluation

Northwestern Ontario enters 2012 with an employment situation that is vulnerable to international resource commodity price shocks and government deficit reduction exercises. In the face of these economic forces, leaders in the Northwest and particularly Thunder Bay will need to exercise their leadership skills with respect to regional advocacy, economic development and First Nation’s issues in a manner that accommodates the region’s growing political diversity. The Northwest is a large geographic expanse with a small and politically diverse population.

The western-most part of the region – from Dryden west to the Manitoba border is the closest to the booming west and its robust economic opportunities and examples. It also has the fastest growing population in the Northwest and this will likely be confirmed with the release of the population numbers in spring from the 2011 census. As a result, this part of the Northwest has been more prone to political experimentation sending a Conservative to Ottawa while remaining NDP at the provincial level.

The eastern part of Northwestern Ontario was hit the hardest by the forest sector crisis and in the absence of immediate new economic opportunities has embraced the politics of protest and gone NDP federally while still keeping an eye on government economic support by voting Liberal provincially. The provincial Liberal tide is strongest in the Nipigon-Thunder Bay-Atikokan Axis where Thunder Bay’s governing class sees itself not so much as a regional elite but as an extension of Toronto’s urban elite and its agenda of a green energy industrial strategy, knowledge sector research jobs and expanding government administration and regulation of social life and the economy. However, the successful implementation of this vision now rests on a minority provincial government.

As strange as it may sound, frequent and convenient air travel has resulted in Thunder Bay’s governing class developing views more in common with residents of downtown Toronto than Greenstone. Indeed, Thunder Bay is one of the islands of Liberal Red in the urban-rural split that characterized the results of the last Ontario election. When it comes to public sector spending cuts, it will be interesting to see how much the Toronto-centric Ontario government and bureaucracy values the affinity and devotion of Thunder Bay’s governing elite. It will also be interesting to see how long Thunder Bay’s governing elites can balance a vision of Thunder Bay as a regional center for the Northwest at home while portraying it as an extension of Toronto values at Queen’s Park.

Livio Di Matteo

Di MatteoLivio Di Matteo is an economist in Thunder Bay, Ontario specializing in public policy, health economics, public finance and economic history.  Livio Di Matteo is a graduate of the Fort William Collegiate Institute (1898-2005) whose school motto “Agimus Meliora” has served as a personal inspiration.  Livio Di Matteo holds a PhD from McMaster University, an MA from the University of Western Ontario, and an Honours BA from Lakehead University. He is Professor of Economics at Lakehead University where he has served since 1990. His research has explored the sustainability of provincial government health spending, historical wealth and asset holding and economic performance and institutions in Northwestern Ontario and the central North American economic region. His historical wealth research using census-linked probate records is funded by grants from the Social Sciences and Humanities Research Council of Canada. He has constructed, assembled and analyzed nearly 12,000 estate files for Ontario over the period 1870 to 1930. Livio Di Matteo writes and comments on public policy and his articles have appeared in the National Post, Toronto Star, the Winnipeg Free Press, Thunder Bay Chronicle-Journal, and NetNewsledger.com.  Livio Di Matteo has had an entry in Canadian Who’s Who since 1995.

This article was originally posted on Livio Di Matteo’s NORTHERN ECONOMIST Blog at http://ldimatte.shawwebspace.ca.

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