Monday, December 6, 2010

The Manitoba miracle

Downtown Winnipeg, Manitoba, Canada. The downt...Image via WikipediaSix years ago, Rylan Hart, a contractor from Winnipeg, packed up his tool box and headed west. While Manitoba’s economy was expected to continue plodding along, British Columbia was on the cusp of a housing boom, and as a skilled tradesman he was perfectly positioned for the windfall when it came. But Hart had been warned by veterans of B.C.’s “roller coaster” construction sector not to expect the good times to last, and they didn’t. The combination of recession, an Olympic hangover and the new harmonized sales tax sent shivers through his industry. “Everything just tanked,” says Hart, 35. So in July he did what a lot of others in the Manitoban diaspora have done over the last year—he packed up and headed back to the Prairies.
But if the Winnipeg that Hart left was dull but stable—it’s often said Manitoba doesn’t suffer economic slumps because it never enjoys boom times in the first place—the Winnipeg he returned to, with its luxury condo projects, massive housing developments and stunningly low unemployment, is scarcely recognizable. “From the moment I got back I’ve been going full tilt,” he says. “I keep having to tell [potential clients], ‘No, I’m too busy.’ I’ve already got work until at least next spring lined up.”

By many measures, Manitoba has emerged as the shining star of Canada’s recession and subsequent recovery. True, economic growth fell to zero last year, but that meant it was the only province that didn’t shrink. And with the recovery in full swing, Manitoba enjoys the lowest unemployment rate in the country, at 5.2 per cent, compared to a national average of 7.9 per cent and 8.6 per cent in Ontario. The housing market is going strong, and Manitobans are outspending their countrymen at the mall and at car dealerships. “The mood is very optimistic here,” says Dave Angus, president of the Winnipeg Chamber of Commerce. “Psychologically, our ability to weather the economic storm has been huge.”
There are several reasons for all this. The one economists typically point to first is the diversity of its economy. No other province has as eclectic a mix of businesses and services at its core. There are Manitoba’s vast fields of wheat and other crops, of course, which in a similar way helped American states like North and South Dakota and Nebraska survive the recession easily. But crop production makes up just five per cent of the Manitoba economy. Far more important are sectors like manufacturing, with its focus on aerospace and buses, as well as financial services, transportation, and mining and petroleum production. “Manitoba is the most diverse of all the provinces,” says Paul Ferley, assistant chief economist for the Royal Bank of Canada. “In booming times you don’t see Manitoba at the top end, but in periods of economic weakness it usually doesn’t show the extreme declines.”
But that doesn’t tell the full story of how the province dodged the Great Recession bullet. Even before infrastructure became the buzzword of the global recovery, Manitoba had a number of high-profile projects on the go that helped shield it from the downturn, such as the $800-million expansion of the Red River floodway, a $585-million project to expand Winnipeg’s airport, and the construction of the 23-storey Manitoba Hydro tower in downtown Winnipeg. While construction on those projects has largely wrapped up, work is under way on the Canadian Museum of Human Rights, and the province appears intent on building a new stadium for the Winnipeg Blue Bombers, even though the price tag has soared 40 per cent to $160 million.
There’s an obvious theme to many of those projects—they wouldn’t be happening without massive spending by all levels of government. Critics argue that government spending is crowding out private investment and inflicting long-term damage to the economy. Manitoba has the highest net provincial debt as a share of its economy of any of the western provinces, at 24.4 per cent, though that’s still far below the Canadian provincial average of 37.6 per cent. And, ironically, as a have-not economy Manitoba relies heavily on the generosity of Ontario taxpayers as well as Alberta through federal-provincial transfers. It’s led Peter Holle, president of the Frontier Centre for Public Policy, to label Manitoba a “zombie economy.”
But those concerns have taken a back seat as the job market and consumer confidence have heated up. Retail sales in the province climbed 6.6 per cent in August from the year before, while the country as a whole managed an increase of just 3.5 per cent.
On a recent Saturday, a cold wind failed to keep car buyers away from Birchwood BMW on the western edge of Winnipeg. Francis Fang, an accountant, strolled between shiny black Bimmers on the hunt for a sports coupe to go with the Mercedes C-Class he recently bought. “I’ve travelled to Calgary and Vancouver and you could just feel things were more depressed,” he says. “We’d watch the recession on the news, but you didn’t feel it through your work or your jobs.” It’s been a similar story at the Gauthier Cadillac Buick GMC dealership in the city’s north end. “We’re seeing it from the front line,” says vice-president Jason Cross. GMC truck sales have doubled over the last year. Not surprisingly, national retail chains have taken note. Ikea has announced plans to open its first store in the city, possibly in 2012.
Low unemployment in Manitoba isn’t necessarily a new phenomenon, but in the past it’s been driven by the fact so many people leave the province to look for work elsewhere. Manitoba still suffers from negative net interprovincial migration, but that has slowed down and is more than made up for by a healthier inflow of foreign immigrants. (Over the last year, the province saw its highest population growth since 1982.) Manitoba has been the most aggressive of all the provinces at using the Provincial Nominee Program to lure skilled immigrants, says Mario Lefebvre, director of the Centre for Municipal Studies at the Conference Board of Canada. Manitoba now attracts roughly 13,000 immigrants a year, which, given the size of the province’s population, is a rate on par with Toronto’s. Manitoba’s immigration strategy got a shout-out from the New York Times recently, when the paper hailed Winnipeg as “a hub of parka-clad diversity.” It’s helped drive the local housing market—even amid the recession, housing starts came in at around 4,200 last year, one of the highest levels since the 1980s.
Can Manitoba keep it going? Ferley at RBC believes economic growth in Manitoba will actually come in below the national average this year, partly because grain production is down 25 per cent due to poor weather, and because other provinces that saw their economies hit hard are enjoying a strong rebound. But Ferley expects growth in Manitoba to pull ahead again next year, hitting 3.7 per cent, a full percentage point above the national average.
Problems persist, of course. Incomes in Manitoba still lag far behind those in other western provinces. Downtown Winnipeg continues to suffer from poverty and high crime rates. And one of the big lures for former residents boomeranging back to Manitoba has been affordable house prices and a lower cost of living—both of which are at risk as a result of the housing boom. But for now, Manitoba’s fortunes appear to finally be moving in the right direction. “This is a great place to be right now,” says Hart, the contractor who returned this past summer. “I’m very happy with the way things are going, and I don’t plan on leaving any time soon.”

Source: http://www2.macleans.ca/2010/12/06/the-manitoba-miracle/
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