Thompson-Okanagan Development Region

Transcription

1 Thompson-Okanagan Development Region The Thompson-Okanagan Development Region (TODR) is situated in south central BC, bound by the Cascade Mountains in the west and the Monashee Mountains and Alberta border in the east. Its total land area is 94,308 km2. In 2010, the TODR s population was 524,161,1 which represented 12% of BC s total population. The TODR s largest centres are Kelowna, Kamloops, Vernon, and Penticton. Last year, for the first time in more than 25 years, the TODR s population declined slightly, by 439 persons. This decrease resulted from fewer people moving into the region as net migration last year was half of what it was in 2008 before the economic downturn.2 The TODR was also the only Development Region in the province to decrease in population. The TODR s economy has evolved beyond its historic base of forestry and mining to include a mix of industries. It is also known for agriculture/viticulture, tourism and trade/ services, and more recently as a centre of post-secondary education and diversified manufacturing. The TODR s attractive climate has made it a popular retirement destination, which, in turn, has generated substantial investment in development and construction. This has generated the need for additional investment and construction of infrastructure and utilities to serve the region s expanded population base. The TODR, like many parts of the province, started to show signs of economic recovery last year. The region s forest and mining industries benefited from higher commodity prices and demand, particularly from Asia, for lumber and mineral resources. This included five new mine proposals,3 as well as the construction, expansion, or re-opening of three other mines4 and construction of the Adams Lake sawmill, which was specially designed Statistics Canada, Estimates of Population, by Sex and Age Group: Census Divisions and Census Metropolitan Areas Census boundaries, Annual, CANSIM, Table BC Stats, Regional District and development Regions: Migration Components, February Ruddock Creek Zinc-Lead, Clearwater Molybdenum, Harper Creek Copper-Gold, Siwash/Elk Gold and Spanish Mountain Copper-Gold mines. 4 Afton Copper-Gold, two expansions at Highland Copper and restarting of Cooper Mountain mine BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 1

2 to process pine-beetle killed wood products. 5 Tourism room revenues nudged up 6.8%. 6 Higher home sales in late 2009 and early 2010 also spurred a 53.6% increase in residential buildings permits. 7 These improvements led to job growth and lower unemployment, especially among youth. WORK Indicators Job Creation Job creation is a primary indicator of the region s economic health and shifts in its economy. After significant job losses in 2009 (-8,600 jobs), the TODR s economy rebounded last year with the addition of 9,200 new jobs. Last year s job growth rate of 3.7% exceeded the provincial average (1.7%) and was second only to that of the Cariboo (6.4%). More than three-quarters of the region s job gains (7,100 jobs) were in the Kelowna Census Metropolitan Area (CMA). 8 Table 1-1: Employment, Thompson-Okanagan Development Region, 2005 to Job Creation (000) TOTAL EMPLOYMENT (000) Goods-Producing Sector (000) Agriculture Forestry, fishing, mining, oil and gas Utilities Construction Manufacturing Services-Producing Sector (000) Trade Transportation & warehousing Finance, insurance, real estate & leasing Professional, scientific & technical services Business, building & other support services Educational services Health care & social assistance Information, culture & recreation Accommodation & food services Other services Public administration Source: Statistics Canada, Labour Force Survey Historical Review 5 Ministry of Finance, Major Projects Inventory, December BC Stats, Tourism Sector Monitor, February BCREA, Statistics and CMHC, Housing Now: Kelowna CMA, January Statistics Canada only provides a sub-regional labour market breakdown for the Kelowna CMA and the Thompson Okanagan Development Region as a whole. No data is available on a regional district basis. 9 Industries with 0.0 are estimated to have less than 1,500 employed at that particular point in time, thus the numbers presented in the table may not add up to total sector figures, and job creation statistics can not be calculated BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 2

3 The TODR s service sector added 8,200 jobs last year or 89% of the Region s total employment growth. In 2010, eight out of eleven service industries reported job gains. The re-staffing of positions cut in 2009 likely accounts for job growth in trade (3,700 new jobs), information, culture and recreation (2,800 jobs), transportation and warehousing (2,200 jobs), and education (1,300 jobs). While last year s increase in residential building permits explains jobs created in professional, scientific and technical services (2,300 jobs) and finance, insurance, real estate and leasing (800 jobs). Service industries with fewer jobs last year were health care and social assistance (-4,300 jobs), business, building and other services (-2,300 jobs), and accommodation and food services (-700 jobs). Health care job losses were recorded primarily in ambulatory care 10 services 11 and may represent unfilled job vacancies rather than cuts as demand for these services has not diminished. Less construction, cost pressures in tourism, or job vacancies likely account for the remaining job losses. The TODR s goods-producing sector also added 1,000 new jobs last year. Job growth occurred primarily in mining (1,800 jobs) as well as manufacturing (1,500 jobs), forestry (600 jobs) and utilities (200 jobs). These increases reflect high commodity prices and renewed mining activity, a surge in lumber demand from Asia and the expansion of power generating facilities in the Region. These gains more than offset losses in agriculture (-1,700 fewer jobs) and construction (-1,400 jobs). Unemployment Rate In 2010, the unemployment rate in the TODR declined from 9.4% in January to 8% by year end. The region s annual average unemployment rate of 8.6% was the third-highest among the Development Regions after the North Coast (10.2%) and Kootenay (9.3%). Nevertheless, the TODR enjoyed a decline in the rate of unemployment (0.2 percentage points or ppt), one of six Development Regions to do so in Table 1-2: Unemployment Rate, Thompson-Okanagan Development Region, 2005 to 2010 Percentage Point (ppt) Change Thompson-Okanagan 5.2% 5.0% 4.4% 5.5% 8.8% 8.6% 3.4 ppt -0.2 ppt British Columbia 5.8% 4.8% 4.3% 4.6% 7.7% 7.6% 1.8 ppt -0.1 ppt Source: Statistics Canada In 2010, young workers in the TODR appear to have benefited from last year s job growth, as the youth unemployment rate decreased by 2.5 ppt to 10.6%. This rate was lower than the provincial average and tied the Vancouver Island/Coast for the third-lowest youth unemployment rate behind the Northeast (8%) and Kootenay (9.6%). The TODR s decline in youth unemployment last year was outstripped only by the Cariboo, where the rate dropped by 5.2 ppt. 10 Ambulatory care includes practitioners office staff, outpatients labs, home care, ambulance services, etc.. 11 BC Stats, Employment and Unemployment by Detailed Industry, BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 3

4 Table 1-3: Youth (age 19 to 24 years) Unemployment Rate, Thompson-Okanagan Development Region, 2005 to 2010 Percentage Point (ppt) Change Thompson-Okanagan 6.5% 6.9% 7.1% 9.1% 13.1% 10.6% 4.1 ppt -2.5 ppt British Columbia 8.5% 6.5% 6.1% 6.8% 11.1% 11.3% 2.9 ppt 0.2 ppt Source: Statistics Canada, Labour Force Survey, Custom Table INVEST Indicators Business and Investment Activity Development fuelled by population growth and tourism demand has been a major economic stimulant in the TODR over many years. Last year, despite a 53.6% increase in residential building permits, capital investment and development in the region declined for the second consecutive year. According to the BC Major Projects Inventory, 15 new project proposals valued at $1.4 billion were initiated in 2010 compared to 34 valued at $2.8 billion in New projects starting construction in 2010 were also down from 23 projects worth $1.7 billion in 2009, to 12 valued at $0.8 billion last year. 12 This decrease reflects the withdrawal of second home, resort, and investor buyers, who have been the catalyst for much of the region s development. Last year s rise in housing starts was driven by local demand stimulated by lower construction costs, HST avoidance, and expectations of higher mortgage rates. 13 The TODR s backlog of projects proposed, under construction, or on hold also decreased from $33.9 billion in December 2009, to $30.4 billion in December Approximately 61%, or $18.5 billion, of this investment is residential, resort/residential, or commercial development, which was 4% lower than in 2009 ($19.6 billion), and 9% lower than 2008 ($20.3 billion) before the economic downturn. This project inventory includes a number of large multi-phase developments that will be built over several years, the largest of which are the $2.1 billion Glenwood Highlands development in Kelowna and the $1.5 billion Lakestone golf residential/resort development. Industrial, institutional, and government-funded infrastructure projects totalled $11.9 billion in December These projects include $5.9 billion in energy and transmission projects, $2.7 billion in mining projects, $1.6 billion in hospitals, education facilities, and municipal infrastructure and $1.5 billion in highway and road improvements. The largest of the projects under construction are the Highway 1 Kicking Horse Canyon Improvements ($972 million), Kelowna Hospital expansion ($433 million), Copper Mountain mine development ($438 million), and Highland Copper mine expansion ($400 million). 12 Ministry of Finance, Major Projects Inventory, Quarterly Reports, 2009 and CMHC, Housing Now, Kelowna CMA, January BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 4

5 2011 could be another slow year for the development industry, as investor and second-home buyer demand has yet to return, focusing the market more on local buyers. 14 Lingering inventories of newly constructed units and competition from well-priced resale units that are approaching record high listings are also constraining new construction. While housing inventories are expected to draw down this year, anticipated higher mortgage rates 15 could also dampen demand. Incorporations and Bankruptcies Business incorporations and bankruptcies provide a good measure of entrepreneurial and investor confidence. After a decline in 2009, business incorporations in the TODR rebounded in 2010, increasing by 202, or 8.5%, compared to the year before. This improvement was comparatively moderate and ranked fourth among the Development Regions behind the Northeast (46.5%), Nechako (22.2%), and Mainland/Southwest (16.6%). For the ninth consecutive year, bankruptcies in TODR went down in 2010 (-37.3%). This decline was the fourth largest in the province behind those of the North Coast (-100%), Cariboo (-91.7%), and Mainland/Southwest (-38%). These findings suggest that entrepreneurs and investors in the TODR were both cautious and resilient enough to weather recent economic challenges. Table 1-4: Business Incorporations and Bankruptcies, Thompson-Okanagan Development Region, 2005 to 2010 Percentage Change Business Incorporations 2,948 3,196 3,446 3,124 2,375 2, % +8.5% Business Bankruptcies % -37.3% Source: BC Stats and Office of the Superintendent of Bankruptcy Canada Business Establishments In 2010, the number of business establishments in the TODR increased for the eighth consecutive year, growing by 614, or 1.4%. This increase was lower than the provincial average (2.1%) and ranked fifth, ahead of the Northeast (0.5%) and the North Coast, where the number of businesses declined (-0.4%). The TODR s business growth last year was entirely due to self-employment (838) that made up for losses in both small businesses with 1 to 19 employees (-186) and those employing 20 or more employees (-38). The growth of self-employment is not surprising in a region that attracts retirees who often seek to supplement their retirement income by starting a business. 14 CMHC, Housing Now, Kelowna CMA, January and February BCREA, Mortgage Rate Forecast, March BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 5

6 Table 1-5: Number of Business Establishments all sizes, Thompson-Okanagan Development Region, 2007 to Percentage Point Change Region Year Thompson-Okanagan 43,045 43,684 44,196 44, % 1.4% British Columbia 360, , , , % 2.1% Source: Statistics Canada LIVE Indicators Educational Attainment As educational attainment in the labour force rises, so does its productivity and potential for generating future real wealth. Last year, the percentage of the TODR s labour force, age 25-54, with post secondary education declined 1.1 ppt to 59.6%, although this was still one of the highest rates in the province. The number of TODR workers with post-secondary certificates or diplomas increased (1,800), but this addition was not sufficient to offset the region s loss of university graduates with higher university degrees (-3,100). The increase in the number of workers with a post-secondary diploma can be explained by last year s job gains in forestry, mining, and manufacturing, all of which are becoming more technologically advanced. But the loss of workers with advanced degrees is difficult to justify apart from region s cited shortage of doctors, 17 as employment grew in most industries requiring advanced qualifications. 18 Despite the decline in its labour force educational attainment, the TODR retained its third-place ranking behind the Mainland/Southwest (67.1%) and Vancouver Island/Coast (64.1%). Last year s decline was contrary to the province s overall gain of 1.4 ppt and also widened the gap between the TODR and the two leading Development Regions (MSWDR and VICDR), where labour force educational attainment rose by 2.1 ppt. Table 1-6: Percent of Labour Force Age 25 to 54 with a Post-Secondary Certificate/ Diploma or Higher, Thompson-Okanagan Development Region, 2005 to 2010 Percentage Point Change Thompson-Okanagan 53.5% 54.6% 58.7% 57.5% 60.7% 59.6% 6.1 ppt -1.1 ppt British Columbia 59.7% 61.0% 61.7% 62.6% 63.0% 64.4% 4.7 ppt 1.4 ppt Source: Statistics Canada, Labour Force Survey, Custom Table 16 Statistics Canada has changed its methodology in measuring business counts, thus the data reported here are inconsistent with figures reported in earlier editions of this publication. Previously, the concept of a statistical establishment was the measure that was used. In 2008, the concept of a statistical location was introduced with data back to 2007 available. The change to business location counts was made because they provide a better measurement of actual business units. Due to this change, the reported number of businesses will be higher than would be the case if the earlier framework was still in use. 17 Interior Health Authority website. 18 Such as legal services, management, scientific and technical services, post-secondary education, etc BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 6

7 Dependency on the Social Safety Net Our indicator, basic income assistance recipients as a percent of the working age population, age 19 to 64, reflects what is happening outside of the labour force. While there is always a fairly consistent percentage of people who are dependent on income assistance for reasons of health or inability to work, this indicator also has a positive correlation with the unemployment rate. As job losses rise, the number of people who lose their EI benefits or choose to leave the labour force also rises accordingly. The TODR s dependence on social assistance rose slightly in 2010, increasing from 2.2% to 2.3%. Although last year s increase was minimal, the only other Development Region to see a rise in its social dependence rate was the North Coast (0.6 ppt). All the others either remained unchanged or, in the case of the Vancouver Island/ Coast and the Northeast (-0.1 ppt), reduced their rate of social assistance dependence. Last year, the TODR s social dependence rate was higher than the provincial average (1.7%) and ranked fourth behind the Mainland/Southwest and Northeast, which had the lowest social dependence rate (1.4%), as well as the Kootenays (1.7%) and Vancouver Island/Coast (1.8%). Table 1-7: Basic Income Assistance Recipients as a Percent of the Population, Age 19 to 64, Thompson-Okanagan Development Region, 2008 to Regional District Okanagan-Similkameen Thompson-Nicola Central Okanagan North Okanagan Columbia-Shuswap Development Region Total British Columbia Source: BC Stats Within the Region, the social dependence rate remained unchanged in three out of five Regional Districts, but increased in the Central Okanagan and Okanagan-Similkameen by 0.3 and 0.2 ppt respectively. These findings again suggest a lag in the economic recovery of some industries, as well as some parts of the Region. Consumer Bankruptcies This year, we have selected per capita consumer bankruptcies as a LIVE indicator, as it is linked to economic trends (specifically unemployment, wages, and savings rate), and it provides up to date information on the outcome of today s borrowing trend in the context of changes in the credit market. Since the recession of 1992, bankruptcy rates have risen steadily throughout Canada, although BC s rate has generally been lower than the national average Rates are as of September for each year. Data unavailable for years prior to These figures include those on Temporary Assistance, but exclude those on Continuous Assistance (Disabled or with persistent multiple barriers to employment), Children in the Home of a Relative, and OAS/Seniors and aboriginal people living on reserve. 20 Office of the Superintendent of Bankruptcy Canada BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 7

8 After rising 54% in 2009, the TODR s bankruptcy rate moderated last year, falling by 9.2% to 3.3 bankruptcies per 1,000 persons age 18 and older. This decline reflected last year s improved economy and job growth. Although the Region s bankruptcy rate exceeded the provincial average (2.6), it equalled that of both the Vancouver Island/Coast and Northeast Development Regions and was lower than the Nechako and Cariboo (tied at 3.6). Table 1-8: Annual Consumer Bankruptcy Rates per 1,000 Population Aged 18 Years and Older, Thompson- Okanagan Development Region, 2005 to 2010 Percentage Change Thompson-Okanagan % -9.2% British Columbia % -10.9% Source: Office of the Superintendent of Bankruptcy Canada and Statistics Canada Of the five Development Regions that saw a reduction in their bankruptcy rate, the TODR ranked fourth behind the Cariboo (-21.9%), Mainland/Southwest (-12.6%), and Kootenay (-10.8%). In contrast, the bankruptcy rate in the Northeast (34.6%), Nechako (22.7%), and North Coast (9.1%) Development Regions all increased. Conclusions 2010 was a year marked by the early signs of economic recovery in the TODR. Overall employment growth recouped 2009 s job losses and pushed down the unemployment rate, particularly among young workers. Business incorporations returned to positive growth, while bankruptcies continued to decline for the ninth consecutive year and personal bankruptcies returned to a downward trend. Some residual effects and challenges from the economic downturn remain. While local demand spurred an increase in home sales and housing starts early in the year, the development and construction industry contracted again last year as second home, resort, and investor buyers have not yet returned to the market. Moreover, by year-end, home sales had tapered off since mid-year and ended up 6.8% lower than in Dependence on social assistance also went up slightly, highlighting a lag in economic recovery in some industries and parts of the region. Educational attainment of the TODR s labour force, which is important for both productivity gains and diversification, also declined last year. Prospects at this time for 2011 are cautiously optimistic. Demand for forest products and mineral resources, especially from Asia, are expected to continue to be high, although at the time of writing (May 2011) mineral prices have seen a sudden downturn. 21 It is not yet clear what this market correction means for longer term mineral prices. Price reduction, all time low construction costs, and overall economic improvement are making the region more attractive for second home, resort, and investor buyers. 22 This together with local demand should draw down excess inventories. While uncertainty remains concerning the impact of oil prices, US economic recovery, interest rates and investor confidence, these trends, if realized, should boost further employment growth and economic activity in the TODR. 21 TD Bank Economics, Provincial Economic Forecast, April 2, The Vancouver Sun, Okanagan poised for Come Back, April 4, BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 8

9 Glossary of Definitions Business establishments: Production entity or group of entities that produces goods or services, does not cross provincial boundaries, and provides data on value of output and input costs to the government. Job creation: Change in number of employed individuals between two given years. Social safety net: Transfers to unemployed individuals and families from the federal and provincial governments under the auspices of the Income Assistance and Employment Insurance programs. Unemployment rate: Share of employable labour force looking for work but unable to find it BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 9