Thompson-Okanagan Development Region

Transcription

1 Thompson-Okanagan Development Region The Thompson-Okanagan Development Region (TODR) comprises five Regional Districts, the Okanagan-Similkameen, Thompson-Nicola, Central Okanagan, North Okanagan, and Columbia-Shuswap, and has a total land area of 94,308 km2. In 2006, an estimated 514,412 people lived in the TODR,1 about 12% of the provincial total. The population within the TODR is concentrated primarily in the Central Okanagan and Thompson-Nicola Regional Districts (58%). Source: BC Stats The TODR s economy has been transitioning from an historic dependence on resources especially forestry to a more diversified base mixing forestry, agriculture/viticulture, mining, manufacturing, post-secondary education, tourism, and trade/services. This growing diversification is both a draw for and reflection of the Development Region s strong population attraction, which has spawned extensive construction and development activity in recent years. The TODR has experienced accelerating population growth over the past five years, reaching 2.3% in This was the highest in the province and almost double the provincial average (1.2%). Between 2001 and 2006, the TODR s population grew 6.1%,2 which was the second-highest growth rate in the province after the Mainland/Southwest Development Region. The Central Okanagan Regional District accounted for just over half 1 2 Statistics Canada, Estimates of Population, by Sex and Age Group: Census Divisions and Census Metropolitan Areas Census boundaries, Annual, CANSIM, Table BC Stats, BC Ministry of Labour and Citizens Services, BC Regional District and Municipal Population Estimates, , December BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 1

2 of this growth, whereas the other Regional Districts each attracted between 7% to 18%. Population growth has been entirely due to in-migration, particularly by retirees, 3 as natural increase has been negative for the past few years. live indicators pre-tax income Real pre-tax income provides a useful comparison of how people living in each Development Region are faring relative to those in other parts of the province. This analysis uses real pre-tax income per taxfiler to evaluate the progress of the Development Region economies and make some comparisons. 4 While the most recent regional income data is only available to 2004, it gives us a picture of how income has changed in the Development Regions in the past, how they rank, and what underlying factors drove these trends. By looking at the factors today (unemployment rate, job creation, etc.), we can make an educated guess about what pre-tax income has done since Regional pre-tax income per taxfiler for each Development Region has been deflated with the Consumer Price Index to eliminate inflationary effects and allow a comparison of real changes with other regions. Real pre-tax income per taxfiler in the TODR in 2004 was $29,045, ranking fifth in the province. However, the Development Region s high proportion of retirees, whose incomes tend to be lower than employed taxfilers, likely reduces the TODR s standing within this comparison. Although the TODR s real pre-tax income per taxfiler remains below the provincial average, it has steadily narrowed this gap since In 2004, real pre-tax income per taxfiler within the Development Region varied in the Regional Districts, from 7% above the average in the Central Okanagan to 8% below in the Okanagan-Similkameen. Table 7-1: Real Pre-Tax Income per Taxfiler (2001$), Thompson-Okanagan Development Region, 2001 to 2004 Percentage Change Region Year 1-Year Thompson Okanagan DR $27,741 $27,835 $28,047 $29, % +3.6% British Columbia $30,735 $30,575 $30,705 $31, % +2.9% Source: BC Stats, British Columbia Neighbourhood Income Demographics Real pre-tax income per taxfiler in the TODR rose 4.7% between 2001 and 2004, 5 which was the second-highest growth rate in the province after the Northeast (7.8%). Growth was strongest in Okanagan-Similkameen (6%), North Okanagan (5.5%), and Central Okanagan (5.3%), the three Regional Districts that have benefited most from population expansion over this period. From 2001 to 2004, the TODR s increase in pre-tax income per taxfiler was a direct result of the creation of better-paying jobs in the region. Over this period the Development Region added 19,500 new jobs, and reduced unemployment by 2.7 percentage points (see WORK Indicators for further details). 3 BC Stats, BC Ministry of Labour and Citizens Services, Quarterly Regional Statistics, In previous editions, we have used real income per capita, however the recent release of Census population figures has shown that population estimates made by statistical agencies between census years, are in some cases, significantly divergent from Census counts. We therefore use the more accurate number of taxfilers as the denominator. Source of data: British Columbia Neighbourhood Income Demographics, BC Stats. See Glossary at back for a definition of pre-tax income and taxfiler. 5 BC Stats, British Columbia Neighbourhood Income Demographics, 2001 to 2004 adjusted for inflation BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 2

3 live indicators Although data is not yet available on real pre-tax income for 2005 and 2006, the Thompson-Okanagan Development Region s job growth has continued to be strong, further reducing unemployment by another 1.7 percentage points to reach a 10-year low. These factors support the expectation that real pre-tax income per taxfiler has continued to rise in 2005 and educational achievement BC Stats data shows that between 2003/04 and 2005/06, approximately 23% of 18-year-olds in British Columbia did not graduate from high school. 6 When comparing the various Regional Districts within the TODR to the provincial average, only the Okanagan-Similkameen (22.6%) fared better. Looking at the last four years, the non-graduation rate improved in the Central Okanagan (29.3%) and went up slightly in the other Regional Districts. Table 7-2: Percentage of 18-Year-Olds Who Did Not Graduate, Thompson-Okanagan Development Region, 2001/ /04 to 2003/ /06 Regional District Average Average 2001/ / / /06 Okanagan-Similkameen Thompson-Nicola Central Okanagan North Okanagan Columbia-Shuswap British Columbia Source: BC Stats While economic, social, and geographic forces influence graduation rates, parental attitudes towards education are also thought to be an important factor. 7 In addition, there is also the lure of high paying jobs that do not require high school education. The TODR s robust job growth over the last five years, particularly in construction, forestry, and mining, likely explains why most Regional Districts continue to have a higher rate of non-graduates than the provincial average. This conclusion is corroborated by the 10 percentage point decrease in youth unemployment in the Region from 16.6% in 2000 to 6.6% in dependency on the social safety net Job growth in the TODR, particularly in construction, has resulted in lower unemployment and increased personal income. The construction industry is normally one of the highest EI claim groups in the TODR. 9 Strong job creation in this sector has steadily driven down dependence on social assistance and unemployment insurance 6 BC Stats, Ministry of Labour and Citizens Services, Indicators of Education Concerns, 2004 and C. Anderson and C. Bruce, Using Family Background to Predict Educational Attainment in Canada, Th e Expert Witness Newsletter, Vol. 9 No 3, Autumn 2004 Economica Ltd. 8 Statistics Canada, Labour Force Survey Historical Review 2005 Edition (special run). 9 Services Canada BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 3

4 live indicators over the past five years from 8.3% to 3.4%. Within the TODR, all Regional Districts have reflected this trend, reducing dependency rates by 4.3 to 5.5 percentage points since Compared to other Development Regions, the TODR s dependency rate, while higher than those of the Mainland/Southwest (3%), Kootenay (3.2%), and provincial average (3.3%), is comparable to the rates of the prospering and economically diversified Vancouver Island/Coast (3.4%) and oil-rich Northeast (3.5%). Table 7-3: Basic Income Assistance Recipients & EI Beneficiaries as a Percentage of the Population Aged 19-64, Thompson-Okanagan Development Region, 2001 to Regional District Okanagan-Similkameen Thompson-Nicola Central Okanagan North Okanagan Columbia-Shuswap Development Region Total British Columbia Source: BC Stats work indicators job creation For the fourth year in a row, the TODR enjoyed strong job growth with the addition of 9,700 new jobs in 2006, bringing the five-year increase to 43,500 an impressive 20.8% gain which was the highest in the province. Job growth was almost evenly divided between the goods and service-producing sectors both last year and since The goods-producing sector grew by 4,800 jobs last year and was up 19,700 jobs, or 40.1%, since This rate of job growth led the province and was almost double the increase experienced in the Vancouver Island/Coast Development Region, the next-highest growth region (22.6%). Job increases occurred in every goods-producing industry, other than utilities, and were dominated by construction, which accounted for two-thirds of the TODR s five-year increase. This growth is not surprising given the boom in residential, tourism, and commercial development that has been generated by low interest 10 Rates are as of September for each year BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 4

5 work indicators rates and the TODR s population and employment growth. Last year saw a continuation of this trend, except for a small setback in manufacturing, which lost 1,900 jobs. These losses were most likely in forest products, the Development Region s largest manufacturing employer, which suffered last year because of a high Canadian dollar and decline in lumber exports to the US. Table 7-4: Employment, Thompson-Okanagan Development Region, 2001 to Job Creation (000) Year 1-Year TOTAL EMPLOYMENT (000) Goods-Producing Sector (000) Agriculture Forestry, fishing, mining, oil and gas Utilities n/a 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 Last year, jobs in the service-producing sector increased by 4,900, and since 2001 were up 23,700 (14.8%). This rate of increase was second only to that of the Vancouver Island/Coast Development Region (19.8%). Since 2001, job increases were recorded in all but three industries (education, other services, and public administration) with the largest gains being in trade (7,100 jobs) and health care & social assistance (6,500 jobs), followed by professional, scientific & 11 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 5

6 work indicators technical services (3,700 jobs) and finance, insurance, real estate & leasing (3,200 jobs). These job gains directly reflect the population growth and construction boom of the TODR over this period. Last year, service sector job growth was almost universal, and again strongest in trade (2,500 jobs) and health care & social assistance (2,700 jobs). The exceptions were minor job losses in transportation & warehousing (-700 jobs) and professional, scientific & technical services (-800 jobs) which could easily be structural adjustments. There was also a significant decline in accommodation & food services (-4,000 jobs), which is puzzling. The TODR s room revenues were up 9.1% last year, as were food expenditures. 12 In addition, the job losses in these industries are too large to be explained by structural adjustments or unfilled job vacancies. 13 While both these factors may have partly contributed to job losses, statistical error may also be to blame. 14 unemployment rate Like British Columbia as a whole, the unemployment rate in the TODR has declined over the past five years, falling 4.2 percentage points from 9.3% in 2001 to 5.1% in Although slightly higher than the provincial average, in 2006 the TODR had the fourth lowest unemployment rate in the province after the Northeast (3.7%), Mainland/Southwest (4.4%), and Vancouver Island/Coast (4.9%). Within the Development Region, unemployment varied from lows of 3.5% and 3.9% in Vernon and Kamloops, to 6% in Kelowna. Table 7-5: Unemployment Rate (%), Thompson-Okanagan Development Region, 2001 to 2006 Percentage Point (ppt) Change Development Region Year 1-Year Thompson-Okanagan DR ppt -0.2 ppt British Columbia ppt -1.1 ppt Source: Statistics Canada Given the strength of job creation over the last five years in the TODR, it is not surprising that the 2006 unemployment rate was almost half of what it was in 2001 (5.1% versus 9.3%). However, as the unemployment rate has reached, or is approaching its effective natural limit within the Development Region, its decline understandably levelled off last year (0.2 percentage points). The TODR had the smallest reduction posted among the Development Regions. Record low unemployment levels have elicited concerns that labour force growth is not keeping up with economic growth, resulting in labour shortages, rising wages, and jobs going unfilled, all of which may curtail the TODR s future economic growth BC Stats; Richard Porges, Director of Research, Tourism BC. 13 According to Richard Porges, Research Director, Tourism BC, a 17.4% drop in employment is not supported by other industry indicators and is too large to go without notice by the industry. He suggests a possible problem with small sample size or other statistical error may account for this reported result. 14 Danielle Zeitsma, Economist, Labour Force Survey, Statistics Canada concedes that sampling error may be a factor as the survey is designed to be accurate at the national level and the possibility of sampling error increases as the survey is broken down to the provincial, local and industry levels. 15 Credit Union Central of BC, BC Labour Market Outlook BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 6

7 invest indicators business and investment activity British Columbia s economy continued its four-year growth spurt in Residential and non-residential construction was strong; high commodity prices stimulated mining development; energy demand spurred a number of power generation projects; and heavy Asian trade flows prompted port and transportation investments. 16 Both business and investment activity in the Thompson-Okanagan Development Region reflect these trends. At the end of December 2006, 54 projects valued at approximately $10.4 billion were under construction in the TODR, 17 which is 73% more than the construction in progress reported in the fall of Most of this investment ($9 billion or 87%) is residential, residential/resort, commercial development oriented toward the retirement market, or tourism/resort development. New winter and summer tourism facilities, ranging from golf or waterfront to ski resort projects with residential components, account for over $5.6 billion, or more than half of the total construction in progress. These include ski resort expansion projects at Golden Peaks, Sun Peaks, Big White, and Silver Star valued at $1.2 billion,14 resort/residential or golf residential projects valued at $4.4 billion, and the Glenmore-Highlands and Downtown North residential developments in Kelowna valued at $2.3 billion. Other projects under-construction totalled $1.4 billion and included four highway and bridge upgrades, two mining investments, a multi-purpose building at UBC-Okanagan, improvements to BC Hydro s Mica generating complex, the Westbank water treatment centre, and a school replacement. Another 52 projects valued at $8.1 billion were also proposed in the TODR. Again, the majority of this investment ($5.8 billion or 71%) is residential/commercial development, with virtually all of it tourism/resort oriented. Proposed developments in other sectors total over $2.3 billion and include four mines and expansion of the Highland Valley copper mine; public infrastructure projects that address increased population demand ranging from sewage treatment, hospital, airport, and landfill expansions; four industrial projects; six power projects; an aquatic centre and multiplex complex; and five education facilities. The value of development in the TODR, both proposed and under-construction, ranked second-highest within the province after the Mainland/Southwest Development Region. While the majority of these investments underscore the strength of the TODR s attraction for retirees and tourists, public infrastructure investment in support of these developments, as well as expenditures on new mining, power, and education facilities add to the Development Region s diversity and sustained economic growth. 16 Scotiabank Group, Provincial Trends, March Ministry of Economic Development, BC Major Projects Inventory, December BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 7

8 invest indicators incorpororations and bankruptcies For the fifth year in a row, the number of business incorporations in the TODR went up in 2006 (8.4%), signalling the increasing attractiveness of the Development Region for investors and entrepreneurs. Since 2001, the number of incorporations has risen a dramatic 117.4%. At the same time, the trend in business bankruptcies has been equally encouraging, declining by 17.1% in 2006 for the fourth consecutive year, resulting in a five-year decline of 37%. Both of these facts point to a strengthening economy that is attractive to investment. In fact, the TODR s growth rate in business incorporations since 2001 is the second-highest in the province after the Northeast Development Region (141.5%). Table 7-6: Business Incorporations and Bankruptcies, Thompson-Okanagan Development Region, 2001 to 2006 Percentage Change Year 1-Year Business Incorporations 1,470 1,644 1,820 2,039 2,948 3, % +8.4% Business Bankruptcies % -17.1% Source: BC Stats number of business establishments Between 2001 and 2006 the number of businesses in the province increased by almost 35,000, with self-employment (businesses with no employees) accounting for 70% of this growth. 19 Since 2001, the number of business establishments in the TODR has increased by 3,797, of which 77% constituted self-employment, the largest proportion of new businesses among the Development Regions. This is not surprising given the high percentage of retirees or semi-retirees in the TODR and the propensity of many retirees to undertake consulting or open a small business to supplement their retirement income. Although the rate of business growth in the TODR (10%) ranked fifth over the last five years, and was less than the provincial average (11%), the Development Region led the province last year adding 1,346 new businesses. This was a one-year increase of 3.3%, more than double the provincial average. These facts, together with the rise in business incorporations and decline in business bankruptcies confirm the TODR s attractiveness as a place to invest. 18 Business bankruptcy data represents the cities of Kamloops, Kelowna, Penticton & Vernon. 19 BC Stats, Establishment Counts by Employee Size, and Statistics Canada, Business Register, BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 8

9 invest indicators Table 7-7: Number of Business Establishments all sizes, Thompson-Okanagan Development Region, 2001 to 2006 Percentage Change Region Year 1-Year Thompson-Okanagan DR 37,809 37,459 38,632 40,123 40,260 41, % +3.3% British Columbia 315, , , , , , % +1.5% Source: BC Stats and Statistics Canada (2005 & 2006) BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 9

10 conclusions The Thompson-Okanagan Development Region experienced accelerating population growth and robust economic expansion in 2006, marked by strong job gains and abundant business and investment activity, especially in construction. As a place to live, our indicators reveal the second highest one and three-year gains in pre-tax income per taxfiler, as well as a sharp decline in social safety net dependency across all five Regional Districts within the TODR. However, educational attainment continues to be a challenge as only the Okanagan- Similkameen Regional District exceeded the provincial average, and the Central Okanagan was the only Regional District to improve on its graduation rate last year. The work and invest indicators show even more dramatic improvement. The Region has led the province in employment growth since 2001 and had the second highest rate of job creation last year, plunging unemployment to a record low (5.1%). About $11 billion in development projects were underway at the end of 2006, with another $8 billion at the proposal stage, which in total represented the second highest value of development activity among the province s Development Regions. The TODR also had the highest increase in business establishments in 2006 and third highest over the last five years. Since 2001, business incorporations grew by a spectacular 117.4%, while bankruptcies declined by 37%, further confirming the Development Region s positive investment climate. There are a few observations or issues that emerge when we review the indicators in a little more detail: Except for the Okanagan-Similkameen, educational attainment remains below the provincial average in the TODR, and deteriorated slightly in four out of five Regional Districts over the past five years. This is most likely a reflection of the TODR s strengthening economy and abundance of new jobs, particularly in construction, which often does not require high school accreditation. Young workers lured from school by these kinds of well-paying jobs may be vulnerable when a downturn occurs in the job market. In addition, it can affect the future economic competitiveness of the TODR given the need for a well-educated and highly-trained workforce in an increasingly knowledge-based economy. Job and business growth as well as major development projects in the TODR have largely been driven by tourism and population increase, primarily by retirees moving to the Development Region. While demographics favour continuation of this latter trend, growing competition from other regions, such as the nearby Kootenays, price escalation, and the possible reduction of house values in pre-retirement markets (e.g., Vancouver) could temper population and economic growth and bear watching. On the other hand, investments in infrastructure, such as new mining, power, and education facilities, including the burgeoning development of UBC Okanagan, should further diversify and strengthen the local economy. Record low unemployment levels have raised concerns about wage escalation, lower productivity, labour shortages, and the inability to fill job vacancies. In addition, there are fears that the Region s relatively high housing costs may serve to inhibit the attraction of much needed skilled and semi-skilled workers. These factors could curtail future economic growth BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 10

11 glossary of definitions Business establishments: Production entity or group of entities that produce goods or services, do not cross provincial boundaries, and provide data on value of output and input costs to the government. Employment income includes wages and salaries, commissions from employment, training allowances, tips and gratuities, and all income from self-employment (business, professional, farming, fishing income, and commissions). Job creation: Change in number of people employed between two given years. Pre-tax income is comprised of labour force income (employment income, wages and salaries, income from self-employment, employment insurance benefits), pension income, old age security, CPP/QPP, superannuation, family allowance income, interest and other investment income, limited partnership income, rental income, other income (e.g. alimony, income for non-filing spouses), RRSP income, non-taxable income, GST credit, child tax credit, workers compensation payments, social assistance payments, and guaranteed income supplements. Not included in pre-tax income: veterans disability and dependent pensioners payments, war veterans allowances, lottery winnings, and capital gains. Social safety net: Transfers to unemployed individuals and families from the federal and provincial government under the auspices of the Income Assistance and Employment Insurance programs. Taxfilers: Those individuals who have filed a tax return for the reference year, and were alive at the end of that year. Non-filing spouses and non-filing children are not included. Unemployment rate: Share of employable labour force looking for, but unable to find, work BC Check-Up Published by the Institute of Chartered Accountants of British Columbia 11