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British Columbia’s economy enjoyed another year of strong growth in 2017. Real GDP increased by 3.3%, surpassing the Canadian average and all provinces except Alberta. Job creation, household spending, and export sales contributed to BC’s robust performance. The number of jobs in the province grew by 3.7%, the highest annual employment growth in more than a decade, and the unemployment rate reached 5.1%, its lowest point since 2008. Swelling consumer demand generated a 9.6% increase in retail sales.
The weak Canadian dollar and higher prices for some commodities drove the value of exports up 13.0%, with coal, natural gas, and pulp responsible for much of the gain. The volume of lumber shipments to the US declined, however, due to the softwood lumber dispute. As a result, energy replaced wood products as BC’s number one export.
In the Kootenay Development Region (the Kootenays), strong commodity prices contributed to a good year for the region’s mining industry. While parts of the forestry industry slowed in response to the US trade dispute, pulp production was up due to increased international demand. Tourism traffic to the region’s all-season attractions grew, despite a temporary slowdown in areas that were affected by last summer’s wildfires. Although these dynamics helped set the stage for a moderate recovery in the Kootenays’ labour market, several of our indicators point to areas of weakness in the regional economy. Accordingly, the Kootenays remained a challenging place to live, work, and invest for some residents in 2017.
The number of jobs in the Kootenays increased by 6.7% in 2017, boosting annual employment to 71,900 — the highest level in four years. While both the goods and services sectors expanded, it was the service industries that generated the majority of new jobs — mostly full-time positions. As a result, the general unemployment rate declined for the first time since 2013, to 7.3%, and the youth employment rate fell by 5.5 percentage points (ppt) to 13.1%. Despite these improvements, both the general and youth unemployment rates remained well above the provincial average.
Many of the new jobs created in the Kootenays’ service sector were low-skilled positions. Thus the share of labour force with a post-secondary certificate/diploma or higher declined for the second consecutive year to reach 65.8% in 2017. Furthermore, an increase in minimum wage jobs and Employment Insurance beneficiaries meant that the Kootenays did not see the same improvement in its consumer insolvency rate as most regions in BC, remaining unchanged at 2.7 insolvencies per 1,000 adults. As a result, the Kootenays’ consumer insolvency rate rose above the provincial average in 2017.
On the investment side, our indicators were mixed as well. The value of major projects remained relatively flat between 2016 and 2017, idling at about $9.1 billion. As of December 2017, there were 30 major projects listed in the Kootenays. The largest share, estimated at $3.6 billion, was under construction with about two-thirds of the value representing several large projects that have been slowly developing over the past one to two decades. The number of business incorporations declined by 5.0% in 2017 to reach 529, with the annual count not yet recovering to levels seen before the 2008 global financial crisis. In contrast, many regions in BC surpassed their pre-recession levels at some point during the past three years. On the positive side, there were only two reports of business insolvency in 2017. The consistently low levels of business insolvency since 2015 point to a relatively healthy investment climate for existing businesses.
Looking ahead, TD Bank Economics forecasts British Columbia’s real GDP growth will slow to 2.4% in 2018, but remain ahead of the national average.1 Expectations are that global steel production and demand for steelmaking coal will continue to increase, which bodes well for the Kootenays’ mining industry.2 Unfortunately, the US softwood lumber tariffs will continue to challenge the forestry sector as a resolution to the trade dispute may take some time. However, the recent signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which allows Canada preferential access to partner country markets, may spur the diversification of BC’s wood products to new export destinations.3
The Bank of Canada’s interest rate increases in 2017 and early 2018 may suppress investment and construction in the Kootenays during the next year and dampen consumer spending.4 Furthermore, both businesses and consumers carrying high levels of debt may find it more challenging to meet their payments.
Looking at the first three months of 2018, overall employment in the Kootenays fell to 63,700 jobs, with both the goods and services sectors losing workers. This is likely due to slowing activity over the winter months, as employment fell off in the construction and manufacturing industries. With tourism season nearing the end, job losses in the accommodation and food services, and information, culture and recreation industries were responsible for some of the employment decline in the services sector.
1 TD Bank Economics, Provincial Economic Forecast, Resilience in the Face of Uncertainty, March 15, 2018.
2 Teck Resources Limited, Teck Reports Unaudited Fourth Quarter Results for 2017, news release, February 14, 2018.
3 The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed on March 8, 2018 and will allow Canada preferential access to markets in the other 10 CPTPP countries. Source: Government of Canada, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – Backgrounder, updated 2018-03-23.
4 In total, the interest rate rose by 0.75 percentage points (ppt) between July 2017 and January 2018. Source: Bank of Canada, Canadian Interest Rates and Monetary Policy Variables: 10-Year Lookup, V122495.
1 TD Bank Economics, Provincial Economic Forecast, Resilience in the Face of Uncertainty, March 15, 2018.
2 Teck Resources Limited, Teck Reports Unaudited Fourth Quarter Results for 2017, news release, February 14, 2018.
3 The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed on March 8, 2018 and will allow Canada preferential access to markets in the other 10 CPTPP countries. Source: Government of Canada, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – Backgrounder, updated 2018-03-23.
4 In total, the interest rate rose by 0.75 percentage points (ppt) between July 2017 and January 2018. Source: Bank of Canada, Canadian Interest Rates and Monetary Policy Variables: 10-Year Lookup, V122495.