WHY QUEBEC’S ECONOMY IS ENJOYING ITS ‘BEST BOOM’ EVER
Digital outfits taking over from Bombardier, SNC-Lavalin, Kevin Carmichael writes.
Statistics Canada’s monthly Labour Force Survey has become a showcase for Quebec’s minor economic miracle.
Once an economic basket case, the province is now in competition with British Columbia for the title of Canada’s most impressive regional economy.
Among the Big Four provinces, Quebec alone recorded an increase in employment in July, StatCan reported on Friday. The province’s unemployment rate in July, and for the third time in four months, was 4.9 per cent, the lowest in a database that dates to 1976. The Canadian rate was 5.7 per cent.
Quebec had never beaten the national average until September 2016, and hasn’t been above it since. The July jobless rate in B.C. was 4.4 per cent, up a bit from that province’s record low of 4.2 per cent, last touched in September and October. The numbers for Ontario and Alberta were 5.7 per cent and seven per cent, respectively. Both figures are satisfactory. The labour market in Canada’s largest provincial economy remains strong, while the situation in Alberta has stabilized after the jobless rate surged to around nine per cent from about 4.5 per cent after oil prices collapsed in 2014 and 2015.
“I’ve never seen things so good in Quebec,” Eric Boyko, chief executive of Montreal-based entertainment company Stingray Group Inc., told me in an interview last month.
Boyko reckoned his home province was making up for lost time. Neither the governing party nor the opposition has any interest in separating from Canada, an attitude shift that has allowed Quebec companies to operate free of political risk for the first time in decades. The province is also benefiting from getting its finances under control and a world-class tech scene built around four universities.
Fighting to make money despite the burden of separatism, and learning to make do without natural benefits such as a reserve of oil and proximity to the heart of the U.S. automobile industry, has created an excellent corps of entrepreneurs.
A decade ago, the very public shrinking of Bombardier Inc. and SNC-Lavalin Group Inc. would have caused considerable fear and loathing. Today, with the exception of the shareholders of those two companies, I’m not sure many people care. There are far more jobs on offer than there qualified workers to fill them.
Bombardier and SNC-Lavalin are being replaced in the public’s consciousness by digital economy outfits such as Stingray, Lightspeed POS Inc. and Stradigi AI, all of which talk about becoming world leaders, but without the sort of heavy government support received by older champions of Quebec Inc.
Quebec has become a beacon for what a polity can achieve with good policy, patience and a little luck. The province’s average hourly wage surged by 6.1 per cent from July 2018, compared with increases of five per cent in Ontario, 3.3 per cent in Alberta and 3.5 per cent in B.C. Inflation is around two per cent, so Quebeckers appear to have a decent supply of disposable income to keep their local economy humming.
“The unemployment rate below Ontario for two years, could you even imagine? A surplus of $8 billion. Full employment. (New) buildings everywhere,” Boyko said. “It’s the best boom ever.”
Yes, angry westerners, Quebec is a recipient equalization payments, its economic renaissance is still young, and its population remains poor relative to the other major provinces. But the province hasn’t been getting fat on those transfers, as some seem to believe.
Quebec is the only province that has actually reduced debt in the past six fiscal years, a “remarkable accomplishment,” Rishi Sondi, an economist at Toronto-Dominion Bank, said in a report published July 30.
The province’s ratio of net debt to gross domestic product is now 40 per cent, compared with 51 per cent in 2013. The turnaround is the result of steady economic growth and spending cuts by former Liberal premier Philippe Couillard.
Voters may have been unimpressed, since they handed a majority to François Legault and the Coalition Avenir Québec party last fall, but bond investors were happy at the time, as they started lending Couillard money at lower rates than Ontario was receiving. Legault’s first budget was essentially a pledge to stay the course.
“The government should be lauded for its steadfast commitment to continue to bring its debt burden lower, and its efforts could pay dividends for years to come,” Sondi said.
Quebec benefits from keeping ideology away from economic policy. When the invisible hand was slow to guide money toward startups, the government and local financial institutions stepped in to ensure there would be a pool of capital from which the next generation of entrepreneurs could draw.
The province was also ahead of its time in realizing that the upfront costs of a proper subsidized daycare program would be more than covered by stronger economic growth over the longer term. Some 87 per cent of Quebec women between the ages of 25 and 54 are in the labour force, compared with 93 per cent of its men, the lowest gap in the country.
About 94 per cent of Alberta’s men of prime working age have jobs or are looking for one, but only 83 per cent of women of the same age can say the same. That’s better than Ontario. The participation rate of women of prime working age in B.C. is about 85 per cent.
Bottom line: Quebec is getting more out of its residents than any of the other big provinces because it has given women the flexibility they need to be mothers and economic agents at the same time.
Quebec isn’t economic nirvana. Bureaucracy is a pain, individual tax rates are high and there still is a tendency in Quebec
City to think that companies must be lured with handouts. Boyko grumbles about watching his taxes used to subsidize the labour costs of international competitors that set up shop in the province. The price of talent has become so expensive in Montreal that most of Stingray’s new hires are in Halifax and Toronto, he said.
Quebec’s loss is Ontario’s and Nova Scotia’s gain. It’s good to have one of Canada’s primary engines firing on all cylinders again.
The government should be lauded for its steadfast commitment to continue to bring its debt burden lower, and its efforts could pay dividends for years to come.