Metro should fend off recession
Diversified economy offers region advantage
By Jesse Robichaud
Times & Transcript Staff
Published Monday October 27th, 2008
There are rough economic waters looming on the horizon for much of Canada as a financial storm pounds down on the United States and most of the world.
But while worrying scenarios are running through the minds of Canadians from Newfoundland's offshore oil rigs to Vancouver's stock exchange, Metro Moncton remains on the course it began charting when it started diversifying its economy as a means of recovering from the closure of the CN shops.
Assumption Life CEO Denis Losier says Metro Moncton, and much of New Brunswick, is in a better position than many parts of the country as it approaches what he thinks will be a nationwide recession.
"There are good and bad things. We never had the boom and bust that Calgary and other areas of the country have had," said Losier.
"That helps because we are used to operating very efficiently in the best and in the worst of times."
Losier said Metro Moncton's economy has been built to sustain more hardship than it was capable of withstanding before diversification became its strategy.
"Since the CN closures and Eaton's, obviously, we are much more diversified economy, in terms of warehousing, distribution, call centres, light manufacturing, all of these areas have been developed fairly well," said Losier, a former provincial cabinet minister responsible for economic development.
"We are a more service oriented economy than we were 20 years ago, and that's fine, that's good," said Losier, who cautioned that no local economy can isolate itself from overwhelming global market forces.
The City of Moncton's economic development specialist, Ben Champoux, says Metro Moncton's diversified economy has never been in a better position to fend off an economic slowdown.
"As soon as you don't have all of your eggs in one basket, your chances of going through tougher times more effortlessly are much greater," he said, noting no single sector makes up more than 10 per cent of the region's economy.
Champoux compares the stability of Metro Moncton's economy to the growth of a mutual fund.
"It is made up of a bunch of shares from a lot of sectors, unlike the '70's and '80's when we were a blue collar manufacturing town."
Champoux sees Canada's economic downturn as a growth opportunity for Metro Moncton, which has been posting record construction and employment numbers.
He says when those strong indicators are combined with the most affordable housing market in the country and an attractive quality of life, Metro Moncton could come out on the winning end of the shake-up that is about to hit the country.
Champoux said Metro Moncton's message can make bigger waves in tough economic times than it can when the North American economy is running red hot.
"When they are working hard, they are making lots of money, and they can afford to live anywhere, they aren't as receptive as they are today," said Champoux of workers who may eye the region in the coming months.
Indeed, he believes said the current economic forecast has made Metro Moncton an attractive destination.
"Today the economy is slowing down, people are starting to lose their jobs in the major centres across North America, and suddenly in Moncton we have a bright economy," said Champoux.
"Suddenly all of those key messages that we bragged about for years suddenly resonate louder than ever before."
Champoux said there are even some sectors that are being stimulated by the financial unrest felt elsewhere. He said RBC's call centre in Moncton is receiving more calls than ever before, which has pushed RBC to add hours to shifts and hire on new employees.
"I am not saying that some jobs in Moncton haven't suffered because that would be naïve on our part, but the bottom line is that we are better equipped than ever to go through those times."
On top of posting record job numbers in recent months, Champoux said the City of Moncton alone had issued more than $100 million in building permits by the end of September.
That number doesn't include a $90 million casino, a $50 million justice centre announced yesterday, and the bulk of a $15 million stadium at the Université de Moncton, or upcoming commercial and hotel developments.
"When you combine record years of construction activity with record employment levels, these are strong indications that consumer confidence remains strong in Moncton," said Champoux.
"It shows our consumers, our citizens, are not too concerned yet by what we hear through North America."
Champoux said Metro's position as a centre of retail and entertainment will not be threatened by a downturn in the economy, because he said the majority of people who are drawn to the city for shopping and major events are from the Maritimes.
He said for those visitors, Metro Moncton remains a bargain at a time when they may be forced to tighten their belts.
Champoux said another indication of consumer confidence is strong is that 91 per cent of new building permit values are generated by the private sector, and he noted new commercial developments near the Trinity Power Centre, and significant renovations to Champlain Place in Dieppe.
He said developers wouldn't be making these investments if Metro Moncton was in a risky situation.
"That's why we're confident that Moncton is better equipped than ever before to not just survive the hard times that are mentioned throughout North America, but grow significantly throughout the hard times," he said.
Still, Losier says no economy can be fully isolated from the pain that will be felt in the coming months as the United States' appetite for exports declines.
"There might be a silver lining there, but it's not very thick," said Losier.
"It might help rationalize some companies, and force them into situations where they are much more productive. But if credit isn't available to maintain whatever operations they have, or to finance production for exports... if the exports problems collapse in the U.S., we have a problem."
Losier says he wouldn't put much stock in the Bank of Canada's predictions that Canada will avoid falling into a recession, and he said more needs to be known about the state of Canada's economic outlook.
He said it is not yet clear how indebted Canadian consumers are compared to the United States, and he said it is impossible to say how consumers and investors will react if the economy continues to deteriorate.
"It's psychology driven right now more than fact-driven. If people are preoccupied and scared and they cash in all of their investments, it might take longer for things to come back."
But as long as the credit crunch doesn't kill major projects in New Brunswick's burgeoning energy sector, he says some projects could benefit from workers returning home to the province.
Two noted New Brunswick economists, Donald Savoie of the Université de Moncton and David Murrell of the University of New Brunswick, have stated that the province's overall economy will suffer less than other parts of the country due to three factors.
Firstly, they say the province's forestry and tourism sectors have already been in recession over the past two years.
Secondly, they say plummeting oil and commodity prices will keep the value of the Canadian dollar low and in turn stimulate the province's economy, which relies heavily on exports to the United States and American tourism dollars.
Thirdly, they say the active presence of large, and well-established companies like the Irving and McCain business groups provide strong anchors for the province's economy at a time when capital could become scarce.
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