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The Manitoba miracle

How an economic laggard became a leader in the recovery


 
The Manitoba miracle

PHOTOGRAPH BY MARIANNE HELM

Six years ago, Rylan Hart, a contractor from Winnipeg, packed up his tool box and headed west. While Manitoba’s economy was expected to continue plodding along, British Columbia was on the cusp of a housing boom, and as a skilled tradesman he was perfectly positioned for the windfall when it came. But Hart had been warned by veterans of B.C.’s “roller coaster” construction sector not to expect the good times to last, and they didn’t. The combination of recession, an Olympic hangover and the new harmonized sales tax sent shivers through his industry. “Everything just tanked,” says Hart, 35. So in July he did what a lot of others in the Manitoban diaspora have done over the last year—he packed up and headed back to the Prairies.

But if the Winnipeg that Hart left was dull but stable—it’s often said Manitoba doesn’t suffer economic slumps because it never enjoys boom times in the first place—the Winnipeg he returned to, with its luxury condo projects, massive housing developments and stunningly low unemployment, is scarcely recognizable. “From the moment I got back I’ve been going full tilt,” he says. “I keep having to tell [potential clients], ‘No, I’m too busy.’ I’ve already got work until at least next spring lined up.”

By many measures, Manitoba has emerged as the shining star of Canada’s recession and subsequent recovery. True, economic growth fell to zero last year, but that meant it was the only province that didn’t shrink. And with the recovery in full swing, Manitoba enjoys the lowest unemployment rate in the country, at 5.2 per cent, compared to a national average of 7.9 per cent and 8.6 per cent in Ontario. The housing market is going strong, and Manitobans are outspending their countrymen at the mall and at car dealerships. “The mood is very optimistic here,” says Dave Angus, president of the Winnipeg Chamber of Commerce. “Psychologically, our ability to weather the economic storm has been huge.”

There are several reasons for all this. The one economists typically point to first is the diversity of its economy. No other province has as eclectic a mix of businesses and services at its core. There are Manitoba’s vast fields of wheat and other crops, of course, which in a similar way helped American states like North and South Dakota and Nebraska survive the recession easily. But crop production makes up just five per cent of the Manitoba economy. Far more important are sectors like manufacturing, with its focus on aerospace and buses, as well as financial services, transportation, and mining and petroleum production. “Manitoba is the most diverse of all the provinces,” says Paul Ferley, assistant chief economist for the Royal Bank of Canada. “In booming times you don’t see Manitoba at the top end, but in periods of economic weakness it usually doesn’t show the extreme declines.”

But that doesn’t tell the full story of how the province dodged the Great Recession bullet. Even before infrastructure became the buzzword of the global recovery, Manitoba had a number of high-profile projects on the go that helped shield it from the downturn, such as the $800-million expansion of the Red River floodway, a $585-million project to expand Winnipeg’s airport, and the construction of the 23-storey Manitoba Hydro tower in downtown Winnipeg. While construction on those projects has largely wrapped up, work is under way on the Canadian Museum of Human Rights, and the province appears intent on building a new stadium for the Winnipeg Blue Bombers, even though the price tag has soared 40 per cent to $160 million.

There’s an obvious theme to many of those projects—they wouldn’t be happening without massive spending by all levels of government. Critics argue that government spending is crowding out private investment and inflicting long-term damage to the economy. Manitoba has the highest net provincial debt as a share of its economy of any of the western provinces, at 24.4 per cent, though that’s still far below the Canadian provincial average of 37.6 per cent. And, ironically, as a have-not economy Manitoba relies heavily on the generosity of Ontario taxpayers as well as Alberta through federal-provincial transfers. It’s led Peter Holle, president of the Frontier Centre for Public Policy, to label Manitoba a “zombie economy.”

But those concerns have taken a back seat as the job market and consumer confidence have heated up. Retail sales in the province climbed 6.6 per cent in August from the year before, while the country as a whole managed an increase of just 3.5 per cent.

On a recent Saturday, a cold wind failed to keep car buyers away from Birchwood BMW on the western edge of Winnipeg. Francis Fang, an accountant, strolled between shiny black Bimmers on the hunt for a sports coupe to go with the Mercedes C-Class he recently bought. “I’ve travelled to Calgary and Vancouver and you could just feel things were more depressed,” he says. “We’d watch the recession on the news, but you didn’t feel it through your work or your jobs.” It’s been a similar story at the Gauthier Cadillac Buick GMC dealership in the city’s north end. “We’re seeing it from the front line,” says vice-president Jason Cross. GMC truck sales have doubled over the last year. Not surprisingly, national retail chains have taken note. Ikea has announced plans to open its first store in the city, possibly in 2012.

Low unemployment in Manitoba isn’t necessarily a new phenomenon, but in the past it’s been driven by the fact so many people leave the province to look for work elsewhere. Manitoba still suffers from negative net interprovincial migration, but that has slowed down and is more than made up for by a healthier inflow of foreign immigrants. (Over the last year, the province saw its highest population growth since 1982.) Manitoba has been the most aggressive of all the provinces at using the Provincial Nominee Program to lure skilled immigrants, says Mario Lefebvre, director of the Centre for Municipal Studies at the Conference Board of Canada. Manitoba now attracts roughly 13,000 immigrants a year, which, given the size of the province’s population, is a rate on par with Toronto’s. Manitoba’s immigration strategy got a shout-out from the New York Times recently, when the paper hailed Winnipeg as “a hub of parka-clad diversity.” It’s helped drive the local housing market—even amid the recession, housing starts came in at around 4,200 last year, one of the highest levels since the 1980s.

Can Manitoba keep it going? Ferley at RBC believes economic growth in Manitoba will actually come in below the national average this year, partly because grain production is down 25 per cent due to poor weather, and because other provinces that saw their economies hit hard are enjoying a strong rebound. But Ferley expects growth in Manitoba to pull ahead again next year, hitting 3.7 per cent, a full percentage point above the national average.

Problems persist, of course. Incomes in Manitoba still lag far behind those in other western provinces. Downtown Winnipeg continues to suffer from poverty and high crime rates. And one of the big lures for former residents boomeranging back to Manitoba has been affordable house prices and a lower cost of living—both of which are at risk as a result of the housing boom. But for now, Manitoba’s fortunes appear to finally be moving in the right direction. “This is a great place to be right now,” says Hart, the contractor who returned this past summer. “I’m very happy with the way things are going, and I don’t plan on leaving any time soon.”


 

The Manitoba miracle

  1. Manitoba's growth in recent years has been driven by the public sector. Not just the mega-projects mentioned above, but in health administration, crown corporations, and so on. The Winnipeg Free Press just reported that of the 12,700 jobs created last year, 10,100 of them were created by the public sector. We also seem to have a perpetually low workforce participation rate, and another 4,000 people left the workforce last month according to the same article.

    Manitoba's growth — even if it appears "slow but steady" — is not sustainable unless more of it comes from private sector investment and less from government spending. If Ottawa ever decides to ratchet back transfer payments, MB could be in big trouble.

  2. you mean we are not going to have and enjoy governmental used car lots? How sad
    Just when I got my NDP government issued email address too.

  3. What a strange article… it mentions the fact that most of the economy is sputtering along on crowns and transfers and public megaprojects, and then goes on to whitewash the provincial economy as though none of that is happening.

    So why write it at all?

    • I agree Brian, I don't know what Jason Kirby is getting at. Is Manitoba a strong, viable economy? Is it a zombie economy? Is public sector activity overwhelming? Just enough? MB has a NDP government and isn't imploding, Alberta has Tories and Ontario has Liberals and all of that doesn't seem to matter because on the one hand Kirby is saying they give MB money through federal transfers but on the other their economies are doing worse.

      I didn't learn anything new from this article. It didn't even make me think about how to develop a sustainable economy.

  4. I would not put any stock in what Mr. Holle or the Frontier Centre says about Manitoba or the rest of the world for that matter.

    Readers should note that the Frontier Centre was previously lauding the Irish miracle and how that economy should serve a sa model for the rest of the world. Look at Ireland now.

  5. Francis Fang sounds like a douche

  6. I love the Peg. I don't live there, I live in Southern Ontario (supposedly, the "centre of the universe"), but I've travelled to Winnipeg many times, on business and to visit family and friends. Every time I visit, I discover something new in Winnipeg.

    The last few times I've visited I've spent time in a gem that I discovered only a few years ago: the Exchange District.

    This is an incredible cornucopia of wonderful historic buildings. It truly is a living museum of architecture. We think of Western Canada as being quite new, but many of us in the East don't realize that Winnipeg is a fantastic repository of buildings from the 19th century. They are amazingly well preserved. And they don't just sit there; they work.

    Anybody visiting "Winterpeg" soon, I recommend you set aside some time to wander around the Exchange District — yes, even in the blustery winds of winter – and you won't be disappointed.

  7. I don't know why everybody's knocking Manitoba's government investment here. What, do you think it's any different in Southern Ontario? Go ahead, point to RIM and high-technology. You think the Blackberry is where it is today without the federal and provincial governments being involved? You have no idea.

    And as for the other big "private" sector in Southern Ontario — car manufacturing — gimme a break. Does everybody forget about the "Auto Pact"? How we sold out our Arctic sovereignty to President Johnson and his "Dew Line" in return for government-protected car factories in "Canada" that really only benefited Southern Ontario?

    And decades later, still needed $-billions and $-billions more in government assistance to desperately keep the Southern Ontario economy artificially afloat?

    How quick we forget.

  8. Manitoba is still far behind Alberta, and little would change as long as they continue the love affair with the NDP. Winnipeg is a pretty nasty place, Jets or no Jets.

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