By Mike Calder, CPA, CA
The Kootenays faced economic challenges in 2016. Despite positive news in our region’s forestry, mining, and tourism industries, employment declined by 2.3 per cent and drove total employment to a 12-year low of 67,400 jobs.
As a result, our unemployment rate increased for the third consecutive year, reaching 8.0 per cent, well above the provincial average of 6.0 per cent in 2016.
Looking forward, initial statistics for the first quarter of 2017 provided some positive news. Employment grew by 11.1 per cent and unemployment rate fell to 6.4 per cent.
According to the CPABC Regional Check-Up, an annual economic report by the Chartered Professional Accountants of British Columbia, industries that created the most jobs during this period were accommodation and food services, trade, forestry, mining, and manufacturing.
Tourism activity remained vibrant, with many Kootenay communities benefiting from increased cross-border visits throughout 2016 and into 2017.
A weak Canadian dollar and favourable weather conditions for our region’s ski resorts generated a significant boost to tourism in early 2017, which is expected to continue.
The outlook for our mining industry is also positive. Our region’s coal mines, which account for most of Canada’s coal production and exports, had a solid year in 2016 thanks to a rebound in prices. Teck, which produces steel-making coal and other materials, is predicting that coal production will be close to the volumes achieved last year, and have received permit approval to begin mining in new areas to extend mine life and increase production.
Several major projects are also scheduled to begin construction this year, the largest of which is a $370 million open pit coal mine near Sparwood.
While tourism and mining saw improvements, one area of concern is the forestry sector. The U.S. has recently implemented a tariff of up to 24 per cent on our softwood lumber exports. With two-thirds of our province’s softwood lumber headed for the U.S. in 2016, the tariff could impact U.S. demand and reverse the gains made last year.
In addition, smaller Kootenay forestry companies, who export almost exclusively to the U.S. market, will be more vulnerable as they may not have sufficient financial resources to sustain them over the course of the dispute.
However, given the weak Canadian dollar, projections that U.S. housing starts will increase, and our region’s proximity to the U.S., we can still expect to see some demand from south of the border.
Overall, we should see some increase in economic activity in our region this year.
As the tourism and mining industries are expected to remain busy throughout the year, this should translate to job creation in both the goods and service sector.
However, with the uncertainty over the fate of our softwood lumber industry, the overall economic outlook for our region remains cautiously optimistic.
Mike Calder, CPA, CA is a partner at BDO Canada LLP in Cranbrook. The CPABC Regional Check-Up report is available at www.bccheckup.com.