Martin Regg Cohn Ontario Economy is Great Watch, Climate Change Edition

One thing that Surly Hamiltonian loves to document is the Toronto Star's Queen's Park columnist Marty Cohn's endless predictions that good times are just around the corner for Ontario's economy. Some argue that the Toronto Star is the house organ of the Liberal party both federally and provincially and thus we end up with Cohn's sometimes delusional columns when referring to the Ontario economy.

Annoyingly for Hamiltonians, the fact that the Spectator is under the Torstar aegis means the paper doesn't have their own Queen's Park scribe, so we are stuck with Cohn.

Cohn has a column about the Ontario government coming back to the climate change issue. However he says:

"With the domestic economy rebounding, and global warming talks gaining momentum"

I assume that he's referring to the Ontario economy, since with oil's price crash, the overall Canadian economy isn't looking so great (although it doesn't seem like it will meet the technical definition of a recession).

However how great is the Ontario economy doing right now? Sure the dollar is down as are gas prices. However in fact for Ontario the economy has actually lost jobs in November and December, and the entirety of 2014 wasn't particularly impressive and similar to the previous moribund years after the worst years of the recent recession.

Now I suppose the low dollar and gas prices could mean that in 2015 Ontario will finally have a good GDP year (although maybe Cohn has above 2% GDP growth as his definition of good). People could travel less, both for cross border shopping and foreign vacations and Americans could visit Toronto more giving GDP a boost. I'm skeptical that manufacturing will make much of a turnaround, but rather continue its decline, although not as fast (note that the Mexican peso is also way down versus the US dollar).

The fact that oil is way down has to have some effect on Ontario's economy; the banks are all headquartered here and no doubt will feel some pain. The Canadian stock market performance certainly hasn't been great of late and I don't see it rocketing up anytime soon.

But more importantly, can Ontario's main industry, housing, continue as it has been the past decade? Even a slowdown would cause problems, because Ontario doesn't have a lot of GDP growth coming from other areas. I doubt it will collapse as the Ontario population continues to increase through foreign rather than intra-provincial migration, but the limits of people's ability to pay based on their income is being tested.

One final point. Cohn could possibly be right that the Ontario economy is rebounding. But he's banged that drum so long, that he's like an economist who has predicted n of the last m recessions, where n >> m.

   

April 2014 Canadian GDP Disappoints, What About Ontario and Martin Regg Cohn Says Don't Worry, Wynne Will Balance 2017-2018 Budget

A bit of a long blog post title, but I'm going somewhere with it. Plus there's something I want to record for posterity.

I'm not certainly not the first prognosticator in North America to say that GDP growth in the next few years is going to be disappointing. However I'm one of the rare few that focuses on Ontario's GDP growth, which unfortunately for Ontarians doesn't often get a lot of focus. Not even in the most recent election campaign.

We have already covered here the fact that Canada had 1.2% GDP growth in the first quarter of 2014 and that combined with US GDP growth of -2.9%, that can't be good for Ontario. Canada's GDP growth for the fourth quarter of 2014 was 2.9% while Ontario's was 1.9%. Ontario also suffered the same bad winter as the rest of the US. That's however in the past, although we won't know Ontario's first quarter number until August.

On both sides of the border, some have been predicting a rapid snap back in the second quarter of 2014. Estimates are now out for Canada's April GDP numbers and they are disappointing:

"Statistics Canada said Monday the economy grew by 0.1 per cent in April, the same pace as in March.

Economists had expected a gain of 0.2 per cent, according to Thomson Reuters."

“Even if some of April’s weakness should prove temporary, and thus likely to influence the next month’s readings positively, the disappointment means that growth is likely to come in closer to two per cent than 2.5 per cent (the Bank of Canada’s prior forecast) in the second quarter,” Exarhos wrote in a note to clients."

So no snap back and a reduction of an estimate for Canadian GDP growth to 2%. Considering the recent relationship between Canadian and Ontario GDP growth, the 2014 full year GDP growth for Ontario will probably be less than 2%. Which isn't good coming off two years in a row of 1.2% GDP growth. Plus considering the recent ratcheting up of oil prices due to the murk that is Iraq, June probably isn't going to be a great month for GDP in Ontario and if the relatively high prices continue into the third quarter, Ontario's third quarter GDP probably won't be any great shakes either.

Now on to Toronto Star columnist Martin Regg Cohn and the Ontario Liberals and posterity. Cohn has recently wrote two columns, one where he tells the Ontario PCs that come around the next election that the budget will be not just be balanced, but in surplus:

"By the 2018 campaign, the budget will be mostly likely in surplus (see: Paul Martin)."

Wow. The Liberals have been saying for quite some time that the 2017-2018 will be balanced, and Cohn here is likely referring to the 2018-2019 budget. Still that's astonishing and that assertion needs to be preserved and remembered and referenced when that time finally rolls around. Cohn as a backup for that refers to another column, entitled "Kathleen Wynne won't back down on activist plan", which has the text "And she stands by her promise to wipe out Ontario's deficit within three years."

Well that settles it. Wynne says she will balance the budget in fiscal year 2017-2018 and Cohn assumes that will happen and it apparently has something to do with Paul Martin.

The thing is, Ontario's GDP growth has been woeful for some time and all indications are it will continue to be woeful in the future. Balancing the Ontario budget in 2017-2018 requires some assumptions of decent growth that just aren't going to happen. There may not be new money for public sector unions, but in reality there will be less money.

Surly Hamiltonian will be continuing to follow Ontario's GDP growth and deficits and will also periodically check in on Cohn's assertion that by the 2018 the budget will most likely be in surplus.

 

Ontario Poll Wackiness, Looking Good for the PCs

I just saw some tweets from the Star's Martin Regg Cohn (@reggcohn) with some Ontario polling results. One tweet that was interesting was Nanos pre-election results, with the Liberals and PCs tied at 36 with the NDP at 21.6%.

The reason that's interesting is that historically Nanos polls have been strangely Liberal biased, with Forum polls often having the PCs way ahead. For instance, I blogged about a Nanos poll on March 20th, that had the Liberals in the lead at 36% and the PCs at 33% with the NDP at 25%. Perhaps it was a rogue poll, but federally and provincially, Nanos often has a Liberal skew.

In another tweet today, Cohn says that Ipsos Reid had the PCs at 37%, the Liberals at 42% and the NDP at 27%, with a possible PC majority. I'm assuming the tweet was wrong with the PCs at 42% and the Liberals at 37% but who knows.

Anyways, if Nanos has the Liberals and PCs tied, that's probably bad news for the Liberals. The NDP being far back probably isn't as bad as one would think. The NDP always has a good ground game in the ridings they hold, and after picking up a bunch of bye election seats, I expect the NDP to hold them. However I'm not sure what Howarth thinks, and she may chicken out from calling an election when the budget comes up.

The Star's Martin Regg Cohn's Latest Column, Apparently Public Sector Salaries Haven't Increased So Much

I was reading Martin Regg Cohn's latest column on Ontario public sector compensation and I got to wondering about some of his stats, where they came from and what they mean:

"Since the Liberals took power in 2003, average public sector wages increased by 28 per cent compared to the provincial average of 24 per cent, while inflation was 17 per cent. With wages soaking up $55 billion a year, it is mathematically impossible to get a grip on public finances without focussing on public servants in the short term."

Now first I'll point out that the public sector is quite large in Ontario, so if the public sector wages have increased by 28% versus 24% for the provincial average, the private sector average will be somewhat lower than 24%, maybe only 21%. So minus the 17% inflation that would be only a 4% increase for the private sector versus 11% for the public sector. Looked at that way, things don't seem as comparable.

Further, what public sector wages does this 28% stat refer to? All public sector workers in Ontario, including federal and municipal? Over the past few years many municipal workers (excluding fire and police) haven't done that great (I think Hamilton's city workers are on a 1.5% salary increase per year although I should check that). Ontario teachers are coming off a four year deal with approximately 3% salary increases. I would be curious to know what the stat for teachers is since 2003. Plus for physicians, how do they fit in? Are they included in the public sector wage stats? Their increases over the Dalton McGuinty era has been nothing short of stunning compared to private sector increases.

One last point about these stats, I'm guessing they are not reporting on pension benefits. Given that we're in an era of ultra low interest rates, the cost of providing defined benefit pensions in the public sector is high compared to the defined contribution pensions or no pensions in the private sector. Factoring in the present value of these pensions would no doubt further warp the 28% stat.