Skip to main content

Ontario falls 40% short of jobs target -- but deficit target may be met

Inflation is increasing in Ontario, while jobs and growth lag


 Revenue prospects for this year:  An earlier post looked at poor job creation in Ontario and the impact that might have on obtaining the revenue goals the government has set for this year. 

 Last week's jobs report for July was  dreadful on a Canada-wide basis.  But the report noted Ontario saw some pick up in July, with 15,100 new jobs overall. 

However, the job growth in July was all part-time; Ontario actually lost 29,300 full time jobs.  That is consistent with the pattern since July 2013: all the new jobs in Ontario have been part-time, while the number of full time jobs has shrunk 0.4%.  

 Moreover, the first seven months of 2014 still average only 43,000 more jobs than the first seven months of 2013, less than half the Ontario government's goal of 100,000 new jobs in 2014.

 Update: As widely reported, the Stats Can Labour Force Survey for July got it wrong.  The corrected report for Ontario provides some better news.  Instead of a 15,100 new jobs in Ontario, the  corrected release indicates 39,500 new jobs in July. Compared with one year earlier, the increase in employment is 60,300.  

 That is more in line with the the Stats Can employment and average weekly earnings (“SEPH”) data which is more reliable but less timely than the Labour Force Survey data. The SEPH data indicates 62,600 new jobs for the first five months of 2014 compared with the same period last year.

 Despite the improved news, even the new Labour Force Survey data indicates that almost all the new jobs are part time (52,000 out of 60,000).  Moreover, we are still almost 40% short of the government's 2014 target. 
 
 Increasing inflation driving higher government revenue?  More promisingly -- for Ontario's revenue target -- is the rapid increase of inflation in Ontario. 

 The Ontario government’s first quarter 2014 economic accounts came out  in July and Ontario’s nominal economic growth was up 1.1% over the quarter, well up from 0.2% in the fourth quarter of 2013.    

Nominal growth however is composed of both inflation and real growth and the growth we saw in the first quarter was mostly due to inflation. Economy-wide prices increased 0.9% and consumer prices increased 0.7% over the quarter. 

Real economic growth faded (due, they say, to a harsh winter) to a miserable 0.1% in the first quarter.

But, thanks to inflation, the annualized GDP in the first quarter of 2014 was $706.2 billion, a mere 1.5% short of the Budget target for the following fiscal year.  

 Since the first quarter, Stats Canada reports that inflation has picked up in Ontario.  In June consumer inflation rose to 3% over the previous June in Ontario, the highest consumer inflation in Canada and double the rate forecast in the Ontario Budget for 2014. 

 So higher than expected inflation is driving nominal economic growth.  Nominal economic growth is the key driver of government revenue, so, even with modest economic and job growth, this is a good sign that we will meet the Budget’s revenue forecast.

The good news: If this level of inflation continues, we are on track to exceed the Budget’s revenue goal, allowing the government to more easily meet their deficit target.

And the bad news: Higher inflation means that the government’s current spending plan will buy even fewer public services.  

As  a result, we will have to win increased spending in next year's Budget just to stop the cuts from becoming worse than already planned. 

 Higher inflation also means the real wages of workers are falling more quickly, especially for workers (like many public sector workers) who will receive only modest wage adjustments.

 Update 19 August:  The Ontario  Ministry of Finance has now confirmed that Ontario is on track to beat its deficit target.  

 Photo: Simon Cunningham
Labels:

Comments

Post a Comment

Popular posts from this blog

More spending on new hospitals and new beds? Nope

Hospital funding:  There is something off about the provincial government's Budget claims on hospital capital funding (funding to build and renovate hospital beds and facilities).    For what it is worth (which is not that much, given the long time frame the government cites), the province claims it will increase hospital capital spending over the next 10 years from $11 billion to $20 billion – or on average to about $2 billion per year.   But, this is just a notional increase from the previous announcement of future hospital capital spending.  Moreover, even if we did take this as a serious promise and not just a wisp of smoke, the government's own reports shows they have actually funded hospital infrastructure about $3 billion a year over the 2011/12-2015/16 period. So this “increase” is really a decrease from past actual spending. Even last year's (2016-17) hospital capital funding increase was reported in this Budget at $2.3 billion - i.e. about 15% more th
Post a Comment
Read more

Ford government fails to respond to 72% increase in COVID inpatient days, deepening the capacity crisis

COVID infections continue to drive up hospital costs and inpatient hospitalizations in Ontario. For the most recent fiscal year (April 1, 2022- March 31, 2023) hospital stays related to COVID cost $1.221 billion, according to new CIHI data.   This is about 4% of total hospital spending, creating a very significant new cost pressure beyond the usual pressures of population growth, aging, inflation, and rising utilization.   Costs for COVID related hospitalizations increased 22.2% in Ontario in 2022/23 from the previous fiscal year, rising from $999 million to $1.221 billion.  That rise is particularly notable as the OMICRON spike of late 2021 and early 2022 had passed by the the 2022/23 fiscal year.   The $222 million increase in COVID hospitalization costs came in the same year as the Ford government cut special COVID funding and, in fact, cut total hospital funding by $156 million.     In total, there were 60,653 COVID hospitalizations in Ontario in 2022/3, up from 47,543 in 2021/2. 
Post a Comment
Read more

Paramedic Services in Canada: Structure, Privatization, Unionization and other issues

Governance and Funding :  While police and fire services are usually municipal services, Emergency Medical Services (EMS) are typically controlled by provincial governments.  In Ontario, regional municipal governments have responsibility for delivering and funding EMS.  But even in Ontario the province plays a key role, strictly regulating EMS, providing funding for 50% of the approved land ambulance costs, and paying 100% of the approved costs for air ambulance, dispatch, base hospitals, First Nation EMS, and for territories without municipal government. Delivery :  Like police and fire services, EMS is predominantly a publicly provided service in Canada.   But businesses have now made some significant in-roads into EMS, primarily  Medavie,  a private corporation based in the Maritimes that describes itself as not-for-profit.  Medavie goes back over 70 years, with its roots in health insurance.  It still operates Medavie Blue Cross with 1,900 employees.  It now a
Post a Comment
Read more