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

Popular posts from this blog

Deficit? Public spending ain't the cause. Revenue, however...

With the election over, pressure to cut public programs has become quite intense. In almost all of the corporate owned media someone is barking on about it.

Another option -- increasing revenue from corporations and the wealthy is not mentioned.  However, data clearly indicates that Ontario does not have an overspending problem compared to the other provinces.

Instead, it indicates Ontario has very low revenue. 
Ontario has the lowest public spending of all the provinces on a per capita basis (see the chart from the 2014 Ontario Budget below).  So there is little reason to suspect that we have an over-spending problem.  If anything, this suggests we have an under-spending problem.







The Ontario government has also now reported in the 2014 Budget that Ontario has the lowest revenue per capita of any province.  This is particularly notable as other provinces are quite a bit poorer than Ontario and therefore have a much more limited ability to pay for public spending.  (Also notable in this…

Budget underwhelms on health care. Bait and Switch is such a nasty term

Last year the government promised a 4.64% health care funding increase in 2018/19. Then, earlier this month, they announced they would deficit spend to improve hospitals, mental health, home care, and child care.   Three of the four items cited by the government for improvement were part of health care. 

As it turned out the government did in fact promise in today's Budget to deficit spend $6.7 billion. (Due to a $1 billion fall in expected revenue, the extra spend amounts only to an extra $5.7 billion for 2018/19 programs – but that is still a significant chunk of new found cash for program spending.)  
If health care had gotten even a proportionate share of this new $5.7 billion in program spending, it would have added an additional $2.4 billion to health care  --  in other words about another 4% increase.  

But all health care got -- despite the government’s health care rhetoric -- was an extra $284 million. That may sound like a lot but with a total health care spend of $61 bill…

Ford government promise falls far short of solving hospital hallway medicine problem

Tens of thousands of new Long-Term Care (LTC) beds needed just to offset aging
The new Progressive Conservative government in Ontario has promised 30,000 new long-term care beds over the next ten years, often connecting this to their promise to end hospital hallway medicine.  But how does this promise stack up with growing demand for these facilities?
Most people 85 and older live in collective dwellings (LTC facilities, seniors residences, multiple level of care facilities).  The setting with the largest number of elders 85 and older is LTC facilities, with about 35% of the population 85 to 89  years old and almost 40% of the population 90 to 94 years. Older people are even more likely to be in a LTC facility.
The population 85 and older is the main driver of the need for long-term care beds.
An additional thirty thousand LTC beds by 2028 will only partially offset the rapid growth in the 85+ population.  The ministry of finance projects 42.5% growth in the most relevant population (85 a…