Midway through the second half of 2014, several key indicators suggest that Newfoundland and Labrador’s economic pulse is not beating as quickly as it was twelve months ago.
Turning first to the province's labour market, over the past twelve months, total employment has contracted by 2,700 jobs due in part to a winding down of the construction phase of the Long Harbour Processing Plant. There has also been idling of the Wabash Iron Mine, together with a sustained shrinkage of the public sector.
Despite a 1,400 jobs decline in the province's labour force due in large part to a significant outflow of migrants to other provinces, the unemployment rate in Newfoundland and Labrador has trended steadily upwards from 10.5% to 12.7%, a two-year high.
This weak pattern of job growth appears to have had negative impacts on both consumer spending and residential construction.
Turning first to consumer spending, whereas retail sales in the first seven months of 2013 posted growth of 6% compared to the same period in 2012, sales in the first seven months of 2014 are up by a more modest 2.9% year-over-year.
Housing demand, as indicated by year-to-date sales of existing homes, has also cooled in 2014. They are off by 4.2% year-over-year and the number-of-months supply of existing homes for sale is up by 18% year-over-year in September.
Consistent with the marked softening in housing demand, year-to-date housing starts in the province are down by 19% while the number of residential building permits approved is off by 23% year-over-year.
The one bright spot on Newfoundland and Labrador's economic landscape is its exports which year-to-date are up by 25.3% in nominal terms, almost entirely due to an 81.1% year-to-date increase in foreign sales of crude petroleum. This gain more than offsets the effects of a 31% year-to-date drop in exports of iron ore and concentrates.
Looking forward, the near term outlook for the Newfoundland and Labrador economy is overshadowed by a number of factors.
First, iron ore production will be hobbled by the negative impact of weaker Chinese demand on iron ore prices and concerns about supplying power to the Alderon Kami Mine.
Second, the recent retreat in oil prices suggests that sales of crude petroleum will make a smaller contribution to the province's net exports in 2015 than they did in 2014.
Having said this, capital spending in 2015 should benefit due to several major projects including the Muskrat Falls electric power project, the Hebron oil and gas project, the southern extension of Hibernia and Husky Oil's White Rose Extension. In addition, manufacturing output should get a boost due to increased production at the Long Harbour Processing plant.