Although there is evidence the pace of economic activity in Nova Scotia picked up speed in 2014, it is very clear that the province is not firing on all cylinders.
This observation is based on the fact that despite a 49% year-over-year increase in total exports stemming from a ten-fold increase in foreign sales of natural gas from the recently developed Deep Panuke offshore natural gas field, most of the key components of domestic demand are clearly in the doldrums.
For example, after remaining essentially flat in 2013, total employment in the province in the 12 months ending July is down by 2.2% year-over-year due primarily to a 6,500 year-over-year decline in full-time hiring that has been accompanied by a 3,500 year-over-year drop in the number of part-time jobs in the province.
Consistent with this subpar pattern of job creation, Nova Scotia's unemployment rate, which dipped briefly to 8.7% in June, hit a sixteen-month high of 9.4% in July.
Against this background of weak labour demand, it's not surprising that consumer spending, reflected by retail sales, increased by only 2.5% year-to-date. This increase, the second smallest in the country, was well below the 4.7% year-to-date gain recorded by the country as a whole.
The combination of a weak job market and a much colder than normal winter clearly depressed housing demand, indicated by a 5.1% year-to-date decline in existing home sales. This contributed to the 35% year-to-date drop in housing starts. For the year as a whole, starts will probably total in the range of 2,700 to 3,000 units compared to 3,919 in 2013.
In the near term, the recent slight rise in the CFIB's Business Barometer for Nova Scotia suggests that approaching 2015 small- and medium-sized business firms in the province are more upbeat about their near-term prospects than they have been since late 2013.
Looking further ahead, a number of indicators suggest that Nova Scotia will exhibit stronger more balanced growth in 2015 and 2016 than it did in 2014.
First, a steady gradual pickup in U.S. growth should help sustain Nova Scotia's total U.S. exports, despite the prospect that extreme cold weather in the United States is unlikely to boost the province's natural gas exports next year as much as it did this year.
Second, the start of the first phase of Halifax Shipyard's Arctic/Offshore Patrol Ship program is projected to create 11,500 direct and indirect jobs in the province during the program's peak years.
Third, offshore oil and natural gas exploration programs by BP and Shell will give a significant boost to engineering construction in the province into 2019.
In addition, work on the $1.5 billion Maritime Link subsea transmission line between Newfoundland and Nova Scotia is schedule to start in the final quarter of 2014, with an expected completion date of 2017.
Given the prospect for sustained growth of exports and a strengthening of domestic demand driven in large part by improving business non-residential investment, we expect Nova Scotia's economy to grow by 2.2% to 2.7% over the next two years, following an estimated gain of 2.3% in 2014.