State of the Yukon economy

The new season of Game of Thrones is not yet available on Apple TV, but fortunately Yukoners have something nearly as good in the meantime.

The new season of Game of Thrones is not yet available on Apple TV, but fortunately Yukoners have something nearly as good in the meantime: the upcoming debate in the legislature on the budget of the Department of Economic Development.

With an election coming up, our politicians will be manoeuvring as furiously as Cersei Lannister to make sure this is the last legislative episode their opponents appear in. I fear that sober economic analysis may be as sparse in our legislature as it is in Game of Thrones (the lack of attention paid to how the Master of Coin and the rebel leaders are financing such a long war is one of the few weak spots of the series – the sinews of war are infinite money, as Cicero said).

So what is the state of our economy? Not so great, sadly. Our economy has shrunk for the last three years. Private sector jobs are down from 11,700 in March 2014 to just 10,300 in March this year.

This is particularly disappointing since the previous decade gave us a once-in-a-lifetime event: the so-called “supercycle” where demand from emerging markets provided a massive boost to prices for our favourite resources. Gold was less than US$300 per ounce in 2000. It peaked at over US$1,800 in 2011. Copper went from under US$1 per pound to over four times that during a similar period. Oil was over $100 per barrel for a prolonged period.

The supercycle could only have been better for the Yukon if Starbucks had switched from coffee to spruce-needle tea and the hottest fashion item in China was the red squirrel jacket.

Our economy’s struggles are just as disappointing when considered in the longer run. We’ve been a territory for 118 years now, and our economy has only 10,000 private-sector jobs. Many of those are largely dependent on government contracts. Meanwhile, our friends in Alaska have grown their population to a whopping 20 times ours. And the pesky Norwegians have turned their country from a low-income fishing economy after World War II where everyone wanted to emigrate to Minnesota into a place where every citizen is born a millionaire, at least theoretically, if you divide their national oil fund by the number of Norwegians.

Yes, you’re right. That’s a million Norwegian krone, and the krone is worth less than a dollar. But it’s still a lot more than your share of the Yukon Resource Fund.

What are the prospects looking forward? Four big sectors of our economy tell a big part of the story, so let’s look at them. Two are nascent and two established, two resource-based and two not.

The first, mining, was 18 per cent of our gross domestic product in 2014. Output peaked in 2013 when Bellekeno, Wolverine and Minto were all operating. However, with the Bellekeno and Wolverine mines closed and Minto planning a temporary closure in 2017, the outlook is challenging. A lot depends on whether new properties held by companies such as Kaminak and Victoria Gold succeed in opening in the next few years, and what happens to mega-proposals such as Casino and Selwyn in the longer run. And that is difficult to forecast, since it depends not just on global mineral prices but also on our environmental processes and the qualities of each individual property.

Oil-and-gas production is minimal in the Yukon today. There was formerly broad cross-party political support for oil-and-gas production here, with the NDP government of the late 1990s holding our first land disposition. That has now changed. The NDP and Liberals have both staked out positions on fracking, for example, that are to the left of the Alberta NDP. Northern Cross’s YESAB application in Eagle Plains is currently in the courts.

Even the prospect of some local production to create jobs here by displacing some of our imported fossil fuels (well over 100 million litres per year) remains uncertain.

On the non-resource side, tourism has been a mainstay of the Yukon economy for decades. It was around four per cent of our economy in 2014. It is relatively labour-intensive, although the jobs are often not well-paying. The average weekly wage in February in Canada for mining and energy jobs was five times higher than that for accommodation and food services jobs, for example.

Growth is also a challenge given all the choices people have for travel these days. Border crossings, a measure used by the Yukon government to measure tourism, have been stuck in the 300,000 to 350,000 range since 2000 and in fact have declined in the last two years despite the government’s new advertising campaign. On the other hand, Air North’s success in making Vancouver-Whitehorse travel cheap and convenient is a major positive development in tapping into the regional and friends-and-family markets.

Finally, we have the tech and knowledge sector. It is still small here. In fact, it doesn’t even get a mention in the Yukon government’s economic forecast. However, it has a lot of potential in my opinion. Knowledge workers sick of Seattle traffic and Vancouver condo prices are popping up in small towns all over the Northwest. Based on various reports on the Yukon knowledge sector, I am guessing there are probably over 200 in Whitehorse already, and they are often paid well. That’s like having an extra mine we didn’t know about in operation, except with no tailings. Who knows how big this could get in the long run.

The Yukon government recently boosted its technology budget by $3 million, partly in the hope of giving more opportunities for local tech firms.

So what would success look like over, say, the next five years? Think of doubling the number of mines we had operating in 2013, which would add over 1,000 jobs. Say we had 250 jobs in a small energy industry serving Yukon needs, plus another 500 new jobs from each of the tourism and knowledge sectors.

Success of this scale in any of these sectors would be a major win. And even if all were achieved, our economy would remain dominated by government. But this kind of success would boost our private sector employment by around 20 percent and, importantly, significantly raise average wages since most of these sectors are relatively well paid.

The big question is how to actually do it. Our politicians will have a chance to share their ideas in the upcoming election campaign.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won this year’s Ma Murray award for best columnist. You can follow him on Channel 9’s “Yukonomist” show.