The long term perspective

Are you looking for the perfect Christmas gift for that special policy analyst in your life? Your problem might be solved: Yukon Economic Outlook 2013, a 52-page gem published by the Department of Economic Development.

Are you looking for the perfect Christmas gift for that special policy analyst in your life?

Your problem might be solved: Yukon Economic Outlook 2013, a 52-page gem published by the Department of Economic Development.

The report got its 15 seconds of fame the day it was published, with media reports that focused almost entirely on a single number: its forecast for economic growth for next year. The media love economic forecasts, since they can pick out one simple number and then get as many economists as they want to disagree on television about it.

But the really interesting thing about this year’s outlook is the other 51 pages. The authors have compiled historical data going back to 2000 on a range of indicators from vacancy rates to Yukon natural gas production. While only an economic nerd would describe the outlook as a “page-turner,” I was fascinated to see how each aspect of our economy has developed over the last 13 years.

Some examples:

* The Yukon’s gross domestic product has almost doubled, to just shy of $3 billion.

* Government’s share of the economy has fallen nine points to 30 per cent.

* Our population is likely to crack the 40,000 mark in the next few years, up from around 30,000 in 2000.

* Inflation in Whitehorse has been persistently higher than the rest of Canada since 2007, with housing costs being a major driver.

* Median rent is up over 30 per cent, with the vacancy rate plummeting from 20 per cent in 2000 to less than two per cent in 2013.

* The average price of a house sold in Whitehorse went up from $150,000 to over $400,000.

* The value of Yukon building permits peaked at over $160 million in 2011, but is expected to be just $80 million this year.

* Mining exploration went from near zero 13 years ago to a peak of over $300 million in 2011 with the global boom, but has subsided to around $100 million in the last three years. Mineral product has gone from very low to around $500 million per year.

* Natural gas production has plummeted from over 500 million cubic metres to around 25 million cubic metres as our legacy Kotaneelee fields run out, making the Yukon one of the few jurisdictions in North America where gas production has gone down in recent years.

* Border crossings, often used as a proxy for tourism, have remained essentially flat at around 300,000 per year for the last decade (except for a dip in 2009).

The big economic driver missing from the report was federal transfer payments, which is huge here. Back in 2000, our transfer payment plus the health and social top-up was less than $400 million. This year revenue from the federal government was $979 million.

If you add all this up, it represents some big changes. The population is up significantly. More than one Yukoner in four didn’t live here in 2000. Rising rents and house prices suggest housing hasn’t been built fast enough to keep up with their arrival. Mineral production and government transfers are both up significantly, around $500 million each.

Meanwhile, despite the Yukon being a fantastic place to visit (and years of government advertising to that effect), tourism’s share of the economy has shrunk.

The data paints a picture of a place where it is much harder to get by on a low income. Rents and retail prices have risen significantly, particularly in the last five years. This is fine for those with well-paid mining positions or government jobs with cast-iron cost-of-living allowances. For everyone else, these items have eaten away steadily at your purchasing power.

While this is all of historical interest, the big question is where we go from here. Will population, rents and transfer payments keep rising? Will building permits and mining exploration recover from their recent dips?

And in the longer term, will these big trends continue for another decade? In 2023, will the Yukon have 50,000 people and an economy of $5 billion?

It’s hard to say, but it is an interesting thought exercise to ask what we would need to believe in order for that to happen. There are probably two things in this category.

First, transfer payments would have to keep growing steadily faster than inflation. It seems unlikely we will be as lucky as we have been for the last decade given the federal government’s current attempts to balance the budget, but even a more modest growth rate of inflation plus a point or two would support economic growth.

Secondly, either the mining sector or natural gas production would need to make another $500 million jump. This would mean a doubling of mining activity, or the creation of a new gas industry here. If both happen, the impact would be another boom. If neither do, then a classic Yukon period of hard economic sledding would ensue.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Twitter @hallidaykeith