It's The Economy, Stupid

I know long time readers will be getting tired of my variations on the “if you build it, they will come” theme from the great baseball movie Field of Dreams but I still think this concept underlies a lot of economic development theory – like the chicken versus the egg debate – what comes first?

A few years ago I was talking with a client in Cape Breton and mentioned I thought they were going to have to attract a lot more people in the coming years if the economy was to grow.  I suspect some people thought I was off my rocker.  How can we possibly be talking about attracting people to Cape Breton when a) we have unemployment at 17% and continued out-migration of young people every year?

But I was looking at the fundamentals.

The Employment Insurance usage rate (# collecting regular EI benefits as a share of employment income earners) in Cape Breton was 27% at the time of the 2016 Census.  I concluded (just like many areas around Atlantic Canada) that a significant share of the unemployed in Cape Breton at any given time are not available to work because they are waiting for their seasonal job to start.  It looks like the area has very high unemployment but if you were to define the unemployed as “the number of people not working in Cape Breton during month x who are ready, willing and able to work the jobs on offer in Cape Breton” the unemployment rate would be far lower.

When we think about the workforce these days we need to be laser focused on the number actively looking for work and not some larger number that includes those who say they are looking for work (the status required to collect EI) but are really not.

Secondly, the workforce was aging – again just like everywhere else.

So, large EI user base distorting unemployment data, aging workforce, and, yes, continued outward migration of young people.

That’s why I said the region would need to staring bringing in significant numbers of workers in the coming years, and entrepreneurs, and investors, international PSE students, etc.

So what is going on in Cape Breton?

First, a definition. For most of the data below I am talking about the Cape Breton RGM or the Census Agglomeration area.  There is Cape Breton Island but that is a large geographic area nearly twice the size of Prince Edward Island so we will keep the discussion to the urban region.

International student enrolment at CBU is skyrocketing.  They have gone from middling to among the top universities for international students (as a share of the total) in the country.

The number of immigrants settling in Cape Breton has risen by the big increase has been in non permanent residents – a huge increase in just the past couple of years. Non permanent residents usually come to a region for work. There were more than 2,000 in the urban centre in 2019.

What does that look like comparatively?  The Cape Breton CA has gone from well below average in terms of annual inflow of immigrants and non permanent residents to well above average.  Adjusted for population size, Cape Breton attracted 244 immigrants and non permanent residents per 10,000 population in 2019 (or a 2.44% rate) which was well above everywhere else in Atlantic Canada by a wide margin, except the gold standard, Charlottetown.

And it just might be impacting in a positive way the labour market. After a decade of mostly declines in total employment across the urban region, employment has been rising again in the past year.

Of course this will lead to the inevitable “they won’t stay”, “they are only coming to get into Canada”, “why do we need more university students”, yadda, yadda, yadda.

But I ask you what is the downside?

Worst case scenario most of them leave but some stay (win).

Best case many of them stay and help grow the economy, population, K-12 school population, workforce, base of entrepreneurs, etc. (win-win-win).

We’ll have someone on the Growing Pains podcast soon to discuss what is happening in Cape Breton and efforts to retain this vast new population.