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Puzzling predicament |
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Written by GORDON HOEKSTRA
Citizen staff
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Friday, 18 July 2008 |
There are many pieces to the economic puzzle in Prince George these days and that's why the latest downturn in forestry isn't being felt as much as in the past. (Citizen graphic by Mick Kearns)
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the latest economic downturn
It was called the lumber industry's darkest picture in 40 years.
U.S. housing starts had plummeted, prices sank, sawmills closed and workers were laid off. In the Central Interior, one estimate, recounted in a Citizen story, had 3,000 of 7,000 sawmill workers unemployed or on a short work week. There was no prognosis of a quick turnaround.
You'd be forgiven for thinking this is another description of the current forestry downturn, circa 2008.
But the year was 1982.
It was a brutal time for communities in the Central Interior as unemployment rates soared to a high of more than 20 per cent, then stayed in the 15 to 18-per-cent range for another three years.
While these downturns more than two decades apart are similar as they were led by a collapse of the U.S. housing market -- and both, interestingly, evoked comparisons to the 1930s depression era -- the magnitude of the fallout on the local economy this time is different.
There is no doubt forest companies are feeling financial pain, and there has been a definite impact on the hundreds of workers who have lost their jobs in sawmills in Prince George, but the overall impact on the local economy has not been as great as in the early 80's.
This time around, despite the forestry job losses, unemployment has remained stubbornly lower.
It has hovered around eight per cent in the region. (There are some exceptions like Mackenzie and Fort St. James). And while it has crept up in Prince George from the five per cent mark late last year to 7.6 per cent in June, these figures are half of those in the early 1980s.
More recently, despite the decline in the forest sector, the number of people employed in Prince George has increased, federal labour force statistics show. There were 1,600 more jobs in Prince George in 2007 than in 2004 -- 400 full-time and 1,200 part-time jobs -- even though the forestry sector started to decline during that period, according to a synopsis by Dwayne Prokopowich, a labour market information analyst.
The reason the significant forestry downturn has not hit the city as hard, say business leaders and observers, is the economy has diversified, a fact that is both obvious and hidden.
An obvious difference is the expansion of the public sector through the creation of the University of Northern B.C., but less well known are efforts by companies that traditionally service the forest sector in branching out into new sectors and geographic areas.
"The new Prince George is different than in the past -- it's more resilient, it has more to offer," says Tim McEwan, president of Initiatives Prince George, the city's economic development agency.
McEwan was quizzed recently in an aside while on a call with business leaders from Vancouver on his view on the "catastrophic" fallout in Prince George from the forestry downturn. "I had to tell them that was not the case," said McEwan.
While UNBC was just an idea two decades ago, it now provides and estimated 700 full-time equivalent jobs in Prince George, as well as being home to nearly 4,000 students. The jobs are high-paying, stable jobs -- not dissimilar from industrial jobs -- that bring in money from the outside into Prince George.
The university has also attracted more than $100 million in research funding.
The College of New Caledonia, which was started in 1969, has expanded its services over the years, focusing more recently on health services and trades, with its faculty increasing from 150 to 200 in the past two decades. The college has more than 3,000 students.
Northern Health -- which covers a vast array of services in the city, including the hospital and public and mental health -- has nearly 2,000 full-time and part-time workers, as well as a pool of 900 casual workers. While it is difficult to track employment numbers from the past as Northern Health is a conglomerate of services perviously provided under different provincial departments, there's a belief the numbers have increased, including the regional corporate presence in Prince George, at the hospital and in public health.
Construction also continues to chug along in Prince George.
The value of building permits is only slightly down in the first five months of 2008: $38 million compared to $41 million in 2007.
The projects --some of which are being spread over a couple of years -- include the $32 million twinning project of the Simon Fraser Bridge, the $36-million Prince George Airport runway expansion and the $42-million Gateway Retirement Community project.
Many companies headquartered in Prince George also work out of town. Western Industrial Contractors, in partnership with Fraser River Pile & Dredge, secured a $32-million contract for the container terminal in Prince Rupert.
"When there was a downturn in the forest sector, spending and building would stop, that's just not true now," said Roz Thorn, president of the Prince George Construction Association.
Thorn noted -- that despite a feeling the local economy is somewhat fragile -- there is also potential in the mining, oil and gas, and transportation sectors. There is an understanding of the global demand for natural resources, being led by the booming economies of China and India, she said.
There is, perhaps, no better example of a company that has embraced a strategy to diversify itself than Northern Steel Ltd.
The 30-year-old company originally was in the forestry and commercial and institutional building sectors, but over time has moved completely into the heavy industrial sector, starting firstly with the chemical sector, then moving into pulp and paper, mining and the oil sands. Over that time, owner Fritz Hausot expanded his plant and added specialized robotic welding equipment, creating a facility with an expert, experienced crew that manufactures specialized metal equipment and parts.
In a recent project for Suncor Energy, the company manufactured two reclaim chutes used in the oil refining process that weighed 75 tonnes each.
As a result, Northern Steel, which employs more than 60 people at its plant in the Danson Industrial Site just south of the city, is not affected at all by the downturn in the lumber sector.
The company relies on the Prince George area for only 10 per cent of its business, and ships its products as far away as Russia and Chile.
This diversification was a conscious effort of Hausot's, who was well aware of the cyclical nature of the forest sector. He notes there is little chance of the four different sectors his company is involved in of being down at the same time. "I didn't want to be tied to that cycle," says Hausot.
Prince George has also seen rapid growth as a retail sector with the creation of West Gate and Parkwood Place, and more retail development just west of the intersection of Highway 16 and 97. Among the stores that have come to the community are Wal-Mart, Home Depot, Future Shop and one of the largest Canadian Tire stores in Canada.
The community has also seen the emergence of a technology sector. A recent survey by the Innovation Resource Centre showed there are nearly 270 firms in north-central B.C., three-quarters of those in Prince George, which employ an estimated 3,000 people.
Garth Frizzell, president of Prince George-based tech-firm Terra Cognita Software Systems, says that 10 years ago, the forestry downturn, combined with the rise in the Canadian dollar and the impending fallout on the timber supply from beetle epidemic, would have shut the city down. "Now, it's hurt some areas very badly, but the general economy hasn't felt a ripple," said Frizzell, who added four staff this year to 13 and opened another office in the downtown UNBC building.
He notes that the five biggest drivers of the economy in Prince George are Northern Health, the school district, the city, the university and the college. "What other community of 80,000 has both a university and a college?" he said.
Prince George's continuing evolution as a natural hub in northern B.C. for services like health and education, but also for the industrial sector is no mystery to UNBC geographer Greg Halseth.
That is what communities should do, using their "place-based" assets to diversify, says Halseth, an expert in rural economies.
Halseth says that communities in northern B.C. that made a conscious decision to work at diversification following the very bad downturn in the early 1980s have reaped the rewards of a more resilient local economy. Those include communities like Prince George, Terrace and Valemount, he said.
Halseth reiterated that UNBC is an obvious example in Prince George as it provided not only a supply of skilled graduates, but hundreds of jobs as well.
But the direct pursuit of public infrastructure has helped as well, he said.
Starting in the 1990s, the city built the $12.1-million Civic Centre and plaza, the $10.8-million Aquatic Centre, the $16.8-million CN Centre and the $5.2-million Two Rivers Gallery. More recently, the city and province have partnered in the $31-million Charles Jago Northern Sport Centre at UNBC. "Infrastructure helps attract people and businesses," said Halseth, arguing that the advent of high-tech businesses would not have been possible without the university.
He said that Prince George has transformed itself through a successive series of infrastructure investments to broaden its economy. "It's a really big story."
Current projects like the Prince George airport expansion -- which are creating construction jobs -- are also laying the foundation for more diversification, which is critical as communities can never rest in their efforts to diversify, said Halseth.
While the city attracted three calls centres with the first one arriving in 2002, one has closed and another is set to close in December. From an estimated high of about 900, mostly part-time, workers, the employment from call centres will drop to one third of that.
Meanwhile, Telus is working on doubling the size of its workforce in its downtown Prince George call centre to 150 people. The move will happen once the company completes a $1.3-million renovation Based on salaries and benefits of roughly $50,000 a year, the additional 75 people represent a $3-million addition to the company payroll, said Shaun Greffard, Telus's general manager for customer solutions delivery in the Interior North.
The call centres -- which filled a need at the time -- are a good example of why the community continually has to keep its eye on diversification, said Halseth.
On that front, the economic development players in Prince George are hoping to position the city as a transportation hub, capitalizing on container traffic from a newly-built $170-million terminal at Prince Rupert, a $20-million CN loading facility at Prince George and the expanded Prince George Airport, which will be capable of handling large cargo planes. Already, land around the airport is being assembled and going through zoning applications in hopes of constructing cargo-handling and warehousing buildings.
But one business leader is more cautious.
Bruce Sutherland, who chairs the Northern Trust development initiatives, agreed that the community is more diversified and benefits from being an education and health services centre, but warned it has not yet felt the impacts of the timber fall down from the pine beetle epidemic. The amount of timber available is forecast to drop 40 per cent in the region, more in some hard-hit areas.
"Blind optimism gets us nowhere," said Sutherland, who's company, WolfTek, which traditionally has supplied the forest sector, has seen its workforce of 50 cut in half.
Companies like WolfTek have been hoping to cash in on the mining sector.
A pair of existing mines in the region have already approved significant upgrades: Thompson Creek Metals Corp.'s $374-million upgrade and expansion of its Endako molybdenum mine west of Prince George and Taseko Mines Ltd.'s $350-million project at its Gibraltar mine south of the city.
Sutherland said mining work is beginning to trickle in, but very slowly.
While spending has increased at existing mines, no new mines have been created. Terrane Metals Corp. has a proposal to build a $917-million mine, the closest project to Prince George, but it could be three years before it begins operations.
Sutherland has been disappointed in the province's lack of urgency on, for example, bringing power to a mining corridor in northwest B.C., which he says will also have benefits for Prince George. "We better hurry up," he said.
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Last Updated ( Friday, 18 July 2008 )
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