Soaked

John Gushue of the CBC expounds at length on Newfoundland's new-found prosperity:

The number of employed people — another key indicator of prosperity — has been steadily climbing through the years, and as of Friday's estimate stands at just over 234,000. Employers, basically, are competing among a pool that is much smaller than it was before.

In announcing the layoffs in March, the government claimed that that very vibrancy in the private sector would be strong enough to mop up a lot the job losses it was announcing.

Etc.

Unfortunately, in an otherwise interesting and informative piece, he fails to address perhaps the most important point about all the prosperity that everyone's soaking in.

It is driven by public-sector spending.

Yes, there's that offshore oil industry. But, since the end of major construction, and the move into production, employment in that industry is quite modest. The real economic impact has been in government revenues from oil (and Voisey's Bay), which the current, notionally conservative government have cashed out in the form of more hires in the civil service, other components of the public sector (health, schools, post-secondary education, crown corporations), and higher wages for those new and old hires alike.

Total public-sector employment in the province (including provincial, municipal, and federal employment) was about 60,000 in the last few years of the Tobin and Grimes governments. There was a slight decline in the early Williams years, down to just under 56,000, after which the provincial government went on a hiring spree that, to the end of the latest fiscal year, had not abated. In fact, in the past year, total public-sector employment has increased... again.

As a share of total employment (including self-employment), the public-sector workforce has always been highest in Newfoundland and Labrador, as among the ten provinces. The Williams government's brief flirtation with austerity, coupled with some growth in private-sector employment and self-employment, helped drive that share down from 29% in the late Grimes era to 26% in 2006. By the time the "conservative" Williams left office in late 2011, public-sector employment was back up over 30% of the employed workforce. Most of that was driven by components of the public sector which rise and fall with provincial government policy and budgetary decisions.

The public-sector employment growth rate has also outstripped that of private-sector and self-employment during most of the "conservative" era. Since January 2004, private-sector employment has grown by just under 10%, indexed to its January 2004 levels. Public-sector employment has grown by 16%, with even higher growth rates (note the slopes in the growth line) since the end of Williams' brief flirtation with austerity in 2006. Self-employment is way down, and despite recent growth, is still smaller now than it was a decade ago.

These figures are not consistent with a prosperity driven by industry, commerce, and a naturally growing economy. They are consistent with one thing only, the thing that some of us have been cassandra-ing about for years, only to be shouted down, or worse: the "prosperity" is an economic potemkin village, driven by massive public spending, spending that even Williams and his contemporaries, three, four, five years ago, were already calling unsustainable.

And that's what they called it, behind closed doors, for years, even as they made decisions to ramp that unsustainable spending up even more.

There is no distinction, not dichotomy, between the "prosperity" that everyone is soaking in, and the sudden, panicked decisions to slam on the brakes, bring spending under some semblance of control, and making hard decisions to start cutting.

There is no distinction, because the potemkin prosperity and the wave of cuts are two sides of the same economic coin.   [Charts adapt data from Statistics Canada table 282-0011, 12-month rolling averages]