As you probably heard there was a significant restructuring of provincial economic development in Nova Scotia last week. This included the sacking of the heads of provincial agencies. Premier Houston indicating this might be coming when Don and I interviewed him on Insights.

I have some sympathy for these agencies but it is important to determine if they are fit for purpose for the 2020s. In the 1990s when NSBI was set up, as one example, the overwhelming priority was to create jobs that would mop up all the slack in the labour market. Now the available workforce has dropped to near zero and is in negative territory in some sectors (i.e. if you bring in new jobs, they will just raid workers in other companies).

Economic development agencies shouldn’t learn the wrong lesson from this. Economic growth is still about job creation its just that you need to bring in both the investment and the workers. Easy peasy.

The wrong lesson is to say - we can’t find the workers - so we don’t want the industries and their investment. As I stated in a previous post, trucking, administrative services, agriculture, food manufacturing - all with expanding workforces in Ontario. Please don’t tell me we are living in a world now where it is easier to find workers in Ontario than Nova Scotia. If so, that is the root of the problem.

What should the new CEOs of economic development in Nova Scotia do? Well, the Premier is pumping hundreds of millions more a year into health care so it might be a good idea to figure out how to get private sector GDP growing. Between 1997 and 2010, real GDP from the private sector in Nova Scotia rose by an average of 2.5% per year. Since it has grown by 1.4% per year.

How to get back to 2.5% per year? We need to break it down by sector.

Nova Scotia’s ICT sector real GDP rose by nearly 8% per year between 1997-2010 and dropped to 3.4% per year since.

Nova Scotia’s animal production (incl. aquaculture) GDP increased by nearly 12% per year between 1997-2010 and dropped to +1.1% per year since. Even crop production, excluding cannabis, has seen weak GDP growth of only 1.6% per year since 2010 (but this is an improvement of previous years).

Manufacturing GDP growth went from a modest 1.7% per year to only 0.7% per year. Wood and paper manufacturing went from solid real GDP growth before 2010 to both facing GDP decline since (paper fairly steep).

Pharma products and rubber products (thank the good lord for Michelin!) have seen solid real GDP growth since 2010.

Shipbuilding is doing very well (real annual GDP growth of 16% since 2010) but the rest of the transportation equipment manufacturing sector is struggling mightily. The aerospace parts and products sector went from 12% real GDP growth per year to 2.3% decline since.

Office administration services (aka call centres) went from robust GDP growth through 2010 to a cumulative drop of 20% since.

Using accommodation and food services as a proxy for tourism, real GDP went form growth of 1.4% per year (modest to say the least) between 1997 and 2010 to a decline of 0.6% since. Sure there is a pandemic thing going on there but the weakness started well before.

If Nova Scotia is going to get back to private sector GDP growth of 2.5% per year on average, it’s going to need significant investment in export focused sectors.

I suspect there is potential to see the ICT sector get back to above average growth – particularly with the new focus on talent development. There is some potential in the mining sector. Forest products? Who knows – right now I don’t expect much growth there (no pun intended). Even forestry and logging – real GDP has declined by 40% since 2010.

Tourism? I would love the economic development folks to chart a path to robust growth in the sector. What tourism investment is required and where will it come from? What new tourism assets need to be developed? What markets can be exploited? Where will the hundreds of new tourism entrepreneurs come from? It’s clear to me that just more funky social media marketing will not be enough for a step change in tourism output.

Manufacturing is a tricky one. It’s getting harder and harder to find manufacturing workers. There are no similar to shipbuilding projects out there (?) to benefit from federal largess.

I think agriculture could be part of the growth agenda. The share of land used for farming continues to decline every Census period. The average age of a farmer is, well, old – but many tend to work until the grave. Still we need more succession planning.

Administrative services? As I have pointed out in the context of New Brunswick, this sector is now growing in Ontario – while declining in the Maritimes. Why? Mostly because of a lack of workers here. Good luck finding 300 workers at $19/hour to work in an airline reservations centre or something similar. This is too bad. We should just go to the Philippines or elsewhere and recruit the workers here.

Nova Scotia has considerable legal, engineering and other professional services capacity – mostly in Halifax. That could be a source of more export revenue – but I think there would need to be a strategy built around how to develop such an opportunity. I know there are examples of firms doing work in Halifax for clients around the world. Could that be a serious opportunity or on the fringes?

I’d love to see the post-secondary education sector get its GDP contribution back to pre-2010 levels (see the chart below). I would be interested to see how this could be done. Again, it would likely require a focus on export markets.

In the end if the new CEOs focus on ‘programs’ and cash grants and marketing brochures they will end up on the firing line in a few years. If they work with partners to develop serious and robust strategies to grow export focused industries: agriculture/food, ICT, PSE, mining, new energy, professional services, etc. and it results in strong private sector growth, they will be heralded for their success.

The last point is around municipal economic development. I didn’t read anything about the RENs or municipal economic development. Nova Scotia municipalities generate about $2 billion in revenue each year. IMO, they should be spending about 1.5% of that on ‘economic development’ or about $33 million. There are a few great examples of municipal/REN economic development but much more work to be done. You can have all the ACOA or provincial economic development you want but without an engaged municipal partner, the system is deeply handicapped.

It's the Economy, Stupid!

After the shake up: Economic development in…