The highlights of Oliver's remarks were essentially two points. First, that jobs created by the natural resources sector are not just found in traditional natural resources industries. Rather, we should include all those jobs that are indirectly created by this sector. So professional service firm jobs, for example, would also be included in Oliver's expanded characterization of the impact of the natural resources sector.
Today, Canada’s natural resources sector is a significant component of the national, provincial and territorial economies, contributing to high living standards for Canadians. In 2011, this sector directly accounted for 15 per cent of nominal gross domestic product (GDP) and 790,896 jobs.So it's not just 800,000 jobs the government is touting as natural resources related. They now say it's actually 1.6 million jobs. It's not just 15% of the nominal GDP, "the natural resources sector drives almost 20 per cent of economic activity in Canada."And that 20 percent figure is what all the headlines blare.
In addition, through the purchase of goods and services from other sectors such as construction, machinery, professional services, transportation, the natural resources sector makes considerable indirect contributions to the Canadian economy. Using Statistics Canada’s input-output model, this indirect contribution to nominal GDP is estimated at about $70 billion in 2011, or about 4 per cent of Canadian nominal GDP. Correspondingly, over 800,000 jobs in other sectors were supported by the purchase of goods and services by the resources sector.
A problem with the numbers they offer, however, is that they just don't show how they got to these 2011 figures. They admit in their backgrounder that "nominal GDP" figures from Statistics Canada end in 2008. They must project up to 2011. So what they are doing is saying they have developed a methodology that gets them to their 2011 figures but they don't show it. Canadian Press apparently asked Natural Resources to explain and got this kind of response:
Now, government officials have developed a way to update the nominal GDP numbers for the natural-resource sector so that they can see how much money is flowing into the economy from energy and mining on a more timely basis.A Globe report also raised questions about Oliver's new GDP figures:
Oliver said the exercise shows that in both Alberta and Saskatchewan, energy and resources directly account for one third of nominal GDP. In Newfoundland and Labrador, it's 40 per cent.
However, officials did not immediately explain their methodology, nor did they make a full year-by-year and province-by-province analysis available. So calculations for the two largest provinces -- Ontario and Quebec -- were absent.
The new calculation provides a number much higher than previous estimates. In 2010, the government said natural resources accounted for 11.5 per cent of GDP. The revised calculation is for the nominal GDP, as opposed to real GDP, and takes into account both quantity and prices using just-released numbers. Mr. Oliver called the nominal GDP a “more accurate indicator” of the sector’s economic contributions than real GDP.From 11.5% to 20% in just one year through new calculations. Why the sudden move from "real GDP" to this "nominal GDP" calculation?
A second point that Oliver made the other day and which the government continues to promote is this: "There are currently over 600 major Canadian resource projects planned over the next 10 years or underway representing approximately $650 billion in investments," said Oliver. That $650 billion figure is repeatedly cited. Their backgrounder, however, suggests that $300 billion of that $650 billion may not happen but they include the $300 billion in their $650 billion anyway: "$300 billion in projects which are in earlier stages of planning (i.e. undergoing environmental review, feasibility studies or in the process of securing financing)." You have to rely on their say-so as they don't provide a list of projects. Do they include that $13 billion Kitimat refinery proposal, for example, that has no financing, we don't know.
Further, the $650 billion includes $200 billion in projects that have received approvals and have financing but remain in the proposed category. So it is possible that there is just $150 billion in projects underway that Oliver should be citing. Yet he repeatedly cites the higher figure of $650 billion, without the fine print qualifications, and which gets repeated in the media. $150 billion is nothing to sneeze at, sure. But it's not $650 billion.
Why are they pushing the $650 billion figure? To bolster the case for increased foreign investment. As pointed out in that Globe report though, Oliver's message contradicts Flaherty and Carney's recent rhetoric "who each called on corporate Canada to bolster the economy by investing their stockpiled money in the country."
This post is not intended to say that the natural resources sector is to be minimized. Not at all. It's an important industry. This is why Canadians deserve a clear picture about its impact and in order to get that clear picture, Oliver's numbers and new way of calculating GDP deserve some scrutiny. If they have the data to back up all their numbers, they should just show it.