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Regional Economic Disparity and Newfoundland & Labrador
Economic Development a Major Issue of Federalism

An underlying tension in federalism for Newfoundland & Labrador (and indeed, for all the Atlantic provinces) involves regional economic disparity. Newfoundland & Labrador has not enjoyed the same level of economic development and prosperity as provinces in other regions of the country, particularly Ontario and Quebec, and to a lesser extent, those in Western Canada. This regional disparity has had a significant influence on the relationship between Newfoundland & Labrador and the federal government.

The following provides background on the economic issues facing Newfoundland & Labrador.

Natural Resource Dependent Economy

The economy of Newfoundland & Labrador has not developed in the same manner as the economies of provinces in Central Canada. The Province continues to be dependent upon a single resource for its viability (first, the cod fisheries, and today, in the early 21 st century, oil and gas), and has not develodude,ped a substantial industrial base of any kind.

From Cod Fisheries to Oil and Gas

Until recently, most economic activity centred on the fishing industry, in particular, the cod fishery. However, in the late 1990s, the industry collapsed due to rapidly declining fish stocks and an oversupply of fishermen. Because it was so highly dependent upon the fisheries as a source of income and employment, Newfoundland & Labrador was severely impacted, economically, as a result of this collapse.

Newfoundland & Labrador’s dependence on this economic sector cannot be overstressed. By 2004, offshore oil and gas production totaled $6 billion annually. This accounted for the majority of the Province’s “goods producing” economy, as well as a large portion of its overall economic activity. Most economic growth in the Province over the last decade can be directly attributed to the offshore oil and gas sector. It is also worth mentioning that Newfoundland & Labrador does have substantial agricultural, mining and financial sectors, yet none of these industries have provided a significant economic base for the Province.

For more information on Newfoundland & Labrador’s offshore oil sector:

• Government of Newfoundland & Labrador: Oil and Gas 2004
• The Economic Review: 2003 Statistical Indicators By Industry

Industrial Underdevelopment

Unlike its counterparts in Central Canada, Newfoundland & Labrador was not able to develop a modern industrial economy. While there has been some manufacturing in the Province, much of it was oriented towards food processing (in particular, seafood). In 2004, only 8 percent of the Province’s workers were employed in the manufacturing sector.

1. Source: (Statistics Canada) Distribution of Employed People, by Industry, By Province (2004)

For more information on Newfoundland & Labrador’s manufacturing sector:

• The Economic Review: Manufacturing

Overall Economic Performance

Traditionally, the Newfoundland & Labrador economy has been one of the most under-performing economies in Canada. There has, however, been somewhat of a turnaround in recent years due to growth in the offshore oil and gas sector.

Provincial GDP and GDP Per Capita

Gross Domestic Product (GDP) measures the total amount of annual economic activity. In 2004, Newfoundland & Labrador’s GDP was $15.4 billion, the second lowest of all the Canadian provinces. In recent years, however, the Province’s economy has experienced high levels of growth, due in large part to increased activity in the offshore oil and gas sector.

In terms of GDP per capita, a statistic that measures standard of living, the Province has chronically found itself on the lower ends of the spectrum when compared to its counterparts. As recently as 1990, Newfoundland & Labrador’s GDP per capita was the lowest in the country. In recent years, this situation has improved greatly, due in large part to growth in the oil and gas sector. However, the Province still trails far behind the national average.

1. Sources for GDP Data: (Statistics Canada) Real Gross Domestic Product (expenditures based) & (Statistics Canada) Real Gross Domestic Product (expenditure based), by Provinces and Territories

2. GDP Growth figures based on annual change in Real Gross Domestic Product (expenditure based)

3. GDP Per Capita figures based on Real GDP (expenditure based) divided by Population.

Provincial Unemployment

One of the most pressing problems the Province continues to face is high levels of unemployment. From 2001 to 2003, the unemployment rate was over 16 percent. In 2004, while unemployment fell slightly, to 15.6 percent, it still remained twice that of the national rate – by far the highest in Canada. Much of the Province’s unemployment woes stem from the collapse of the fishing industry, and the absence of employment opportunities outside of the oil and gas sector.

1. Source: (Statistics Canada) Labour Force, Employed and Unemployed, Numbers and rates, by Provinces and Territories.

For more information on the Newfoundland & Labrador economy:

• Government of Newfoundland & Labrador: Economics & Statistics Branch
• Newfoundland & Labrador Department of Innovation, Trade & Rural Development

Population Decline in the Province

Newfoundland & Labrador has experienced a large population drain, as increasing numbers of more people left the Province. From 2000 to 2004, the provincial population dropped by 9,000 people – from 528,000 to 517,000. Since 1996, the Province’s population has decreased by a total of 7 percent. The only other Canadian province to experience similar population declines (although not to the same degree) has been Saskatchewan.

1. Source: (Statistics Canada) Population by Year, by Province and Territory (% Change)

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Financial Crisis Facing Newfoundland & Labrador