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Tim Hudak’s job-creation math: 1,000,000 – 100,000 = 900,000 Add to ...

These are stories Report on Business is following Friday, May 9, 2014.

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Hudak's million
Admittedly, my math is the back-of-the-envelope variety, but I think Tim Hudak just laid out why he now needs a 1.1-Million Jobs Plan.

Here’s how it works: The Ontario Tory leader came into the provincial election campaign with a “Million Jobs Plan” that would create that many positions over eight years. Today, as The Globe and Mail’s Adrian Morrow reports, he vowed to slash Ontario’s public sector by 100,000 positions over two years. Which means he has to make up an additional 100,000 jobs over the following six years, or change it to the 900,000 Jobs Plan.

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Mr. Hudak proposes doing this via corporate tax cuts aimed at spurring on business investment and hiring, along with other measures such as bringing down inter-provincial trade barriers. He would also try to cut electricity costs for businesses by eliminating wind and solar energy subsidies.

What this all shows – and, yes, this is an election campaign with traditional promises, promises – is that you shouldn’t throw numbers around.

Because what Mr. Hudak suggests is near impossible. He’s no more likely to slash 100,000 jobs than he is to create 900,000 more.

As our chief political writer Campbell Clark notes, there actually has been an eight-year period when Ontario saw employment grow by almost 1 million, from 1998 to 2006. And that period, of course, while it had its ups and downs, was nothing like what we face in this rather dismal post-crisis era.

The forecasts of private sector economists don’t go out eight years, but projections for the next two alone might give Mr. Hudak some food for thought.

Just last week, senior economist Robert Kavcic of BMO Nesbitt Burns forecast that Ontario’s economy would expand by 2.2 per cent in 2014 and 2.4 per cent in 2015, below the national average in each year.

He predicts employment will grow by just 0.7 per cent this year, with a jobless rate of 7.3 per cent, and by 1.3 per cent in 2015, with unemployment still high at 7 per cent.

“Ontario’s labour market performance has softened, with employment up a modest 0.7 per cent year-over-year in Q1,” Mr. Kavcic said of the first quarter of this year.

“While public-sector employment has fallen in the past year, the private sector has picked up the slack. The jobless rate sat at 7.3 per cent in March, matching a cycle low, but little changed from two years ago.”

The latest reading of the Ontario labour market, released today by Statistics Canada, only serves to reinforce the long road ahead for the province’s 556,000 unemployed, and the tough task for whoever becomes the next premier, regardless of whether they have a catchy name for a jobs plan.

Unemployment in Ontario nudged up in April to 7.4 per cent, with employment levels little changed. Job gains over the course of a year have amounted to 74,000, or 1.1 per cent, and most of that was at the beginning, not the end, of that period.

My colleague David Parkinson, who writes for ROB Insight, notes that Ontario averaged annual economic growth of 3.4 per cent in those eight years, something this province hasn’t seen in quite some time.

And he calculates that it would take compounded growth of 1.7 per cent to get from 6.9 million jobs now to 7.9 million in the next eight years.

Funny enough, that was the average pace of growth in the years leading up to the latest recession. Since the recovery began, though, growth has only averaged 1.4 per cent.

As Mr. Parkinson sees it, and based on BMO’s assumptions, employment growth would have to run at a pace of at least 1.9 per cent annually from 2016 on to meet Mr. Hudak’s target. And it hasn’t done that in a decade.

While a stronger U.S. economy and a weaker Canadian dollar would both work in Ontario’s favour, BMO's Mr. Kavcic pointed out other factors.

“While the cyclical environment is improving, the longer-term story remains a cautious one for exports and manufacturing,” Mr. Kavcic said.

“Relatively high labour costs continue to pose challenges for the auto sector versus Mexico and the southern U.S.”

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