British Columbia is suddenly Canada’s new economic powerhouse

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Ahhh, British Columbia. The stereotypes of the easy life on the West Coast – the yoga studios, the cappuccinos, the ski-and-golf-on-the-same-day – can belie the fact that suddenly the province is Canada's new economic powerhouse. Consider the statistics.

Over the past 12 months ended in February, British Columbia added nearly 69,000 jobs – an increase of 3 per cent. That far outpaces the national rate of increase over the same period (plus-0.7 per cent). And it's one of only three provinces in which employment has actually risen (Ontario and Quebec are the other two, but at much lower rates).

Manufacturing is one of the fastest-growing sectors, having added more than 9,000 jobs (plus 5.4 per cent). Much of B.C.'s new-found manufacturing mojo is in the highly coveted information technologies and high-tech sectors. Stories are drifting over the Rockies into Alberta of labour shortages for many positions in B.C.'s high-tech companies, particularly since the low Canadian dollar is making it more difficult to recruit specialized talent from the United States.

Natural resources are also on the upswing in B.C., especially forestry. As a group, jobs added in the catch-all category of "Forestry, fishing, mining, quarrying, oil and gas extraction" is up a whopping 15.1 per cent. And given slumping prices for almost everything else (i.e., natural gas, base metals and oil), the conclusion is that most of these new jobs are in the forestry sector. Lumber prices are decent, the U.S. home builders are back on their feet, and the low loonie is making B.C. lumber exports very competitive.

And, of course, the province is bristling with construction activity, both residential and non-residential. Total building permits in Vancouver are up more than 55 per cent year over year in January, despite a bit of a pull-back in that month. In Abbotsford, they're up 66 per cent, and in Kelowna, they've more than doubled.

The obvious question: What's fuelling all of this economic activity? Why is B.C. – traditionally one of the slower-growing provinces west of the Ottawa River – suddenly the miracle child of the nation?

Much of it has to do with continued inflows of offshore investment, particularly from China. British Columbia's exposure and reputation in Hong Kong and mainland China is simply greater than what the rest of Canada enjoys. Unfortunately, points east of the Fraser Valley are an afterthought to the Chinese.

The low Canadian dollar is also playing a big part, especially in the forestry and tourism sectors. All provinces' export industries are enjoying the benefits of the lower loonie, but none is adding jobs like B.C.

Some of it could be attributed to the after-glow of the 2010 Winter Olympics. Even though it's now more than six years in the past, Vancouver-Whistler is still reaping the benefits of global recognition and upgrades to transportation infrastructure. (Each time I fly into Vancouver International Airport and hop on the Canada Line whizzing me straight into downtown, I always think, "This is what a real 21st-century city is all about!")

Yet, the current economic boom, whatever the reasons, causes a conundrum for the anti-tax lobby groups that focus singularly on cutting tax as the means to economic growth. How can B.C. – with it's 7-per-cent sales tax, a carbon tax and heaps of business-unfriendly bureaucratic red tape – manage to grow its economy? Granted, its corporate and small-business tax rates are now slightly lower than they are in Alberta and income taxes are favourable (especially for low-income individuals).

Still, the business lobby groups in the province point to excessive tax and regulatory burden in the province as the No. 1 challenge.

Of course, competitive taxes and a sensible regulatory environment play an important part in creating the right conditions for a strong economy. No one could argue otherwise.

Yet, B.C.'s current boom also points to the fact that there's more to a strong economy than just low tax. Other factors often play much more significant roles. Physical and cultural connections with the rest of the world, a great urban quality of life, a highly educated work force, modern and efficient infrastructure – these can have far more favourable influences on the economy than what the tax crusaders may want to admit.

Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.