The confidence and enthusiasm expressed by the local business community just six months ago in the wake of a federal shipbuilding contract for the Irving Shipyards in Halifax seems to be waning, especially among small and medium-sized business owners. It would seem the so-called "warm glow" effect of the announcement is wearing off, and businesses are settling down to today's reality.
The Canadian Federation of Independent Business (CFIB) says in a press release, "Nova Scotia's Business Barometer index dropped 3.5 points in May, landing at 59.5 – well below the national index of 64.8."
Historically, CFIB says a growing economy has an index rating between 65 and 75 per cent.
"The drop in confidence can clearly be seen in business' summer hiring plans," says CFIB Senior Policy Analyst Amelia DeMarco. "Only eight per cent of Nova Scotia business owners plan to hire more full-time staff over the next three or four months, compared to the 21 per cent who plan to do so nationally."
The Nova Scotia Department of Finance says it expects slower economic growth from 2011 to 2013 because of persistent global uncertainty and fiscal austerity programs.
The Department of Finance's economic indicators report states, "The combat vessel project at the Halifax Shipyard will have a lasting influence on the pace of economic growth and the structure of production in Nova Scotia. Although the biggest economic impacts aren't expected until the latter half of the decade, work at the shipyard will start to have a noticeable impact on the pace of growth within the next five years, beginning in 2012-13."
Peak activity resulting from the ship building contracts isn't expected to happen until 2020.
Valerie Payn, CEO of the Halifax Chamber of Commerce in Burnside, says every business should look at the shipyard contract through its own lens.
"Business owners need to ask themselves 'What's in it for me?', because there will be something," she says.
Payn is adamant that spirits should remain high. Last fall, Payn said the confidence flowing through the local business community was inspiring. "Let's keep it up!" The Chamber is hosting various events to keep local businesses in touch with the project.
Finance industry officials and business community spokespeople said at the time of the ship building contract announcement that money wouldn't be pouring into the local economy immediately. The estimated $25 billion contract over 30 years would take at least two to three years to ramp up into something visible. The local business community was advised to take the intervening years and use them for preparation and planning in order to take advantage of sub contracts, etc. as they became available down the road.
A keen attitude can be hard to maintain when long-term payoffs are years away. Even rumors the federal government plans to delay or change the shipbuilding contract are circulating, despite denials that any changes are being contemplated. That's not helping business confidence.
Another set of numbers recently released by Manpower show a somewhat better picture than that presented by CFIB. According to the Manpower Employment Outlook Survey, 17 per cent of Nova Scotia employers plan to hire for July to September, while seven per cent anticipate cutbacks. The CFIB index report indicated that 14 per cent of Nova Scotia businesses are planning cutbacks. Manpower's Karen Myers says another 76 per cent of employers plan to maintain their current staffing levels for the upcoming quarter.
Both reports agree that business confidence, as an expression of summer hiring, is much lower than the national average.
The CFIB index also reported that 40 per cent of businesses in Nova Scotia now say the overall state of business is good, 45 per cent say it's satisfactory and 15 per cent say it's bad.
While Nova Scotia did manage to dodge most of the fallout from the 2008 and 2009 global financial crisis, the province isn't immune to global pressures. The announcement that Bowater is closing in Queen's County has been an economic blow and shows that large companies are also experiencing turbulent times due to global factors.