BC boom doesn't echo in the outskirts

Bad news hits hard in small towns.

Take Mackenzie, a community of about 4,000 in the Rocky Mountain Trench about 1,000 kilometres northeast of Vancouver.

Last November, the town's biggest employer, Montreal-based AbitibiBowater Inc., announced it would "indefinitely idle" its paper mill and two sawmills in Mackenzie as part of a broader restructuring, putting about 750 people out of work.

Mackenzie mayor Stephanie Killam didn't have to look far for the fallout. Three of the district's six councillors worked for Abitibi. Two others were married to Abitibi employees. That body blow was mirrored throughout the town, which was already reeling from an earlier mill shutdown by another company that wiped out more than 400 jobs.

Mackenzie is a long way from the Lower Mainland, where British Columbia's record-low unemployment rate and pell-mell construction boom are spelled out in thickets of construction cranes, help-wanted signs and pre-sale condo campouts.

"Everybody sees Vancouver and the Lower Mainland as go, go, go - 'we have all this money, we have the Olympics coming,' " Ms. Killam says.

But the downturn in the U.S. housing market and the soaring Canadian dollar means the money tap is turned off in some parts of the province.

Mackenzie and other towns like it can be read as chapter headings in a tale of two economies now playing out in British Columbia - a tale that has highlighted the urban-rural divide, is expected to reduce provincial tax revenues by at least $1-billion this year and is rending the social and economic fabric of communities throughout the province.

Provincial Finance Minister Carole Taylor calls the B.C. economic picture a dichotomy: a split between healthy sectors such as construction and retail and the deathly-ill export sector.

"All of the domestic, internal economy has been working very well," Ms. Taylor said recently in budget presentations.

"But there is just no getting away from the fact that when the United States has a housing crisis of the magnitude that we're now seeing there, and a credit crunch and financial institutions who are all involved - there is no way that we can be completely isolated from that."

It's not unusual for B.C.'s export sector, especially its iconic forest industry, to be the first hit and most bruised by global economic trends that affect the province. Sawmills and logging operations rely on export markets and have long seen their fortunes ebb and flow with financial meltdowns in Asia and housing hiccups in the U.S.

But the current divide is stark, sharpened by factors that include a 60-per-cent rise in the Canadian dollar against the U.S. greenback since 2002 that has made nearly every sawmill in the province a money-losing operation.

Meanwhile, contractors in the Lower Mainland and the Okanagan are building bridges, hospitals and condominiums, postponing jobs because they have too much work and trying to recruit welders and carpenters from Germany, Mexico and anywhere else they can find them.

"The magnitude of the dichotomy, the sharpness of it, is somewhat unusual," says Jock Finlayson, executive vice-president of the Business Council of B.C., which expects construction growth to more than offset weakness in the export sector over the coming year.

The value of B.C.'s exports dropped by 6.5 per cent last year and a similar slide is expected this year. Forest products account for about 40 per cent of provincial exports.

But the export slump was offset by growth in other areas. Job growth of 2.4 per cent last year was higher than the national average of 2 per cent and helped push unemployment to a record low of just over 4 per cent. Thousands of those jobs were in construction, which has recorded four consecutive years of double-digit job growth.

And although many of those workers are building venues and infrastructure for the 2010 Olympic Games, the attention-grabbing event is not the only factor in B.C.'s construction boom.

B.C.'s December major projects inventory (the list is updated quarterly) lists 835 projects worth an estimated record $148.1-billion planned or under way in the province, ranging from hydroelectric dams to sports centres.

The two sides of the dichotomy can overlap.

Take Campbell River, a city of about 30,000 people on the eastern side of Vancouver Island and the self-described Salmon Capital of the World.

For most of its history, Campbell River has been a logging town, but in recent years the retirement and recreational property wave that has swept over the southern part of the island has been washing north, pushing up property values and driving real estate development.

New condos won't make up for the loss of about 250 jobs from the Elk Falls sawmill in Campbell River, which owner TimberWest Forest Corp. recently announced it would close permanently in May after two years of fruitless attempts to sell it.

But Mayor Roger McDonell hopes retirement-oriented real estate, recreation and tourism can help the city weather the blow.

"We do have a foot in both economies," Mr. McDonell says, citing developments such as the native-owned Wei Wai Kum Cruise Ship Terminal.

Ms. Killam is singing much the same tune, saying that Mackenzie has recreational opportunities - such as snowmobiling, downhill skiing, hunting and fishing - that need marketing and development but could have international appeal.

In the meantime, Mackenzie's councillors have agreed to a pay cut next year and are working on a community development plan.

"We're not toast. We're just toast right now."

B.C.'s mixed signals

Retail trade sales
British Columbia ($ Billion)
Year over year % change

'01
'02 6.3%
'03 2.7%
'04 6.3%
'05 4.4%
'06 6.8%
'07 7.1%

Exports
British Columbia origin exports ($ Billion)
Year over year % change

'01
'02 -9.0%
'03 -2.0%
'04 9.7%
'05 10.2%
'06 -2.0%
'07 -6.5%

Housing starts
British Columbia (thousands)
Year over year % change

'01
'02 25.5%
'03 21.0%
'04 25.8%
'05 5.3%
'06 5.1%
'07 7.6%

SOURCE: CANADA MORTGAGE AND HOUSING CORPORATION (CMHC)

(prepared by Wendy Stueck/Globe and Mail)