Natural resources are driving the Newfoundland and Labrador economy, with energy projects pushing the province to more than 60 per cent of planned major project spending in the entire Atlantic region. What does that wealth of work mean for the labour market, economy and public policy in Canada’s youngest province?

In 1883, the Sisters of Mercy purchased the Littledale site in the Waterford Valley for use as a boarding school for Catholic girls. Over the ensuing decades, generation after generation of Newfoundland youth were educated in the leafy and bucolic setting just west of downtown St. John’s.

Today, the site is being redeveloped for a new use, more in line with the metamorphosis that is transforming Newfoundland and Labrador’s capital city. By next spring, the former Catholic school and complex run by nuns will be home to 600-plus employees, all of them working in the province’s booming energy and resource-related fields.

Local firm GJ Cahill Limited bought the site from the Sisters of Mercy two years ago, and has since moved its own employees to the Tower Corporate Campus at Waterford Valley (as Littledale has been rechristened.)

The collegiate setting is aimed at helping foster a creative and innovative corporate environment, according to GJ Cahill spokeswoman Lisa Anthony.

GJ Cahill itself is an example of a company that has grown from humble beginnings into an important player in the resources sector. It started in 1953 as an electrical contracting company, and has since grown into a major fabrication and construction outfit that has worked on all of the province’s major projects.

And in the near term, those projects are expected to continue — from oil to mining to hydroelectricity. Newfoundland and Labrador’s economy is expected to remain strong in the coming years, as energy related initiatives drive growth.

But with those good times come significant challenges — public-policy puzzles that must be solved to ensure that the province’s short-term gain does not become long-term pain.

For the next few years, the news appears good. Newfoundland and Labrador alone accounts for more than half of the total inventory value of major projects on the books in the entire Atlantic region. The province boasts $43.6 billion in planned work, a whopping 61 per cent of the overall total.

The other three Atlantic provinces trail far behind Newfoundland and Labrador in their share of the major development pie. Nova Scotia is next at 21 per cent, followed by New Brunswick at 16 per cent, and finally Prince Edward Island at two per cent.

“Newfoundland and Labrador is a commodity rich province and the revival in commodity prices is helping to boost major project activity,” the Atlantic Provinces Economic Council (APEC) noted in its recent major projects inventory report. “The province has abundant quantities of oil, iron ore, nickel and copper, all of which are in demand from rapidly expanding economies such as China and India. The pace of investment activity is at record levels and rising quickly.”

According to APEC, Newfoundland and Labrador’s current-year major project spending is up 49 per cent in 2011, to $6.2 billion. That follows a rise of 30 per cent in 2010. APEC says roughly half of this year’s total is being spent on five large projects which have a total value of over $17 billion: the Long Harbour nickel processing facility, the White Rose and Hibernia oilfield expansion projects, the Hebron oil project and the Iron Ore Company of Canada expansion in Labrador West.

APEC said it believes these projects, along with the start of activity on the Muskrat Falls hydro project and related transmission infrastructure, will keep spending at record levels over the next few years. “Newfoundland and Labrador will continue to bound ahead,” the report predicted.

All told, APEC has identified 103 projects totalling $43.6 billion in the province, which is up 16 per cent over last year’s inventory. APEC said the main reasons for the growth are the increase in valuation of the Hebron oil project and the addition of planned mining projects in Labrador.

Other forecasts are painting a similarly rosy picture for the province’s prospects in the near term.

All told, APEC has identified 103 projects totalling $43.6 billion in the province, which is up 16 per cent over last year’s inventory. APEC said the main reasons for the growth are the increase in valuation of the Hebron oil project and the addition of planned mining projects in Labrador.

Other forecasts are painting a similarly rosy picture for the province’s prospects in the near term.

“Canada’s most eastern province continues to move full steam ahead with the second-fastest projected growth rate in Canada in 2011, behind only Alberta,” noted Craig Wright, senior vice-president and chief economist with RBC Economics. “Data in the early part of this year showed robust growth in construction, exports and employment. The natural resource industry, which has been the central factor in Newfoundland and Labrador’s economic performance in recent years, will continue to be a source of strength in 2011.”

According to RBC, provincial employment grew by 2.8 per cent in the first quarter alone – the largest quarterly gain in Newfoundland and Labrador in more than a dozen years.

RBC indicated that ongoing major project spending is helping fuel nonresidential investment. And high crude prices are continuing to offset declines in production. Newfoundland and Labrador hit peak oil production levels four years ago, in 2007.

Meanwhile, TD Economics indicated that Newfoundland and Labrador is on track to recover from a whopping 10.2 per cent contraction in GDP during recession ravaged 2009.

“The province made the first leg of its journey in 2010, with an estimated 5.4 per cent real GDP growth performance,” TD Economics noted in a report released this year. “Solid numbers will be recorded over our forecast period (4.7 per cent in 2011 and 2.6 per cent in 2012). If realized, this would make Newfoundland and Labrador one of the top economic growth performers in each year from 2010 (to) 2013.”

But there are concerns buried underneath the avalanche of numbers. TD Economics noted that demographics in the province remain a “challenge.” Those include an aging population and the spending pressures that go hand-in-hand with that.

And what was once unfathomable may now become reality — too few workers for too many jobs. According to Newfoundland and Labrador Finance Minister Tom Marshall, there may be between 5,000 and 7,000 unfilled positions in the province by 2015. “Who would have thought it?” Marshall noted. “Who would have thought it, 10 years ago, that Newfoundland and Labrador would be the place where we’d have more jobs than people?”

This summer, the provincial government released its Labour Market Outlook 2020 report, which forecasts the province’s employment demands for the next decade, and outlines opportunities in several sectors.

According to the report, 70,000 jobs are expected to open up between 2011 and 2020, with attrition accounting for nearly 90 per cent of them. Total employment is expected to grow by 2.8 per cent over the same time frame. That means about 7,700 new jobs in the economy.

“Our historical challenge of too many people and not enough work is now giving way to the new reality of increased jobs and opportunities,” Labour Minister Darin King told reporters in releasing the report.

Most of that growth will occur over the next four years, according to government forecasts, as major projects come on stream. Employment levels are expected to jump 8.2 per cent, before peaking in 2015. That will be followed by a decline of about 5.1 per cent from 2016 to 2020, as the construction phases of the projects ramp down. The utilities, health and trade sectors are expected to be most robust.

To meet labour demands, the government is investing in a suite of programs and initiatives, from skills training to programs targeting immigrants to considering “family friendly” public policy options to help attract and retain young workers and their families.

According to King, the government estimates that between five and seven per cent of the province’s workforce actually travels outside Newfoundland and Labrador for work. The aim is to entice them to instead toil inside the province’s borders.

“We see this as an era of great prosperity for our people, and one that everyone must make an effort to seize,” King said.

Labour and business leaders have also recognized the importance of the work to come.

“First and foremost, workers — including the next generation of workers — must be aware of the opportunities ahead,” Lana Payne, president of the Newfoundland and Labrador Federation of Labour, said in a news release. “But just as important, as a society we must be clear about the kind of labour market we want to build — we want a labour market that supports good jobs, that includes safe and rewarding work for the citizens of our province. We want to ensure that the workers of our province share fairly in the province’s prosperity.”

Roger Flood, the chairman of the Newfoundland and Labrador Business Coalition, added that the report “presents an opportunity … to address labour needs and match labour supply with projected demand.”

Potential labour pains are not the only prosperity-related public-policy issue facing the provincial government. Years of resources-fuelled growth have stuffed provincial coffers full of petro-bucks, allowing the government to ramp up spending by billions while still remaining in the black, and also paying down debt.

But recently, Memorial University economist Wade Locke warned about the potential impact of the province’s big-spending ways. Locke told a panel discussion in St. John’s this summer that government expenditures have kept pace with booming revenues — something that is not sustainable into the future. According to Locke, falling royalty payments could see the province running annual deficits of $1.9 billion within a decade. Locke calculated that the public debt could double over that same time frame.

Locke’s warnings follow similar cautionary words from the province’s former auditor general, John Noseworthy. As far back as 2008, Noseworthy said that Newfoundland and Labrador’s dependence on volatile non-renewable oil revenues left the province in a “vulnerable” financial position.

According to a report issued by Noseworthy earlier this year, total government expenses have increased by nearly $2 billion since 2006. In particular, health and education expenses jumped by just over $1 billion (or 34.7 per cent) since 2006 and now account for 55.6 per cent of total expenses.

The business community is also expressing concern. “We managed to convince ourselves that life is good, and we can afford to live higher on the hog than we’ve been able to in the past,” Jo Mark Zurel said. “So we have our provincial government and our municipal governments spending like there’s no tomorrow.”

But tomorrow always comes, bringing with it those challenging demographics — fewer young people in the workforce paying for an ever-increasing number of older residents who will require expensive services. “We’re going to be hit from both ends,” Zurel said. “We’re going to have the revenues dropping and the costs rising. And that’s a scary prospect.”

Zurel — a former senior vice-president and CFO with CHC Helicopter Corporation who now serves as chairman of the St. John’s Board of Trade and president/owner of the investment company Stonebridge Capital Inc. — said the province needs to diversify the economy to build the foundation now that will support those programs it values later.

Zurel said he has sympathy for politicians who find it difficult to say no when they have the short-term resources to say yes. “I understand they’re in a tough spot,” he acknowledged. But that does not make action any less necessary.

“When revenues are rising, you have the ability to make choices that don’t hurt anybody. But when revenues start to drop, and you have to start cutting, that’s when everybody really feels the pain.”

Zurel said he does not want to look back years down the road and conclude that this generation squandered opportunities for the next one.

And he issued a caution about hydro projects being viewed as a great economic panacea for the province. Muskrat Falls — while potentially good — is mostly about replacing generating capacity, and will be paid for by Newfoundland residents through their power rates. “I think we’ve got to keep that one in perspective,” Zurel noted.

The province’s finance minister, meanwhile, defends much of the increase in program spending. Tom Marshall says the government had to play catch-up on neglected and crumbling infrastructure, and pumped billions into public-works spending to keep the economy steady during the recession.