In Labrador West, mood sinks from boom to gloom

In a matter of only a few weeks, a once-overheated economy in the mining towns of Labrador City and Wabush has not only cooled down, but turned positively icy.

The Labrador West region depends largely on iron ore, and the major employers in the area the Iron Ore Company of Canada and Wabush Mines have both in the last two weeks announced hundreds of layoffs and production cuts.

Lab West has been through tough times over the years, but residents say the current situation sparked almost entirely by the global economic crisis and a worldwide drop in the demand for steel has happened with a speed they have never seen before.

"God knows how long it will take to recover," said Labrador City Mayor Graham Letto.

"We hope it's not that long, and we hope that it can turn around as quickly as it went down, but, you know, I think that's wishful thinking."

IOC said this week it was immediately halting all work on an ambitious $800-million expansion program, parts of which the company unveiled only this fall. The move will mean dozens of layoffs among companies that IOC has hired.

IOC will also shut down its iron ore mine and other operations next July, in a bid to save money.

Last week, Wabush Mines said it would have to lay off 160 employees this winter.

The one-two punch is a blow in the region, which had become accustomed to dealing with problems of prosperity, such as a tight housing market.

Real estate agent Roger Winsor said prospective customers are holding still.

"People that are buying are definitely sitting on the fence right now," he said.

"We've had a couple of deals that we were working on and these buyers are just going to hang tight and see how January shakes out in the marketplace."

Workers have become anxious. Sheldon Drover, 23, who was only recently hired by a contractor that does work with IOC, bought an expensive house in Labrador City. So far, his job is safe, although he admits he is worried.

"Nervous times," he said. "[It's] a little unsettling, but you got to take it day by day. Hopefully, things will turn around as quickly as they went south."

Older workers have been through layoffs before, although that hasn't stopped people from feeling anxious.

"It's going to slow down for sure 2009 is going to be a hard year," said Francois Pradella, assistant manager of the Two Seasons Inn, a 54-room hotel its name a humorous nod to the climate of Labrador West that had been filled to capacity all through the summer.

"The whole town is going to be affected," said Pradella, who expects that the Two Seasons will not have to lose staff.

"The mining business is a cycle. It's been good for three, four years. Now it's going to slow down, and it's going to come back again. These are good mines we have here. So, it's only a cycle, and things always come back."