Conference Board analyzes Canada’s stalled job market
Ottawa, ON - The Conference Board of Canada's latest Month at a Glance report comments that employment in Cana...
Ottawa, ON – The Conference Board of Canada’s latest Month at a Glance report comments that employment in Canada was flat in October 2010, as the country gained just 3,000 jobs. The news, however, wasn’t all bad, Board economist Eric Thomson, noted, as full-time gains offset part-time losses. The unemployment rate dropped slightly to 7.9%, as about 30,000 males in the over-25 age group left the labour force.
Increases in the goods sector were matched by a decrease in service-sector employment. The largest chunk of job gains came in construction, which is continuing an upward trend that began in 2009. Within the service sector, jobs were lost in trade, health care, and accommodation. Information, culture, and recreation gained 22,100 jobs-but not enough to offset losses in other service industries. Most provinces – including New Brunswick, Quebec, Manitoba, and Saskatchewan – posted virtually no change in their employment levels. Alberta’s gain of 17,000 jobs was offset by a big loss of 8,600 jobs in Nova Scotia and smaller losses in Newfoundland and Ontario.
Canada’s real GDP growth rebounded by 0.3% in August – one month after posting its first loss in nearly a year. Canada’s economy is now larger than it was before the recession struck. However, it remains below full potential. The goods-sector continues to rebound from its recession low. The manufacturing industry grew 0.5% on stronger non-durable production. Thirteen of 21 manufacturing industries made gains in August. The mining, oil, and gas industry also improved, adding 0.5% thanks to higher oil and gas extraction. Construction grew 0.3%, with the gains spread among non-residential and residential projects. Utilities fell due to lower power demand; and forestry and agriculture output contracted for the second month in a row.
Growth in the service sector was also widespread, with virtually all subsectors showing gains. Wholesale trade shot up 1.1%, largely due to increased demand for machinery. With Canadians loosening their purse strings, retail trade edged up 0.3% on increased sales of durable and semi-durable goods, such as new vehicles and home furnishings. Growing demand for personal financial products – including residential mortgages, business loans, and mutual funds -boosted the finance and real estate industries 0.6%. Real estate agents and brokers saw an increase in housing transactions in August, following three months of declines (which were sparked by tighter mortgage rules and the introduction of harmonized sales taxes in Ontario and British Columbia on July 1). The only two service industries to shrink were education services and arts, recreation, and leisure.
Recent housing market data show that Canadian homebuyers are swiftly shifting toward condominiums and away from detached homes. According to a recent ReMax report, condo prices have climbed 12.9% in the last year, but remain more than 30% cheaper than the average detached home. Developers are rushing to meet demand. The value of new residential building permits in Canada has risen 15.3% since last year. All of the increase has been in permits for multiple units, which have skyrocketed 74.7%. Permits for single-detached homes are down 8% over that period. Developers appear to be happy to accommodate first-time homebuyers and retirees who are increasingly looking at condominiums due to their affordability and proximity to urban cores. The surge in the number of multiple units being built, along with rising interest rates, will likely cool off price gains over the next couple of years, but demographic and lifestyle trends will continue to drive demand.
At its regularly scheduled policy announcement on October 19, the Bank of Canada maintained its overnight interest rate at 1%. The move followed three consecutive quarter-percentage-point hikes, and the Bank said its decision was due to a gloomier economic outlook-domestically and abroad. The Bank reduced its 2010 GDP forecast for Canada to 3%, down from the 3.5% projected in its July Monetary Policy Report, and cut its 2011 forecast from 2.9% to 2.3%.
Weaker world demand in all major economies – including the US, the eurozone, and Japan – is expected to dampen growth in Canada’s exports. The Bank also lowered its inflation outlook, saying it believes the Canadian economy is further away from full capacity than previously thought. Governor Mark Carney continues to reinforce the line that, given the weaker outlook, “any further reduction in monetary stimulus would need to be carefully considered.”