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Alberta economic snapshot for the week ending Oct. 6, 2012
October 7, 2012
CALGARY, AB, Oct. 7, 12/ Troy Media/ – It may still be the best jobs market in the country, but the pace of new jobs being created in Alberta has slowed down over the past several months. New numbers released on Friday confirm that moderating trend.
In September, there was a net gain of 2,100 jobs in the province – down from an average of 2,600 new jobs per month over the first eight months of the year, and well below the average 8,300 jobs per month in 2011. The unemployment rate held steady at 4.4 per cent, the lowest in the country.
Canada’s national job report, however, was stellar. Last month there were a shocking 52,100 new jobs, most of them full-time. This far surpasses the expectation by economists of an additional 10,000 jobs for the month. But, in spite of the strong gain in jobs, even more Canadians entered the job market, pushing the unemployment rate up from 7.3 to 7.4 per cent.
Compared to a year ago, employment has grown the most in Alberta’s oil and gas sector (+27,800), construction (+20,300), and utilities (+10,700). Fewer jobs are reported in information, culture and recreation (-12,500), trade (-10,800) and professional, scientific and technical services (-10,500).
While the pace of Alberta’s job market is slowing, on balance this is a positive development. Slow and steady employment gains are better than growing by leaps and bounds – especially when the provincial unemployment rate is at 4.4 per cent. If employers are hiring too many new people, it would signal that some jobs are being filled by applicants with insufficient experience or training.
That would be not only inefficient and costly, but potentially dangerous, especially in the skilled trades sectors.
Agriculture
With more hectares seeded in 2012 over 2011, production of field crops expected to be higher. Unfortunately, the weather didn’t cooperate and, according to Statistics Canada, this hurt yields and production levels. In Alberta, canola production is expected to be 6 per cent below 2011 levels and wheat is expected to be 5.9 per cent lower. Barley, by contrast, is expected to be 6.7 per cent higher.
While volumes might be lower, crop farm receipts will likely be higher, so, it will be good year on balance. Canola is trading at over $620/tonne, wheat at US$9.2/bushel and feed barley at more than $200/tonne. These are anywhere from 3 to 15 per cent higher than trading levels in September 2011.
The U.S.
On the heels of last week’s bad news, this week’s economic news hit some decidedly positive notes.
On the production side, the U.S Department of Commerce reported construction spending dipped slightly in August relative to August 2011, but is still 6.4 per cent higher than in the same month last year. Manufacturing also got a boost last month, as the number of vehicles sold hit 15 million, the highest pace of sales since March 2008. The American service sector also had good news. The Institute for Supply Management’s non-manufacturing index rose from 53.1 to 55.1 per cent in September, indicating the industry was expanding at a quicker pace.
American employment numbers are keenly watched, both because of the election and the Federal Reserve’s decision to link its bond purchasing program to the health of the labour market. The numbers for September were very good, indeed. According to the Labor Department the U.S. unemployment rate dipped from 8.1 per cent in August to 7.8 per cent in September. The gain was mostly attributed to better actual job numbers than had been reported in previous releases, which were revised up a combined 86 thousand.
Forestry
Alberta’s entire economy isn’t driven just by oil and gas or agriculture. There are still many towns that rely on lumber or pulp and paper mills. The housing collapse in the United States cut lumber prices to shreds, but, as the housing market begins to recover, so do lumber prices.
The Random Lengths Framing lumber composite price hit $332/thousand board foot (tbf) in September, 27 per cent higher than September 2011. In fact, this is the first year prices have averaged over $300/tbf since the housing industry collapse.
Construction
Statistics Canada announced that building permits jumped 7.9 per cent in August over July and up 22 per cent relative to last year. The numbers were particularly good for the Alberta residential sector, which were up 26.2 per cent on a monthly basis and 26.9 per cent relative to last year.
Overall Alberta punches way over its weight in construction. With a little over 10 per cent of the population of Canada, Wild Rose country accounts for over 17 per cent of value of building permits.
Housing
Like elsewhere in the country, sales activity in Alberta’s capital slowed in September, according to the Realtors Association of Edmonton, with 1,269 recorded sales, a 12 per cent drop compared to September 2011. Sales so far in 2012, however, are up 7.2 per cent, thanks to a very strong spring selling season.
Median home prices have been very consistent in Edmonton over the past half decade. Single family home median prices are now 5 per cent higher, town homes/duplexes are 1.7 per cent higher and condominium median prices are 6 per cent lower. This is the definition of a soft housing landing. Housing in Edmonton today is far more affordable than during the most recent boom years.
Weekend
With the American election 31 days away, there will be a lot of talk about the sustainability of American social programs. The Congressional Budget Office (CBO) is a non-partisan research office that advises lawmakers on the issue. And it is an issue. At 20 per cent of the budget, social security (essentially, their version of the combination of the Canadian CPP and OAS) is the largest single government outlay in the United States. In fact, it’s slightly higher than Medicaid or Defence. The CBO estimates payroll taxes would have to increase from 12.4 per cent to 14.35 per cent for it to be sustainable, or benefits reduced by an equivalent amount. To dig into the study, click here.
Bank of Canada Deputy Governor Tiff Macklem gave a speech in Winnipeg on the relation between labour markets and monetary policy. It made headlines because Macklem reiterated comments of other central bank officials that Canada’s economy is returning to capacity and that monetary stimulus might soon need to be reduced. The text of the speech can be read here.
| ATB Financial
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