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October 7, 2012
VANCOUVER, BC, Oct. 7, 12/ Troy Media/ – Strong gains in a number of good-producing sectors underpinned a relatively positive job market report for B.C. in September.
Total employment rose by 5,700 persons (0.2 per cent) from August to reach 2.328 million persons. While monthly gains were solid, employment was up only 1.3 per cent from the same-month in 2011 and growth has been negligible since April.
Monthly employment gains were largely attributed to higher agriculture, utilities and construction employment, which pushed total goods-sector employment up 2.9 per cent. In contrast, service-sector employment fell 0.4 per cent led by finance, insurance and real estate (-7.4 per cent).
With growth geared towards goods-producing sectors during the month, it is not a surprise that gains were stronger outside Metro Vancouver.
While top-line employment growth has been stagnant in recent months, and is expected to generate an annual average gain of only 1.7 per cent, this masks a positive shift in the labour market towards full-time positions. Full-time employment was up 0.7 per cent from August, and 3.1 per cent higher on a year-to-date basis through September. In contrast, part-time employment was down 2.6 per cent.
Total employment gains have been tepid, but likely reflect some consolidation of part-time positions, an increased number of shifts, and some sector-specific rebounds. This is further borne by an increased number of hours worked in the economy, which rose 2.5 per cent from the first three quarters of 2011.
Despite the gains, B.C.’s unemployment rate rose to 7 per cent from 6.7 per cent in August. Higher levels of unemployment reflect the slow-growth economy that has been unable to fully absorb population-induced labour force gains. Additionally, the positive trend in full-time employment may have led some discouraged workers to search for jobs again, as the labour force participation rate edged higher.
The dollar-volume of building permits issued by municipalities in B.C. fell in August as the strong pace of residential building intentions finally took a breather. Estimated total permit volume fell 15.7 per cent from July to a seasonally-adjusted $885.4 million, with sharp declines in large urban areas like Metro Vancouver, Abbotsford and Victoria.
Despite the decline, building intentions remained at elevated levels relative to 2011 and comparable to the prerecession period. August’s drop was led by a 22 per cent drop in residential permit volume, primarily representing lower apartment and townhome activity which fell by more than 40 per cent. However, the number of apartment permits has run well ahead of last year, and through August was 46 per cent higher on a year-to-date basis.
The strong run of new home building intentions is expected to turn lower in the months yielding fewer housing starts. Weak housing market conditions, in the Lower Mainland in particular, and high new and existing home inventories should lead to a pull-back in residential permit activity.
Meanwhile, non-residential permit volumes held steady in August dropping 1.5 per cent from July. A sharp decline in commercial permit volume was largely offset by higher industrial and public-sector permits, with the latter reflecting projects related to education and schools. Through August, non-residential activity is up 26 per cent from 2011, largely reflecting major projects in the north and expansions of hospitals and health facilities in the Lower Mainland.
Plenty of ‘For Sale’ signs line Lower Mainland streets these days but sales transactions have become a low. MLS home sales in the combined Metro Vancouver and Abbotsford/Mission region (Lower Mainland) numbered only 2,800 units (seasonally-adjusted) in September.
While sales were up 2.3 per cent from August, the gain did little to erase the double-digit tumble from the previous month. On a year-over-year basis, sales were down 32 per cent in the region, but fewer working days this September, and month-end falling on a weekend may have pushed processing of some transactions into October. Nonetheless, there is no denying that a weak market persists in the region with year-to-date sales activity down 18 per cent.
The weak pace of sales was met by an unexpected surge in new listings. Although some of this activity likely reflects re-listing of properties following unsuccessful initial listing, the inventory trend edged up to levels comparable to highs seen in 2010. Low sales and high inventory point to a disconnect between price expectations of prospective sellers and buyers.
Market adjustments will come through lower prices as excessive levels of inventory both in the new and resale market are forecast to yield a peak to trough decline of 5 per cent in underlying prices. The MLS HPI, which is the best metric for measuring price trends has already fallen more than 1.5 per cent since May. Downside pressure on prices is expected to be arrested by supply-side adjustments.
Current economic and labour market conditions, while modest, do not point to severe financial strains. Prospective sellers are expected to pull listings if price levels do not meet minimum expectations, leading to moribund activity and sideway prices into 2013.
August likely marked the bottom for sales activity and a modest uptrend in-line with general economic conditions is expected into 2013.
Business confidence in B.C. showed signs of stabilizing in September after deteriorating for three consecutive months. The latest CFIB Business Barometer reading, which measures confidence of small- to medium-enterprises, rose 2.6 points from August to 59 points on a scale of 0 to 100. Index levels above 50 mean that on balance, the number of businesses expecting stronger business conditions outnumber ones expecting weaker conditions.
Despite September’s uptick, the barometer reading points to a persistence soft economic conditions. Confidence remains lower than a year ago and comparable to early-2009 levels when the economy was coming out of recession.
Weak domestic retail and export trends along with a broader slow-growth Canadian economy, a deepening Eurozone recession, and soft conditions in the U.S. and Asia have likely tempered business expectations for the year ahead.
Businesses will likely hold off on expanding their workforce, generating low employment growth through the remainder of 2012.
The Business Barometer is well-correlated with annual economic growth for B.C., and current trends are generally consistent with our forecast for sub-2 per cent GDP growth this year.
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