BC Economic Snapshot Aug. 11, 2012

VANCOUVER, BC, Aug 11, 2012/ Troy Media/ – Last month B.C.’s labour market gave back a substantial portion of the job gains recorded since February as estimated employment fell by 0.6 per cent (or 14,500 persons) from June to a seasonally-adjusted 2.31 million persons.

While declines were statistically significant and suggest real erosion in the labour market in July, some of the decline was offset by an improvement in job quality as full-time employment gained.

 Employment losses were entirely concentrated in the part-time sector, which shed 24,100 persons (4.8 per cent) from June, which contrasted with a gain of 9,600 full-time employed individuals (0.5 per cent). Full-time employment has continued to trend higher in 2012 and has fully recovered to pre-recession levels.
Declines in part-time employment may reflect a shift of part-time workers to full-time opportunities, or part-time jobs being converted to full-time hours. Of course, part-time positions could also be lost due to insufficient demand in certain sectors.

Total hours worked in the economy provides an additional indicator of real employment. While total hours dipped from June, estimates remained still higher than May levels. Nonetheless, the labour market showed signs of weakening in July.

While the labour force edged lower, the ranks of the unemployed rose, pushing the unemployment rate up to 7 per cent from 6.6 per cent in July. B.C.’s unemployment rate has been volatile this year but has fluctuated near the current level. The unemployment rate in Metro Vancouver rose from 6.5 per cent to 6.9 per cent in July.

The tempering of employment in July supports our view of a less vibrant labour market in the latter half of 2012. Confidence-challenged businesses are expected respond with caution to persistent global economic uncertainty by dampening the pace of hiring. After running ahead of 2011 by about 1.9 per cent over the first six months of the year, annual growth is forecast to temper to 1.6 per cent by year-end.

Trade
Slumping economic growth that has swept from Europe to Asia and the U.S. has weaved its way into B.C.’s export performance during the first half of 2012.

The downtrend extended into June as current- dollar export volumes of provincial goods to international markets fell to a seasonally-adjusted $2.58 billion, down about 2.6 per cent from May.

While lower prices in some sectors contributed to the decline, real or price-adjusted exports are estimated to have declined 0.7 per cent, reflecting fewer product shipments amidst a tempering of global demand.

Real exports fell for a fourth consecutive month in June. June’s monthly decline in current-dollar activity was led by a 10 per cent drop in energy exports and 5 per cent decline in machinery/equipment.

Modest monthly gains were recorded in the forestry and industrial goods and materials sectors, but sector trends have been negative in 2012 in both current-dollar and real terms. Chinese growth has slowed, stunting demand growth in lumber and other commodities, while also negatively impacting prices.

Year-to-date export growth fell to 0.5 per cent from more than 2 per cent in May. July figures are expected to generate negative year-to-date export growth given persistent challenges in external economies.

While exports have dropped, imports have held steady generating a widening merchandise trade deficit for the province. The trade deficit expanded to a seasonally-adjusted $2.9 billion in the second quarter.

Housing

Following an apartment-led spike in June, urban-B.C. housing starts fell back to trend in July with builders breaking ground at a seasonally-adjusted annualized rate (SAAR) of 24,100 units. This marked a 29 per cent decline from June following a 31 per cent gain.

Less activity in the multi-family sector generated July’s entire decline, with multi-starts falling 38 per cent to 16,900 units SAAR. Despite the drop, multi-family starts remained within the range observed since early-2010 with a modest upward trend. In contrast, the pace of detached housing starts rose nearly 6 per cent to an annualized pace of 7,300 units, but remained at low levels.

While monthly starts have been volatile, provincial activity has generally trended higher this year, reflecting a continued ramp-up in Metro Vancouver activity and modest rebounds from recessionary lows in other parts of the province.

However, starts are expected to slow over the course of the year. Tighter mortgage insurance rules will cut into already weak sales in the Vancouver region which, combined with elevated new home inventory, will push builders to slow the pace of activity. Housing starts are forecast to end 2012 up 1.1 per cent from 2011 and reach 26,700 units. Starts are forecast to edge down 1 per cent in 2013.

Construction
Total dollar-volume of building permits issued by municipalities in B.C. slipped in June following sharp consecutive monthly gains but remained at elevated levels. Permit volume fell to $913.9 million on a seasonally-adjusted basis, down 16 per cent after jumping more than 27 per cent the previous month.

June’s decline was led by non-residential activity, which fell 35 per cent relative to the previous month. This was predictable as May’s 20 per cent gain largely reflected a one-time boost related to major hospital/ medical projects in the Lower Mainland.

In contrast, May’s surge in residential permits held up in June with seasonally-adjusted activity dipping only 4 per cent to $635.3 million. This was consistent with the elevated level of housing starts during the same period.

Small Business
Economic uncertainty and erosion in business confidence has slowed the pace of new business formations from early year highs. After a June uptick, total business incorporations dipped 5 per cent a seasonally-adjusted 2,530 formations in July.

Incorporations have slipped after surpassing a monthly flow of 2,700 formations in the spring, narrowing year-to-date growth to 2.3 per cent from a high of 3.5 per cent in April.

A tumble in the Canadian Federation of Independent Business’ confidence indicator for July reported last week and we forecast that below-average economic growth over the next year points to a subdued but stable pace of business formations over the next year.

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