BC Economic Snapshot April 6, 2013

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 Labour Market Weakens In March

VANCOUVER, BC, Apr. 6, 2013/ Troy Media/ – B.C.’s labour market weakened in March following an upshift in employment in February.

Total provincial employment fell by an estimated 14,800 persons or 0.6 per cent from February to reverse most of the prior month’s rebound. Total estimated employment fell to a seasonally-adjusted 2.303 million persons.

Employment declines were entirely concentrated in the full-time sector, which fell by 22,400 persons, as part-time employment expanded for a second month. Construction accounted for a large chunk of the monthly contraction, shedding 12,300 jobs (6.1 per cent) from February. Meanwhile, accommodations and foodservices were down 8,300 persons (4.5 per cent).
Regionally, Metro Vancouver fared better than the rest of the province with an employment gain of about 6,000 persons (0.5 per cent).

We has consistently cautioned against emphasizing any single month of data, given substantial month-to-month variation that may reflect the estimation process rather than real employment changes. However, the labour market deteriorated in March. Unemployment counts rose, while the estimated unemployment rate shifted from 6.3 per cent in February to 7 per cent in March, marking the highest level in a year.

March’s labour market performance remained consistent with the weak hiring trends observed since early-2012 and reflects tempered economic conditions in the province. We forecast annual employment growth of about 1.3 per cent this year.

Housing

Lower Mainland MLS sales activity rebounded in March following an abysmal February showing. While total sales in the region, which spans Metro Vancouver and Abbotsford-Mission, were still 19 per cent lower than same-month 2012, seasonally-adjusted sales popped 18 per cent from February to 3,120 units in March — the strongest pace of activity since July.
On the pricing front, the regional benchmark MLS rose for a second month to reach $535,600, up 0.5 per cent from February. However, these likely reflected seasonal gains often observed with transition from the slower winter months to the spring selling season. Stripping out typical seasonal factors, the benchmark price eased for a 10th month in March. The benchmark price has fallen about 3 per cent since peaking in April.

The mild but persistent erosion in price levels is consistent with the low sales-to-inventory ratios of a buyers’ market. Sales clearly improved from the listless performance in recent quarters, but levels remained exceptionally weak in March and we expect outsized monthly sales gains to be the exception rather than the norm.

Home sales will trend modestly higher from over the remainder of the year as price declines and improved confidence pull some buyers into the market. However, tighter mortgage insurance rules will continue to dampen first-time buyer activity, and by extension, weigh on move-up buyer activity.

We maintain our forecast of an annual MLS sales decline of about 3 per cent from 2012, despite the uptrend. Tempered sales conditions will continue to weigh on price levels.
Further downside adjustment to the MLS benchmark price is forecast to top out at 5 per cent during the first half of 2013, marking a reversion to 2010 levels and a benchmark price of about $510,000 as sellers waver on asking prices.

Supply-side adjustments are expected in light of weak demand. Stable, albeit subdued, economic and labour market conditions, and steady interest rates mean most prospective sellers have the luxury of time. In the absence of severe shocks to household incomes or mortgage payments, many prospective sellers will remain patient or pull listings if price levels do not meet minimum expectations, rather than slash prices.

Trade

B.C. merchandise exports to international markets pulled back in February, extending the softening pattern observed since November. Total current dollar exports edged down to a seasonally-adjusted $2.58 billion in February, down 1.1 per cent from the previous month.
While volume over the first two months of the year was just shy of same-period 2012, the recent export trend is about 3 per cent below mid-2012 levels.

February’s export contraction almost entirely reflected a drop in natural resource shipments. Energy shipments fell 3.5 per cent, while metallic/ non-metallic ore and mineral exports declined 27 per cent. In contrast, forestry product shipments rose 5 per cent and manufacturing exports also gained.

Sluggish global economic growth has tempered demand and prices for base-metals and mineral commodities, while low but rising natural gas prices continue to hamper energy exports. A bright spot remains the provincial forestry sector which is gearing off the U.S. housing market recover.

International exports are forecast to grow modestly by about 3 per cent this year. The faster growing U.S. economy after 2014 will give a considerable boost to B.C. exports of wood products while the strengthening global economy lift mining and energy exports.

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