B.C. Economic Snapshot Nov. 9, 2013

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VANCOUVER, BC, Nov 9, 2013/ Troy Media/ – B.C.’s dormant labour market continued to disappoint in October with a second consecutive monthly decline in employment. Estimated employment fell to a seasonally-adjusted 2.30 million persons during the month, marking a 0.2 per cent dip from September while lagging the same month in 2012 by 0.5 per cent. In comparison, Canada-wide monthly growth reached 0.1 per cent, with a year-over-year gain of 1.2 per cent.

October’s labour market performance was largely negative. Despite a rise in the part-time sector, fewer full-time jobs led to a contraction in overall hours worked in the economy, with losses concentrated in the youth and adult-female demographics.

Among industries, employment declines were observed across both the goods and services industries. Significant declines were observed in primary industries and resource extraction which contracted more than six per cent from September, while the finance, insurance, real estate and leasing and professional and technical services sectors also recorded significant declines. In contrast, partially offsetting gains were observed in the healthcare/social assistance, education and accommodations/foodservices.

While monthly estimates can be volatile and October’s job loss was statistically insignificant, the trend is your friend when examining the labour market – and that trend has been dismal. Employment has been range-bound near current levels for more than a year with the economy failing to generate sustained job growth. Average employment through the first 10 months of the year was 0.2 per cent less than same-period 2012.

While not all that different from zero, it is still well below the 1.4 per cent Canada-wide pace. Despite sluggish hiring, the provincial unemployment rate has held steady, and actually fell in October to a four-month low of 6.5 per cent.

However, this does not by any means reflect a tightening labour market. Labour force participation has continued to decline since the recession, as a fruitless search has led some discouraged long-term unemployed to extract themselves from the labour pool, dampening the unemployment rate.

We forecast dismal employment gains of only 0.2 per cent this year and a modest improvement of 1.6 per cent next year as tempered economic growth continues to weigh on hiring.

Housing
Housing activity in the Lower Mainland remained robust in October with sales up more than 30 per cent from year ago levels. However, a sales deceleration from September points to a slowing of momentum following more than six months of gains.


Total MLS sales in the Lower Mainland, which includes both Abbotsford-Mission and Metro Vancouver, reached a seasonally-adjusted 3,900 units in October, up 31 per cent from the same month in 2012 but seven per cent below September. Despite the retracement, sales remained in line with third-quarter performance which was the highest since early-2011 and near the decade-average. This year’s significant recovery and a U-shaped sales trend since 2011 that bottomed in late-2012 has contributed to a year-to-date sales gain of nearly 5 per cent.

Following the sales lead, the regional MLS benchmark price eased slightly from September by 0.3 per cent to $540,900 (unadjusted for seasonal factors). Price levels have generally held steady since firming over the first half of the year, but apartment condominium prices have eroded slightly. On a year-over-year basis, the benchmark price for all property types was down by a modest 0.4 per cent.

October’s market deceleration came as little surprise. While activity cannot rise indefinitely, recent gains in housing demand were likely underpinned by temporary factors given ongoing sluggishness in the labour market and economy. These included an advance of future sales as an uptick in borrowing costs led some prospective buyers with lower pre-approved mortgage rates to take the plunge. Meanwhile, the initial shocks of last year’s mortgage insurance rule tightening subsided. Similar, albeit more modest sales patterns were observed in other large urban markets, pointing to a rebound driven by broad macro-factors. The expiration of low-rate commitments and persistence of tighter mortgage insurance rules will dampen sales this quarter, but recent momentum and depressed fourth quarter 2012 sales contribute to a 10 per cent annual gain.

A modest improvement in the economy and persistence of low interest rates are forecast to drive a 5 per cent gain in 2014. However, at less than 45,000 units, sales will remain well below the average levels observed from 2000- 2010. The average benchmark price for 2013 is expected drop about one per cent from 2012 with little change projected for 2014.

Construction
Following an August uptick, residential building intentions retreated in September. Total volume fell to a seasonally-adjusted $513.1 million during the month, down 14 per cent from August on lower volume in both the single- and multi-family space.

Through September, residential building intentions were 2.5 per cent lower than in the same period in 2012. Among major urban areas, activity was higher in the Abbotsford and Kelowna CMAs by about 10 per cent. Metro Vancouver activity was stable, while Victoria showed a decline of nearly 15 per cent. A decline in permit volume to the weaker levels of late-2012 points to a slowdown in new home and renovation construction during in the fourth quarter.
In contrast to September’s decline in residential activity, non-residential permit volume bounced back following an August contraction. Municipalities issued permits valued at $326.5 million marking a monthly gain of 10 per cent and in line with 2013-highs.

An increase in public-sector intentions led monthly gains, and offset a pullback in industrial activity. While monthly non-residential permit activity can be volatile, volume has generally climbed since the end of 2012.

Despite this positive trajectory, activity was still down 25 per cent from the first three quarters of last year, reflecting lower private-sector construction. A challenging economic environment has likely curtailed some investment spending on the part of business and government this year, but the drop largely reflects a base-year effect.

Permit volume in 2012 surpassed pre-recession levels – boosted by a number of major project commencements, including the Rio Tinto upgrade in the North Coast region and hospital expansions in the Lower Mainland. The dollar-value of major project starts has been more modest this year. Annual non-residential permit volume is forecast to settle at 20 per cent from 2012, but remain above levels observed from 2009-2011.

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