BC Economic Snapshot Dec. 7, 2013

2013 has been a terrible year for B.C.'s labour market

VANCOUVER, BC, Dec 7, 2013/ Troy Media/ – B.C. once again found itself on the short end of the job-growth stick in November as employment contracted for the fourth time in five months.
In yet another dismal performance, employment fell 0.4 per cent from October to a seasonally-adjusted 2.296 million persons, with actual employment levels down 0.7 per cent from the same month in 2012.

The province has underperformed the rest of the country. National employment added to recent gains with a 0.1 per cent expansion in November, owing in most part to gains in Alberta and Ontario. While year-over-year growth in B.C. is negative, Canada-wide employment was up 1.3 per cent from November 2012.

A closer inspection of the data unearths few, if any, positive nuggets. Losses were observed in both the full-time and part-time sectors in November. Positive earlier year trends in full-time employment have fully unwound in recent months, contributing to a declining trend in hours worked – another measure of real employment. Among age groups, older workers (25+) fared better, while youth employment pulled back during the month.

At the industry level, nine of the 16 sub-sectors shed workers during the month. More significant declines were observed in educational services, professional/ scientific/technical services, and construction. These were offset by gains in the manufacturing and accommodations/ foodservices sectors.

Monthly estimates are often volatile but there can be no denying this has been a terrible year for B.C.’s labour market. Businesses have been hesitant to hire in a slow-growth economy, likely adapting to growth fluctuations by extending hours or using more sweat equity. 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 11 months was down 0.2 per cent pointing to the weakest annual performance since recession-induced losses in 2009 and second weakest since the turn of the century. If not for a somewhat surprising growth in public-sector hiring, figures would be worse, given private-sector employment has declined 0.7 per cent.

Lower employment figures boosted the provincial unemployment rate to 6.7 per cent, up from 6.5 per cent in October. While the rate remains relatively low, it should not be interpreted to mean the labour market is solid. Labour force participation has declined 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.

In contrast, the employment-to-working age population has fallen below 60 per cent – a steep drop from more than 63 per cent in 2007, suggesting significant labour market slack. We forecast no employment gains this year and only a modest improvement of 1.6 per cent next year as tempered economic growth continues to weigh on hiring.


Trade
B.C. goods exports to international markets decelerated for a second successive month in October to a seasonally-adjusted $2.77 billion, down 2.6 per cent from September, but remained above early year levels. Despite the deceleration, which may partly reflect the impact of the U.S. federal government shutdown during the first half of the month, the upward export trend remained intact.

October’s pull-back was modest and within the normal range of monthly fluctuations but sector performance varied considerably. Energy exports fell eight per cent from the previous month, while processed metals and mineral exports fell 18 per cent to give back October gains. Exports of consumer goods also declined about 15 per cent. In contrast, forestry-related output, and some manufacturing sub-sectors rebounded after a September lull.

Monthly exports are typically volatile, but the underlying trend remained positive. Demand growth along with a weak 2012 baseline contributed to a current dollar year-to-date export gain of five per cent led by a 14 per cent gain in forestry products which has accounted for the bulk of the total gain, while raw metal and mineral shipments were also up sharply. Offsetting these gains were declines in energy and processed mineral and metal exports.

Higher prices for some goods, particularly for forestry products have lifted dollar-volume exports, but we estimate that real shipments were still about 1.5 per cent over the first 10 months. This points to a modest improvement for the province’s export economy and reflects a gradual pick-up in global, and more importantly, U.S. economic conditions. While export momentum has generated positive economic news, the lift has been offset by import growth, limiting trade-oriented expansion of the economy.

Housing
The Lower Mainland housing market posted another hefty year-over-year sales gain in November but momentum downshifted following a recent run-up in activity.

While November MLS sales in the combined Abbotsford-Mission and Metro Vancouver area came in nearly 29 per cent above the same month in 2012, sales decelerated for a second successive month. Seasonally-adjusted sales fell three per cent from October to about 3,750 units, following a seven per cent drop the previous month.

The sales moderation was expected as temporary factors contributing to a 50 per cent increase in sales trend through the first three quarters faded. In particular, sales were boosted by interest rate hikes as holders of lower-rate pre-approved rate commitments locked in to avoid higher future rates. Rate commitment expirations and stable interest rates have tempered this source of demand. Meanwhile, the labour market and economy remain sluggish, and a drag on overall housing activity.

While sales have rebounded significantly from the same period in 2012, activity levels should be kept in context. Sales cascaded in the back half of 2012 to near recessionary lows, boosting annual comparisons. Even with the recent upswing, sales are at the lower threshold of the range observed from 2002 to 2007, and the actual sales count in November was about five per cent below the average count for the month going back to 2000.

Nonetheless, sales growth over the past few quarters has led to a firming of home prices. The regional MLS benchmark price held steady at $541,300 in November – unchanged from October, but up about 0.6 per cent from the same month in 2012. Detached home prices have picked up this year, while multifamily price growth has lagged. Downward sales momentum is forecast to persist through the first quarter of 2014, but earlier year momentum will 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 five 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.

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