Saturday, December 08, 2012

BC Economic Snapshot Dec. 9. 2012



VANCOUVER, BC, Dec. 8, 2012/ Troy Media/ – British Columbia’s jobs machine is faltering. Employment fell for a second consecutive month in November, underscoring the sluggish pace of the economy and the seeming inability to generate sustained job growth.

Total estimated employment fell to 2.312 million persons in November, marking a decline of 4,700 (0.2 per cent) from October. While the dip was statistically insignificant, it came on the heels of a sharper drop of 0.5 per cent in October, suggesting a two-month decline of more than 15,500 workers.

 While there has been significant intra-period and inter-region variation, overall employment growth since March has essentially been nil. Annual employment growth will hold steady at 1.8 per cent for 2012, but gains will reflect a first quarter uptick and lower employment last year, rather than recent growth.

Growth in full-time jobs has generally been a silver lining to weak headline gains, but recent figures point to a slump in full-time work. Although year-to-date growth is still robust near 3 per cent, full-time employment remained unchanged in November, following a 1 per cent drop in October. B.C.’s unemployment rate held steady in November edging up 0.1 percentage points to 6.8 per cent as the labour force contracted on a slightly lower adult participation rate.

 Of course, the picture is not entirely gloomy as interregional differences persist. While overall employment growth is weak, recent declines have largely reflected declining employment in Metro Vancouver. Employment in Vancouver fell nearly 14,000 persons in November, offsetting gains outside the region and marking a second consecutive monthly drop. In contrast, the employment trend for the rest of the province has been positive, led by gains in northern B.C., the Kootenay and Vancouver Island.

Among B.C.’s industries, November’s decline was concentrated in service-oriented industries. Transportation and warehousing employment fell 4,900 persons (3.6 per cent) from October, while business/managerial services slumped 6 per cent. On a more positive note, goods-sector employment recovered slightly following October’s decline and led by a surge in natural resource extraction, which offset a near 5 per cent drop in manufacturing employment.

Housing


Home prices in the Lower Mainland continued to drift lower in November as few sales and high inventories continued to weigh on housing values. Total sales in the region, which includes data spanning real estate boards in Metro Vancouver and Abbotsford-Mission, reached a seasonally-adjusted 2,800 units in November. This was down 3.7 per cent from October and marked a 25 per cent plunge from same-month 2011.

The year-long decline in sales trend, which accelerated with the onset of stricter lending practices and a reduction in the maximum amortization period for government-backed mortgage insurance, has pushed sales to levels last seen in early-2009 when the market was pulling out of recession.

On a population-adjusted basis, sales are comparable to the low levels observed in 1999/2000. November inventories remained elevated and at the highest levels since early-2010.

Although the pace of new listings has trended lower as prospective sellers delay the marketing of their properties, or de-list properties in light of a weak sales and pricing environment, sales have been insufficient to draw down inventory. The sales-to-active listing ratio, a proxy for demand and supply conditions, points to an oversupplied market and downward price pressure.

Weak market conditions have led to a slow melt in prices in recent months. The MLS Housing Price Index has fallen by a modest 2 per cent since May on a seasonally-adjusted basis and 3.5 per cent on an unadjusted basis. The corresponding benchmark price in November was a seasonally-adjusted $542,040, down 0.5 per cent from October. We forecast further erosion in prices of 3 per cent to 5 per cent through the first quarter of 2013 as low sales activity persists.

Low-equity and income buyers will remain constrained by recent changes to mortgage insurance rules which will also dampen activity for the move-up segment. However, supply-side adjustments are expected to offset demand-side weakness. Current economic and labour market conditions, while modest, do not point to a jump in the pace of distressed sales. Prospective sellers are expected to pull listings if price levels do not meet minimum expectations, leading to moribund activity and sideway prices into 2013.

Construction

Ongoing weakness and oversupply in housing markets across the province will be a constraint to provincial construction activity in 2013 and are already evident in a slowdown in building intentions. Building permit volume fell 18 per cent from September to a seasonally-adjusted $843.3 million.
While monthly permits are naturally volatile, the underlying trend has declined since May and October’s reversion suggests that trend remains intact.
Residential volume declined for a third consecutive month as fewer apartment permits were issued. This is a sign that developers are heeding the warnings of the weak market and potentially delaying project buildouts. In contrast, non-residential private-sector trends remained positive despite an October set-back.

Small business confidence jumps

Business confidence at B.C.’s small- to mid-sized enterprises moved higher for a second consecutive month in November following a three-month period of increased pessimism.

The latest CFIB Business Barometer reading – a measure of business confidence – rose 2.4 points from October to 67.1 points on a scale of 0 to 100. Index levels above 50 mean that on balance, the number of businesses expecting stronger business conditions over the next year outnumber ones expecting weaker conditions.

November’s reading was the highest observed since May and unchanged relative to the same period in 2011. Rebounding confidence during the fourth quarter suggests businesses are adjusting their outlooks higher in light of signs the broader economy is stabilizing. These include the ongoing expansion in the U.S. economy and housing market, and a stabilization of Chinese growth.

Domestically, businesses remain hampered by stagnant retail trends and slow housing markets, but buoyed by a favourable interest rate environment. Despite rising confidence, businesses remain cautious. The average index level has averaged about 70 points over the past 10 years, and current levels correspond with a below-average growth environment.
We expect businesses to remain hesitant to expand its workforce in 2013, contributing to provincial employment growth of about 1.5 per cent.
| Central 1 Credit Union

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