Troy Media – By Dan Sumner
It has taken quite some time but employment in Alberta has finally returned to its pre-recession glory.
Statistics Canada reported yesterday in the monthly Labour Force Survey that employment rose by a stunning 22,000 jobs, the largest monthly gain for provincial employment since May 2006! This brings the total number of jobs in the province to 2.09 million (all figures adjusted for seasonality).
Despite the impressive gain in employment, the unemployment rate notched higher to 5.6 per cent from 5.4 per cent, as an even larger number of people entered the labour force in June.
Although Alberta’s economy has been on fire recently and the labour market is really looking up in 2011, it has taken 32 months to regain all the jobs lost during the recession. This compares to 27 months for the country as a whole, eight in Manitoba while Saskatchewan barely lost jobs at all.
The Canadian national employment report was also fairly positive with the country gaining 28,000 positions in June, ahead of consensus expectations of a gain of 15,000. U.S. jobs figures were also released this morning, but in contrast to the good news north of the border, the situation for our largest trading partner remains troubling (see below).
After a fairly lacklustre 2010, where employment actually shrunk, Alberta has had stellar employment growth in 2011 with a total of 58,400 jobs added in the first half of this year.
Although economists never like to make big deal about one month of data, the trend in the Alberta job market is definitely positive. Moving forward, there might be some bumps in the road but with the economy in good shape, employment should continue to grind higher.
Will the U.S. job market ever shape up?
In contrast to the above-consensus numbers recorded in Canada in June, the U.S. jobs report blasted through expectations to the downside this morning. Employment was largely unchanged, with only 18,000 jobs added to payrolls (consensus +105,000) and the unemployment rate edged upwards to 9.2 per cent – its highest level of the year. Furthermore, employmentgains recorded in the previous two months were revised downwards. Today’s job report definitely solidifies the theory that the U.S. economy has entered a new soft patch recently, which is in fact starting to look more like a retrenchment than a soft patch.
The disappointing job figures for June cap off a quarter that has seen U.S. employment growth grind to a halt, with the manufacturing sector slowing down and various other economic indicators disappointing. Today’s job figures caught the market completely by surprise and have sent stock markets and commodities lower and treasury securities higher. The weak U.S. economy probably remains the biggest threat to the Canadian economic recovery, which up until now has continued unabated. The Bank of Canada is likely to take recent U.S. economic data to heart as it makes decisions on monetary policy moving forward.
Airplanes flying on plants?
After years of testing, commercial airlines have finally received approval to blend plant-based energy products with jet fuel. ASTM International, which is an organization dedicated to developing world-wide aviation standards, announced on July 1st that it has given its official stamp of approval to use things like algae, camelina or jatropha, or animal fats called tallow, to develop fuel and mix it with traditional jet fuel. This development is just one of many recently announced in the plant-based energy industry.
At this juncture, plant-based fuels are mostly still uneconomic and have largely come from edible sources like corn and sugar cane. However, over the next 20 or so years, as production volumes increase and technology improves, many in the industry think the plant-based fuels derived from inedible sources have a future. According to a Bloomberg article, Airbus and Boeing – the world’s two largest jet makers – believe that by 2030 plant-based fuels could account for as much as 30 per cent of the market for jet fuel.
Alberta has in interest in these sorts of developments, not only as a major energy producer but also as a major agriculture producer. So far, alternatives to traditional hydrocarbons have been slow to make serious headway, but 10 years from now there is certainly no guarantee that will be the case.
Manufacturing 2010 review
After the clobbering the manufacturing sector had in 2009, the rebound witnessed in 2010 was very welcome. According to a recent report on the industry by Statistics Canada, the industry declined 17.8 per cent nationally in 2009 and rebounded by 8.9 per cent in 2010. Leading the rebound was motor vehicle (+29.9 per cent), petroleum and coal (+15.2 per cent) and primary metals (+23.8 per cent).
The rebound in Alberta was particularly strong, up 11.3 per cent in 2010 after falling 23 per cent in 2009. Petroleum and coal products account for a fifth of the manufacturing sector, so the rebound in crude prices accounted for a large part of the rebound. Machinery manufacturing sales, for their part, rose 24.4 per cent as a result of increased volume.
Ontario posted dramatic gains, recouping 50 per cent of the activity lost in 2009 thanks partly to government support for the auto sector (about a fourth of the province’s manufacturing sector). Despite the dollar figure gains, actual employment in manufacturing actually fell in the province by 1.4 per cent in 2010.
Healthcare crimping everyone’s budget
A recent report by the OECD highlighted the fact that rising healthcare expenditures are weighing on the economies of most advanced nations. Canada is well ahead of the OECD average, with 11.4 per cent of GDP spent on healthcare compared to a 9.5 per cent OECD average, but it pales in comparison to the United States, where 17.4 per cent of GDP is spent on healthcare.
Medical outcomes weren’t highlighted, but it’s clear that Canada is amongst the most lavish spenders on healthcare in the world. Given the constant criticism regarding wait times and other services, whether resources are being spent efficiently should be a valid question – especially as we prepare for the aging of society.
Calgary housing looks up in June
Alberta’s largest housing market saw a rather impressive jump in activity in June according to figures released this week by the Calgary Real Estate Board (CREB). A total of 2,513 properties sold via Calgary MLS in June, the highest level for sales since March of 2010 and up 32 per cent from June of last year. Meanwhile prices remained steady with the median MLS price at $370,000 (includes all types of homes), unchanged from both May 2011 and June of last year. Despite being fairly weak over the first half of 2011, condominium sales bounced higher in June with sales up 31 per cent from last June. Other than June, the high-rise condominium market has been the weakest segment of the Calgary real estate market, with still elevated levels of unsold inventory in the market.
Moving forward, housing markets in Alberta face an interesting dilemma: rising interest rates versus a strengthening economy. Currently rates are expected to notch gradually higher in 2012, which will reduce affordability and decrease housing demand. However, with the economy looking better in Alberta and better and wages, employment and consumer confidence on the rise, the housing market may still have some upside potential left.
Dan Sumner, ATB Financial
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