Vancouver's labour market is going through an unprecedented hot streak. Unemployment rates are the lowest since at least 1976. Employment rates (which measure employed age 15+ to population age 15+) are more than 2 points above the previous high.
But what is underlying this boom? Is it broadly based? The answer, as you'll see below is no. Definitely no. It is almost *entirely* a construction boom. All data available here.
Let's start with checking out the number of jobs. I've made an index set to Jan-2001 as 100 for construction, real estate-leasing, and total employment less construction and real-estate leasing.
Construction has boomed from 100 to 240 over the past 7 years. The rest of the economy? only from 100 to 118. The new Realtors out there don't account for a lot--only 36% growth.
But, there are raw employment counts. Maybe our population has grown enough to account for this? No. As VHB regulars know, population growth has been fairly moderate (even anemic) over the past 10 years.
Below is a graph of employment to population ratios for two specific industries, construction and real estate-leasing. Construction has gone from 3% of the population to over 6%. Real estate employment, perhaps surprisingly, hasn't moved much at all.
Ok. Now for the grande finale. Let's put this together. Let's imagine a scenario where the employment to population ratio in construction and real-estate leasing had stayed at its 2001 values instead of growing. In other words, we're looking at what would have happened if there had been no construction boom from 2001-2008. The analysis assumes that the new construction employment took people from being out of work and newly employed them, rather than just moving people from one industry to another. (If everyone employed in construction were previously employed somewhere else, then construction actually had no impact on total employment, right?) On the other hand, we are not accounting for the spillover boom into retail etc. caused by newly employed construction workers splurging on toys and joys.
Well, without the construction boom, employment to population would have stayed bouncing around between 58 and 61%. Instead, we see that it went over 64%. This is quite a difference.
Let's move on to the perhaps more familiar Unemployment rate. Unemployment rates take the number of people not working who are looking for work and divide that by the number of people who are employed or unemployed and looking. Again, the scenario we're imagining here assumes that all of the employment boom came out of the ranks of the unemployed; that if the boom ended tomorrow all of those construction guys would be unemployed and wouldn't find jobs elsewhere. Also, it assumes that there would be no spillover effects onto retail.
The results are pretty stunning. Without the construction boom, unemployment would have stayed bouncing around 8-10% instead of falling to under 4%, as it actually did.
Looking forward, what does this mean? Well, to sustain our employment rate, we need to sustain construction. If there is a drop off in housing starts, the labour market will get worse. If the government doesn't start building new big projects to replace the work finishing up on Olympic projects/canada line/etc. then the labour market will get worse.
-- Vancouver Housing Blog van-housing.blogspot.com