BC Employment by Sector January 2013

Below are some graphs highlighting Vancouver's and BC's employment over the past 15 years in various sectors. But first here are the historical employment, participation, and unemployment rates (CANSIM tables 282-0117 and 282-0087)

The participation rate has not recovered. Work by Calculated Risk indicates that most of the decline in participation rate in the US is demographic-based and not necessarily a sign of long-term "disillusioned" unemployed. I would expect a similar demographic effect to exist in Canada and BC.

The labour rate spreads between the rest of BC and Vancouver CMA are graphed below. A positive number means the rest of the province has a higher number than Vancouver. In terms of unemployment Vancouver has typically been about 50bps lower than the rest of the province, but lately that differential has been negative.

Here are the contributions of the two major goods producing sectors (construction and manufacturing) as a percentage of total employment. These are seasonally unadjusted with 3 month moving average applied (CANSIM table 282-0111).

And the service producing sectors (NSA) (12 month average):

Greater Vancouver Market Snapshot January 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to January 2013. (see REBGV news releases.). (My "next month estimate" numbers are what I think next month will be. Also note these graphs update automatically so older blog posts from previous months will show the same graphs as the ones below.)

The scatterplot of price changes and months of inventory is below. As the Teranet data roll in, look for more points appearing the right-hand side. I would not be surprised to see the Teranet HPI down between -6% and -4% year-on-year by February or March of 2013.

Commentary:

January sales continued with relative weakness compared to not only 2011 but also past years from 2005 (except the residual emerging from the recession of 2008-2009). January sales are near lows in at least the past decade, though above levels seen in 2009.

To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis.

This January saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.

As a recurring reminder, there are some worrying clouds on the horizon: population growth is falling, dwelling completions are set to increase over the next year if not longer, and banks have implemented stricter mortgage guidelines via changes to government-underwritten mortgage insurance qualification criteria and via implementation of stricter mortgage lending guidelines under OSFI's new directives. (Credit Unions are one notable exception though it appears BC CUs will comply with the brunt of OSFI guidelines.) Further stress in current conditions can be attributed to China's slower economic growth, though it looks like growth is set to resume some entering 2013; for how long this growth can continue is uncertain.

On the other hand mortgage rates remain low, near net zero real territory, and it is possible for rates to remain low for a prolonged period (i.e. several years). That stated, longer-term 5-year-term loan rates may have some room to move up in the coming year as the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and not only in Asia but also in other jurisdictions -- and that can plausibly lead to a renewed, but in my view temporary, bout of current account flows into Vancouver-area property investments. Investment trends in China are difficult to ascertain; some analysts and academics like Michael Pettis are pointing to some worrying signs in the coming years regarding hard commodity demand and investment growth there. If that analysis proves correct, that would have a direct and negative impact on Vancouver-bound remittances and externally-generated-capital-based residential investment.

My estimates for February are for inventory of 14335 and sales of 1891 based on estimating average changes from January of years 2005-2012.