Garth on Jobs

But, this just states the obvious. The latest job numbers are terrible (3,000 new positions in the entire country, and a whack of those are ‘self-employment’).

Nov 5, 2010

Note that he omitted the gain of 47,000 full-time jobs offset by a loss of 44,000 part-time ones. Also he references that self employment makes up these new positions contrary to the report indicating 24,000 fewer self-employed positions.

While in this report Garth focuses on the headline number, in other cases he has selected different components which implying a deteriorating job market. However over this time period all of these components have been trending positive.

And today's jobs report shows the economy's still a dangerous thing, especially in Ontario. But, whadda I know?

July 9 , 2009

Hard to see how all this can happen when in a single month 53,000 people stopped looking for jobs, 45,000 more lost their jobs, and 35,000 made up jobs. Yet even with the official job loss number of just 45,000, we were in economic free fall compared to the States.

Aug 9, 2009

Last month Canadian employers terminated 139,000 full-time jobs, and created 130,000 part-time positions. So, those gains everybody was crowing about some weeks ago are pretty much gone, at least for now. And losing 139,000 steady jobs is a big deal – equivalent to the US shedding 1.3 million in a month, which would be a national disaster. Thank goodness some temporary or reduced-hours work was created.

Aug 8, 2010


A more serious analysis would consider all the different factors - not only the ones that portray a negative environment. Another thing to be cautious of in this report is monthly spikes that do not reflect underlying trends.


There has been a legitimate job recovery in Canada since July 2009, although it has not been robust enough to bring the unemployment rate to pre-recession levels. Total employment has fully recovered and wages have increased. The problem is this has been largely offset by a growing labour force.

Real estate downturn hits the economy

The strong economic recovery highlighted in this post has stalled. I assumed a reversal in housing activity to slow down the entire economy but still remain in positive growth. That is now being tested with negative results showing up in some key reports.

Leading indicators (July 2010)

The composite leading index slowed to a 0.4% increase in July, after a gain of 0.7% in June. Most of the slowdown originated in the household sector, where three components fell. None of the seven other components decreased.

Jobs (July 2010)

The number of workers in the education sector was down by 65,000 in July. The large drop in educational services in July was spread across several occupation groups, including educational assistants, teachers and administrators in primary and secondary schools as well as custodial staff.

In July, employment decreased in finance, insurance, real estate and leasing (-30,000), bringing employment in this industry back to its July 2009 level.

(I expect next months report to be better because the loss of 65,000 educational jobs is unlikely to be repeated)

GDP (May 2010)

Sales of existing homes fell significantly in several parts of the country in May, resulting in an 11.3% decrease in the output of real estate agents and brokers. This marked the fifth consecutive monthly decline in this industry.

The question is whether this is leading to a double dip recession or just a slowing in the rate of growth.

Some thoughts from the unicorn ranch...

Housing is starting to drop nationwide in Canada and there are serious financial events that will have consequences for some time. I do question whether we are entering a double-dip recession imminently and this "unicorn ranch" post is a tongue in cheek way of presenting a little optimism. Let's shake things up.

CMHC: no upcoming national catastrophe

First consider this editorial on the CMHC, stressing the crown corporations risk to Canada.

The 20 per cent hit that CMHC could take would be more like 25 to 30 per cent. There are significant expenses in disposing of repossessed property — taxes, utilities, insurance, real estate commissions, legal fees, and so on. I would estimate that CMHC (which, in effect, is the federal government) could wind up $125 billion in the red.

This would blast an enormous hole in our government's finances. Canada would be put into the same category as the other prolific spenders. Which is where we should be. We are merely postponing the inevitable.

Not a chance. Even in a pessimistic scenario where a drop in housing values and spike in foreclosures puts CMHC underwater it would not approach the order of magnitude claimed. The problem with the $125 billion figure is it assumes that CMHC will cover all losses in housing in its entire portfolio.

$500billion * 25% = $125 billion

However, CMHC only pays out when there is a foreclosure and even in a nationwide drop of that magnitude it will only be a fraction of total insured mortgages. In Canada arrears are at 0.44%; it is true this number is low due to a robust market where selling is an option for the distressed. In Alberta there has already been a fairly substantial decline in home prices combined with a deterioration in the employment picture. With these factors in play the arrears rate peaked at 0.75% (for now).

For the benefit of the doubt let's assume a more brutal nationwide housing decline where the arrears rate increases drastically to 5% for insured mortgages and all of these arrears go into foreclosure. In addition to this also assume CMHC eats all the losses. I believe this is overly pessimistic in terms of level of foreclosure and the CMHC would inevitability deny some claims, like recent fraud uncovered in Calgary where BMO took the losses. Using these assumptions anyway the losses for CMHC would be:

$500billion * 25% *5% = $6.25 billion

The article claimed the CMHC had $9 billion in equity, but perhaps in this case the government may have to intervene depending on how liquid that equity was at the time. So instead of a fiscal emergency for Canada its more like the cost of a G20 summit or a gun registry. Funny, I have seen this pop up in discussion forums but the factual inaccuracies were never addressed.

Strong GDP growth during first quarter

Just in case anyone missed it recent GDP numbers indicated a strong rate of economic expansion.

Expressed at an annualized rate, real GDP grew 6.1% in the first quarter after advancing 4.9% in the fourth quarter of 2009. This compared with a 3.0% first quarter rate of increase in the US economy.

It has been argued that a unnaturally strong housing market is solely responsible for this. In my opinion, housing played a role, but the recovery has been too strong and broad based in Canada to have that be the only factor.



Jobs

Stats Canada released employment figures for May. Summary: employment increase. Full time up, part time down. Private sector up, self employed down. Although it is important to keep in mind this is only a single month, it was blockbuster nonetheless.

Following large gains in April, employment rose by 25,000 in May, the fifth consecutive monthly increase. The unemployment rate was unchanged at 8.1%. Since the start of the upward trend in July 2009, employment has risen by 1.8% or 310,000.

Full-time employment increased by 67,000 in May, partly offset by losses of 43,000 in part time. Since July 2009, virtually all employment gains have been in full time.

The number of private sector employees increased by 43,000 in May, while there were 28,000 fewer self-employed workers. Since July 2009, the number of employees in the private sector has risen by 2.8%, with most of the gains in recent months. Since July 2009, the public sector has increased by 2.2%, while self-employment has fallen by 2.3%.

So to the dozens of readers who frequent this blog, did you enjoy your field trip to the unicorn ranch today?

Friday the 13th - Fear Mongering edition

Some highlights from today's Labour Force Survey.

23, 700 jobs lost this month in Alberta
28,000 full time lost with a gain of 4,200 part time jobs
Unemployment rose 1.0% this month and 1.8% over last year.

Last month the Edmonton Real Estate Blog linked to a post from Chris Davies highlighting that only 200 jobs were lost in January in Alberta, which showed a contrast between Alberta and eastern Canada.

However now looking back over three months it appears that the January report did not indicate any sort of trend as the month previous and this month's numbers show a more rapidly deteriorating job market.

Report Month total / full-time / part-time
December -15,800/-19,900/+4,100
January 3,300/-200/3,600
February -23,700/-28,000/4,200

Report %unemployed
November 3.4%
December 4.1%
January 4.4%
February 5.4%