December 2007 marked both the last month the United States had positive job growth and the first month of recession. Fast forward a year and the headlines indicate the worst is yet to come with 533,000 American jobs lost in November 2008 and unemployment continuing its climb to levels not seen since the early 1990`s. The American labour department indicated 2.7 million jobs have been cut since last December.Generally speaking, a recession is defined as two consecutive quarters of gross domestic product (GDP) contraction. While the USA uses slightly differing measures it is still apparent recession has set in south of the boarder.
How does this affect Canada?
Until recently we have remained relatively unaffected by the deteriorating US economy. Last week the Organization for Co-operation and development (OECD) predicts Canada`s economy will shrink for the next 3 consecutive quarters placing us technically into a recession. It is thought this could lead the jobless rate up almost a percentage and a half to 7.5 %. Should Canadians expect the same slow-down in the US or is this cyclical outcome a sign of an efficient market?
While keeping with a Real Estate perspective there are indicators that support the claims that commodity rich Alberta will escape unscathed from our countries slow-down. It should be noted that with $40 barrel oil the provincial tax revenues will diminish to a fraction of those paid on $140 barrel oil, but have had previous commodity driven surpluses.
Net migration to Alberta is still posed to continue both intra-country and from abroad. Primarily based in Ontario, the failing auto and other manufacturing industries have accounted for steady housing demand in Alberta and more specifically Calgary. The closing arbitrage in housing prices between Alberta and Saskatchewan has slowed this outflow as buyers are not seeing the value of a year ago. It is expected 2008 will top the 17,905 net migrants from 2007 and that 2009 will top them both. International workers are looking to stay in Calgary and this demographic will begin to purchase homes rather then rent.
In actuality Calgary is a bright point in the country with persistant job growth. A workforce participation rate of 78.3% has led to a record 715,300 Calgarian's employed in August 2008. The seasonally adjusted unemployment rate of 3.6 % is a sign of a robust labour market.
Calgary Real Estate market may not be affected to the degree of other CMA in Canada and the USA. Importantly, the above suggests that the feared Canadian recession may not materialize as many expect.
Steve Clark
p. 403-404-0866 e. steve@innercircleimaging.com w. www.innercircleimaging.com
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