Canadian employment increased in September by 54,000 jobs, driven by Ontario (41,000). This brought the unemployment rate down from 5.7% in the previous month to 5.5% in September. Leading the increase in September was full-time employment, while part-time fell. Most of the increase was reported in healthcare, and accommodation and food services.
Employment in BC fell by 8,400 jobs in September. This marks the fourth consecutive monthly decline, driven by a decline in part-time employment (-17,200), while full-time employment rose (+8,800). By Industry, the most significant employment losses were in information/culture/recreation. The provincial unemployment rate fell by 0.2 percentage points to 4.8%. Compared to one year ago, employment in BC is up by 1% (33,400 jobs).
Growth in the Canadian economy was flat in July, following fourth months of growth. The goods producing industries reported a decline (-0.7%), led by mining, quarrying, and oil and gas. This was exacerbated by a facility shutdown in Newfoundland and Labrador. In contrast, the service-producers reported a gain (0.3%), leading the way was wholesale trade, professional services and real estate.
We expect growth in the Canadian economy will moderate to between 1.5 and 2 per cent in the second half of 2019 after posting strong second quarter growth and will post trend growth of about 1.8 per cent in 2020. Significant downside risks remain due to elevated trade tensions and their consequent impact on exports and business investment.
Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 1.9 per cent in August year-over-year, down from a 2 per cent increase in the previous month. This marks 6-months of consecutive year-over-year growth in the CPI, coinciding with strong labour market conditions. Excluding the impact of lower gasoline prices, the CPI rose by 2.4 per cent year-over-year. The Bank of Canada's three measures of trend inflation remain unchanged to average 2 per cent in August.
In B.C., CPI slowed to 2 per cent year-over-year, down from 2.1 per cent in July. The decline was largely driven by gasoline prices, as global oil prices declined slightly in August due to higher production and soft international demand.
With Canadian inflation just under 2 per cent, the Bank of Canada will have to turn to other economic indicators at their next meeting on October 28. The Bank will have to consider how to balance a stable domestic economy with continued global uncertainty.
The BCREA Commercial Leading Indicator (CLI) rose by 0.7 points to 135.7 in the second quarter of 2019. Compared to this time one year ago, the index is unchanged.
Slowing provincial economic activity continued in the second quarter of 2019, with declines in retail sales and wholesale trade more than offsetting gains in the manufacturing sector. This meant the economic activity component of the CLI remained negative for the fourth consecutive quarter. Meanwhile, employment was up in office and manufacturing, resulting in a positive change in the employment component of the CLI. The financial component of the CLI was positive for a second straight quarter. The underlying trend in the CLI has been relatively flat over the past four quarters, suggesting a continued stabilizing environment for commercial real estate activity.
Following several years of robust growth, the BC economy continues to slow in the first half of 2019. Broad-based declines in retail sales put a drag on economic activity, particularly in the sub-sectors of motor vehicles and parts, food and beverage, and gasoline.
Following several years of robust growth, the BC economy continues to slow in the early part of 2019. The economic activity component of the CLI posted a third consecutive quarterly decline, led by the personal and household goods, and building material and supply components of wholesale trade.
Employment growth in key commercial real estate sectors was strong in the second quarter. Office employment in finance, insurance, real estate and leasing was up by 6,700 jobs. This measure of office employment now sits at an all-time high, signalling strong future demand for office space. Meanwhile, manufacturing employment rebounded by 6,300 from the previous quarter.
The CLI’s financial component was positive in the second quarter, as a narrowing of short-term credit spreads offset a decline in benchmark Canadian REIT prices.
Canadian housing starts increased by 1.9% in August to 226,639 units at a seasonally adjusted annual rate (SAAR). The trend in Canadian housing starts was up, averaging 218,998 units SAAR over the past six months, continuing a robust trend.
In BC, housing starts were down by 26% on a monthly basis to 39,266 units SAAR. This largely reflects activity that was pushed forward in previous months as developers tried to get ahead of a new development charge in Vancouver. Compared to the same time last year, provincial starts were down 17%. On a monthly basis, starts of multi-units were down by 33%, while singles were up by 4%.
Looking at census metropolitan areas in BC:
The British Columbia Real Estate Association (BCREA) released its 2019 Third Quarter Housing Forecast Update today.
Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 5 per cent to about 75,000 units this year, after recording 78,505 residential sales in 2018. MLS® residential sales are forecast to increase 11 per cent to 82,700 units in 2020, just below the 10-year average for MLS® residential sales of 85,800 units.
“BC markets are showing signs of recovery after nearly a year and a half of policy-induced declines,” said Brendon Ogmundson, BCREA Deputy Chief Economist. “We expect that recovery to continue into next year, with home sales normalizing around long-term averages.”
A recovery in home sales has slowed the accumulation of resale inventory, with active listings still well short of the previous peak in 2012. That leaves market conditions at the provincial level essentially balanced with little upward pressure on prices. We anticipate that the MLS® average price will decline 2.4 per cent in 2019 before rising modestly by 3 per cent to $718,000 in 2020.
Canadian retail sales were unchanged in June, as stronger sales across most sub-sectors were offset by lower sales at motor vehicle and parts dealers and gasoline stations. Retail sales were down in 4 of 11 sub-sectors in June, representing 48% of sales. Provincially, Saskatchewan reported the largest decline (-2.7%) and Manitoba reported the largest gain (1.3%).
In B.C., retail sales declined 0.4% from the previous month to $7.16 billion. Vancouver also reported a 3% decline in sales. Provincial sales were down in most sub-sectors, except at electronics and appliance stores, sporting goods/hobby/book/music stores, and miscellaneous retail stores. On a year-over-year basis, B.C. retail sales were up 1 per cent in June.
Excluding the volatile motor vehicle and parts dealers and gasoline sub-sectors, June national retail sales increased 1.7%. This is a positive hand-off to the third quarter. Keeping in mind that some of the gains were due to the Toronto Raptors games in the NBA finals (as reported by Statistics Canada), supporting increased sales at clothing and sporting stores.