Housing and employment
Canada has taken home its fair share of gold medals in 2010, even if we still can’t put together 11 guys on the field that can kick a football better than our other two NAFTA partners and make it through to the round of 16 at the World Cup. Oh well, c’est la vie. Off the podium though, this country has also stood head and shoulders above most of its G-20 peers when it comes to financial sector stability and economic resiliency. I still firmly believe that the US remains one of the world’s most adaptable and resilient economies over the long term, but there is no denying the fact that Canada’s economy has weathered the recent recession better than most. And it has come out of that recession smelling a lot better, too. Two particular areas come to mind where the fragrance has been much sweeter – housing and employment.
“GO CANADA GO”
While some officials from the real estate arena have come out a little more pessimistic about second-half prospects lately, and recent sales and permits figures have witnessed a sharp decline from this year’s best levels, it’s hard to call this a ‘weak’ recovery for the residential sector. Before the May slide, housing starts broke the 200,000 unit mark for the second time this year and, yes, much of the strength can be put down to pre-HST demand, but that doesn’t explain the initial move off of last April’s lows. In that context, the sharp and disappointing drop in starts in May can be explained mainly by the fact that sales had been front-loaded because of the HST implementation in July (for Ontario and BC) and also the upward creep in mortgage rates during the spring.
Looking forward, however, people are still going to buy homes despite the tax and there will be other more important drivers to affect demand. Like employment.
The comparison of unemployment rates is even more striking. Some of you might be thinking that a 7.9% rate is nothing to cheer about, especially when we were down at 6% a couple of years ago; but, it’s about a percent lower than the peak of just over a year ago. Again, some perspective is needed here. Take a look at the long-term chart for Canada’s unemployment rate. Remember the 13% rate in 1982 and 12% in 1982. A distant memory indeed, but at the time it felt like hell. This folks is not hell. And, if the absolute numbers don’t make you feel somewhat less panicky, how about another comparison with our neighbours to the south. Until the third quarter of 2008, Canada had experienced a higher unemployment rate than the US since 1982.
Interestingly enough, the gap between our rate and the US reached its maximum back in 1993 at just under five percentage points. I say this because it was at that time that Canada hit the fiscal wall. Economic recession and fiscal mismanagement had pushed Canada to the brink of credit rating downgrades, similar to what is being felt in Europe. The response was fiscal belt-tightening, which exacerbated Canada’s struggle to recover from the 1991 recession. Yet, it was as the tough medicine was being administered that employment conditions begun to stabilize. Employment growth turned positive in the spring of 1993 and spent just over a year before hitting the 3% mark. By 1995, the unemployment rate had been knocked down to 9%
-Article is abstract from yahoo finance
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