Only in Alberta – Imagine!  Provincial employment in Alberta is up 97,000 jobs in the last 12 months!  The impact that is having on our economy is visible in our local housing market as demand for rentals is up, vacancies are down and the housing inventory is shrinking.

It’s too early to be predicting much in the way of price increases, but it appears that the market is definitely stabilizing and demand is the strongest it’s been in years.  The reason we aren’t predicting price inflation is that builders and developers appear well prepared to quickly add to the supply of homes, thus keeping supply and demand in balance.

Balanced Job Market – by Todd Hirsch, Senior Economist – Alberta Treasury Branch

The last official jobs report of 2011 disappointed on the national front, but in Alberta the news was once again quite encouraging.

For the seventh consecutive month, Alberta saw an increase in total employment, rising by 4,500 jobs. Compared to twelve months ago, provincial employment is up by over 97,000 (+4.8%). Alberta’s unemployment rate fell to 5.0%—the lowest in the country, and close to the point generally considered a balanced job market.

Canada’s national job market, on the other hand, unexpectedly shed 18,600 jobs in November. That was opposite the expected gain of about 12,000. Job losses were concentrated in Quebec and Saskatchewan. The national unemployment rate edged higher to 7.4% in November, up from 7.3% in October.

Even better news for Alberta, there was a strong shift towards full-time work (+9,100), while part-time positions actually fell (-4,600). Strong gains in oil and gas (+8,900) and other services (+11,600) were partially offset by losses in trade (-8,400) and manufacturing (-8,000).

While Alberta continues to buck the national trend in the jobs market, the pace of provincial job creation over the past several months has slowed. With the rate of unemployment being balanced—and increasing worry mounting in the global economy (see Economically Speaking)—Alberta is likely to see some moderation in employment growth in 2012.

But even with slower job creation, the province’s labour market will remain in enviably good shape.

Market Update

Lacombe – Year to date sales are up 7.4% over the same period last year.  Listings are also slightly higher as well and the ratio of sales to active listings is currently 17% representing a market where the buyer has the advantage.

Ponoka – Year to date sales are up 34.6% over the same period in 2010.  Active listings are about the same as they were a year ago.  The sales to active listings ratio is 21% which still represents a buyer’s market but is rapidly approaching balance.

Blackfalds – Year to date sales are up 27.7% over the same period last year.  Active listings at Dec. 1, 2011 are down slightly from Dec. 2010.  The December sales to active listings ratio was 11.2% – still a buyer’s market.

Sylvan Lake – Year to date sales are up 1.9% over the same period last year.  Active listings as of Dec. 1, 2011 are slightly lower than the same time in 2010 and the sales to active listing ratio at 8.3% suggests the Sylvan Lake market still heavily favours buyers.

Red Deer – Year to date sales are up 15% over the same period last year.  Active listings as of Dec 1 this year are down a whopping 53% over Dec. 1, 2010.  December sales to active listing ratio was 30% – well into balanced market territory and closing in on a seller’s market.

Central Alberta – Year to date sales are up 20.5% over the same period last year.  Active listings as of Dec. 1 this year are down very slightly from Dec. 2010.  December sales to active listing ratio was 8.75% – overall, still a market where the buyer has the advantage.

Summary – There are definite signs that the real estate market in central Alberta is coming out of the doldrums we’ve been experiencing for the last 3 years.  Red Deer is the first to reach balanced market conditions, but if economic conditions remain constant over the next few months, the rest of our markets will soon catch up and even trend toward seller’s market territory, where the sales to active listings ratio is higher than 30%.  That means just 3 houses available for every buyer instead of the 10 or more we’ve experienced since 2008.

The reasons for our improving market are quite simple.  Oil prices continue to hover around $100 and drilling activity is up 41% over last year.  Alberta’s economy is once again leading the provinces with 3% GDP growth this year.  A strong economy generates jobs and jobs entice people to move to Alberta.  More than 25,000 people migrated to Alberta from other countries in 2010 and interprovincial migration is back in positive territory (forecasted at 10,000 for 2011).

Population growth creates demand for housing.  The first indication of strengthening comes in the rental market since many of those folks moving here are not in a position to buy homes.  The vacancy rate in Red Deer is now estimated to be about 1%.

There are caveats on this forecast.  87.5% of Alberta’s exports go to the U.S.  Our fortunes are tied tightly to the U.S. economy.  We are hearing encouraging reports from south of the border, but the improvement is slow and gradual which will temper our growth.  We are predicting balanced market conditions for 2012 in central Alberta but don’t expect much in the way of price inflation.

Market Update – Unemployment is down and the real estate market is benefitting.  Sales this month compared to last year are up and higher employment rates are a contributing factor.

The article below suggests that some industries in Alberta are facing worker shortages.  We should expect those job openings to entice people to move to Alberta which will drive more demand for housing.  The rental market is already straining to handle demand and it’s only a matter of time before the resale and new home markets improve as well.

Jobless Rate by Industry – Todd Hirsch, Senior Economist, ATB Financial

The number of people looking for work in Alberta has fallen over the past year. However, the chances of finding work vary by industry—and some sectors are already seeing some serious labour shortages.

Alberta’s overall unemployment rate has fallen from an average of 6.7% during the first three quarters of 2010, to 5.6% in the same period of 2011. The rate was as low as 3.2% in June 2008, and peaked at 7.6% in April 2010.

Unemployment rates by sector vary considerably. The graph below shows major sectors of the job market, and how the rate of joblessness has changed between January-September of 2010 to the same period this year. (Due to space constraints, only major sectors are presented).

The sector with the lowest rate of unemployment in 2011 is health care and social assistance, at only 2.7%. Interestingly, that is the only sector in which the rate has risen this year (up from 2.1% in 2010). In both 2011 and 2010, the sector is experiencing labour shortages.

Workers in professional, scientific and technical services (3.0% unemployment) and mining and oil & gas (3.1%) are also in short supply.

The major sector with the highest rate of unemployment is the construction sector, at 6.9%. However, that is much lower than the 8.4% recorded last year. It’s also lower than Canada’s overall unemployment rate of 7.3%.

Market Update – Good things continue to happen in Alberta.  For several weeks now, we have been highlighting good news stories about Alberta’s economy.  I am starting to run out of new headlines.

The market seems to be staying busy going into the middle of November.  As I mentioned over the past few weeks, the relationship between supply and demand has changed over the last few months with the gap narrowing rather than widening.

Active listings in Red Deer number less than 500 for the first time since the summer of 2007.  Sales have not recovered to previous levels, but are certainly better than last year (up over last year by 20% in our MLS Board area). 

There is new confidence the Keystone pipeline will be approved which is very good news for Alberta.  It’s still not guaranteed of course.  Environmental groups are fighting it, but the reality is that our oil is going to be needed as conventional supplies dwindle.  The article below suggests that Alberta businesses are very confident about our future.

The Beat of Its Own Drum – Dan Sumner, Economist, ATB Financial – Indicators for economic activity in Alberta during the third quarter have come up roses so far, and this morning another sign the economy is humming along with wholesale trade rising to its highest level on record.

Alberta wholesalers brought in $6.13 billion in revenues in September, the highest amount on record and only the second month in history above the $6 billion mark. During September wholesale activity rose 2.0% and is up 12.1% from a year ago, the second largest gain of any province behind Saskatchewan (+22.5%).

After plummeting during the recession it has been a nearly straight line upwards for wholesale trade in Alberta (see graph). Activity in the sector is one of the few that has definitively regained its pre-recession peak (unlike manufacturing shipments exports and vehicle sales, for instance)

Wholesale trade gives an indication of purchases by businesses. If wholesale trade in Alberta is strong it means firms in the principle industries (energy, agriculture, forestry, retail etc.) are out there spending money and in turn expect their sales to grow.

Wholesale activity for the third quarter joins a host of other indicators (employment, manufacturing shipments, vehicle sales, building permits, housing starts and exports), which all show the Alberta economy picked up during Q3, despite all the turmoil in the global economy.

Alberta continues to shine!  Population growth, employment growth, construction starts are all beating the odds and going up when the rest of the world seems to be struggling to stay at an even keel.  Oil prices and activity in the oil patch are obviously what is driving this latest little surge.

Recent news that the US Government has postponed their decision on the Keystone pipeline may have a tempering effect on oil prices.  As production grows in the oil sands, the ability to get the oil to markets is critical.  Not having the Keystone pipeline limits the amount of oil that can be exported and may drive prices down as supply outstrips demand.  Obviously lower prices could cause a slowdown in our local economy, so we have to hope for a quick resolution to the pipeline issue.

Alberta Adding Jobs by Todd Hirsch, Senior Economist ATB  

While the rest of the global economy is bracing for a slowdown, Alberta remains a very enviable engine of economic growth.

Defying our expectations of a slight pull-back in the labour market, the provincial economy added 7,500 new jobs. This is the sixth consecutive monthly gain; compared to October of last year, Alberta employment is up 4.3%. The unemployment rate stands at a very balanced 5.1% (down from 5.4% in September).

This stands in sharp contrast with the rest of Canada, where this morning’s job report was very negative. Overall, the national economy shed 54,000 jobs—a far cry from the expectation for a gain of 20,000 jobs. Losses were concentrated in Ontario (-38,700), British Columbia (-10,800), and Quebec (-13,300). Canada’s unemployment rate ticked up from 7.2% in September to 7.3% in October.

While Alberta did add jobs over the month, they were virtually all in part-time work; full-time positions actually fell back by about 800 jobs. The new positions were dominated by gains in retail and wholesale trade (+11,600), oil and gas extraction (+8,800), and agriculture (+5,200). Losses were reported in professional, scientific and technical jobs (-8,000) and construction (-3,900).

The solid job gains in Alberta reflect an economy that continues to outpace the rest of the country. The province remains an island of growth, propped up by high oil prices, drilling activity and spending in the oilsands. The hit to Canada’s overall economy, however, will add to the level of worry at the Bank of Canada as the country continues to be weighed down by a souring global environment.

Market Update – Recent news cautiously suggests that the Alberta economy is improving.  Job growth and the resulting population growth, a more balanced re-sale housing market and now higher construction starts are all good indicators of that improvement.

An increase in construction starts is particularly good news since construction is one of the industries that drives our economy.  New construction not only creates a lot of jobs directly in the industry, it creates jobs and growth for the thousands of businesses that provide the materials, supplies and equipment needed.  Any improvement in construction starts will translate into a stronger economy in Alberta, and a stronger economy means a stable housing market.

Starts Pulse Higher – Dan Sumner, Economist, ATB Financial

Activity in the energy patch has had trickle down effects on many sectors of Alberta’s economy recently, but residential construction has remained slow. However, with data out this morning showing that housing starts notched higher for the second time in three months that might be changing.

Builders began construction on 28,400 (SAAR) urban housing units in October 2011, the second highest amount since March 2010. Residential construction has generally been quite subdued in Alberta over the past year (and really since the recession began) but in August and now October starts have climbed above the 28,000 mark.

The very weakest segment of Alberta’s residential construction market over the past three years has been condominium construction—weighed down by an oversupply of units started during the boom. However, it appears that the surges in both August and October were thanks to a rise in multiple dwelling starts (i.e. condominiums).

Edmonton appears to be the winner in October with multiple dwelling starts jumping from less than 300 in September to nearly 800 in October. Back in August a surge in multiple dwelling starts in Calgary was behind the jump.

With two months of data now pointing towards some life in Alberta’s residential construction market, the case for a pickup in construction activity is being strengthened. That said, multiple unit dwelling starts can be very volatile and there are certainly no guarantees the recent rise will be sustained into the New Year.

There’s always good news out there if you are willing to look for it, especially in Alberta these days.  In the last few years we’ve become adept at wondering when the other shoe is going to drop.  The media’s current fixation on issues in the US and Europe have some folks wondering when the next bad news will hit.

As everyone in central Alberta knows, the strength of our economy is highly reliant on the price of oil and gas.  There has been some speculation that oil and gas prices are bound to soften as the world economy slows.  A recent article in the Globe and Mail suggests that oil consumption in China is still growing and quotes the oil analysts at Barclays Capital in London who said “There is a large supply deficit in the global oil market, with demand exceeding supply in the third quarter”.

That suggests to us that there is a long term future for Alberta’s oil and gas and the jobs and healthy economy that come with it.

Manufacturing Shipments Perk-up in August – by Dan Sumner, Economist – ATB Financial

When Canadians think of manufacturing, they typically think of Central Canada. But Alberta’s manufacturing sector has grown in leaps and bounds over the past ten years and more recently has been an important driver behind the post-recession recovery.

Alberta manufacturers managed to grow their shipments 0.4% in August to $5.79 billion. Compared to August of last year, shipments are higher by 15.6%, the second largest year-over-year gain of any province (Saskatchewan has seen the largest at 17.1%).

While shipments were up marginally in August, they have been essentially flat for the last five months (see graph). However, this flatness comes on the heels of nearly straight gains from the middle of 2009 to Q1 of this year. Alberta’s manufacturing sector has also been an important job creation machine recently, adding more jobs than any other sector over the past twelve months.

Nationally the manufacturing story was quite positive in August, with shipments advancing by a higher than expected 1.4%. Canadian shipments have risen two months in a row now, partly a result of the unwinding of effects (supply chain disruptions) associated with the earthquake and tsunami in Japan.

This morning’s national release adds to the evidence that Canadian GDP growth will be positive in Q3, allowing Canada to avoid a technical recession (defined as two consecutive quarters of negative GDP growth).

With a healthy energy sector and rising oil sands production, manufacturing in Alberta should continue to grow in the long run. But in the near-term, shipments from this province will continue to be subject to swings in gasoline and oil product prices.

Just like we’ve been saying, things in Canada are very good compared to
the rest of the world, at least according to the ordinary Canadians in the
survey results below.   The sense of comfort we have with our current
economic conditions contributes to a healthy housing market.

Folks who believe the economy is good or very good invest in homes,
invest in their businesses, hire people, do research and development to improve
their businesses, and all those things are what contribute to a healthy
economy.

Canadians Think Economy is OK – Todd Hirsch, Senior Economist,
ATB Financial

A quick scan of recent international business news headlines suggests much more worry than optimism, and that worry is reflected in a global survey of attitudes.
Canadians, however, stand out with relatively upbeat attitudes.

IPSOS’s “Global
Economic Pulse” is a survey of participants in 24 countries around the world,
assessing the current economic situation in each country. The survey was
conducted between September 9th-19th.

In Canada, 66% of survey participants judged the Canadian economy to be
in GOOD or VERY GOOD shape at the moment. That puts us in #4 spot globally,
behind Saudi Arabia, Sweden and India. Canada outperforms such economic
hot-spots as China, Germany and Australia. On average, only 39% give their
country such a positive assessment.

Canadian attitudes
stand in sharp contrast to those of our American neighbours, where only 15%
believe the economy to be in good or very good shape. (See graph for top 10 and
bottom 5 countries).

There’s always good news out there if you are willing to look for it, especially in Alberta these days.  In the last few years we’ve become adept at wondering when the other shoe is going to drop.  The media’s current fixation on issues in the US and Europe have some folks wondering when the next bad news will hit.

As everyone in central Alberta knows, the strength of our economy is highly reliant on the price of oil and gas.  There has been some speculation that oil and gas prices are bound to soften as the world economy slows.  A recent article in the Globe and Mail suggests that oil consumption in China is still growing and quotes the oil analysts at Barclays Capital in London who said “There is a large supply deficit in the global oil market, with demand exceeding supply in the third quarter”.

That suggests to us that there is a long term future for Alberta’s oil and gas and the jobs and healthy economy that come with it.

Manufacturing Shipments Perk-up in August – by Dan Sumner, Economist – ATB Financial

When Canadians think of manufacturing, they typically think of Central Canada. But Alberta’s manufacturing sector has grown in leaps and bounds over the past ten years and more recently has been an important driver behind the post-recession recovery.

Alberta manufacturers managed to grow their shipments 0.4% in August to $5.79 billion. Compared to August of last year, shipments are higher by 15.6%, the second largest year-over-year gain of any province (Saskatchewan has seen the largest at 17.1%).

While shipments were up marginally in August, they have been essentially flat for the last five months (see graph). However, this flatness comes on the heels of nearly straight gains from the middle of 2009 to Q1 of this year. Alberta’s manufacturing sector has also been an important job creation machine recently, adding more jobs than any other sector over the past twelve months.

Nationally the manufacturing story was quite positive in August, with shipments advancing by a higher than expected 1.4%. Canadian shipments have risen two months in a row now, partly a result of the unwinding of effects (supply chain disruptions) associated with the earthquake and tsunami in Japan.

This morning’s national release adds to the evidence that Canadian GDP growth will be positive in Q3, allowing Canada to avoid a technical recession (defined as two consecutive quarters of negative GDP growth).

With a healthy energy sector and rising oil sands production, manufacturing in Alberta should continue to grow in the long run. But in the near-term, shipments from this province will continue to be subject to swings in gasoline and oil product prices.

It’s Time to Invest in Real Estate – The story below about the Alberta job market is a signal that now is a good time to invest in real estate.  When jobs are being created, new people start moving here and many of them will rent for a year or two while they get established in their new jobs and maybe sell a home where they came from.

Buying a townhouse, duplex or single family home to rent out is a manageable proposition for many families and may end up being a more stable investment than the currently very volatile stock market.

The ingredients to a successful investment are all out there right now – ample supply, relatively low prices and low interest rates.  Interest on any money borrowed to buy rental properties is deductible against the income and any profits realized by a gain in value are taxed at the lowest rate as capital gains.  The best part… the tenants will pay off your mortgage over time, leaving you with a valuable asset and a long term, stable income.

 Alberta Jobs Story Keeps Getting Sweeter – Dan Sumner, Economist – ATB Financial

Over 2011, Alberta’s job creation figures have impressed even the most optimistic observers. And according to data out this morning, the jobs picture just keeps getting better and better.

Employers in this province added a further 8,600 net positions to payrolls in September, the fifth consecutive month of positive job creation. The last time Alberta saw job gains for five consecutive months was in mid-2006. The unemployment rate also declined in September to 5.4%, matching its low mark of the current economic cycle.

Digging below the headlines, the data was even more interesting. The number of full-time jobs expanded by a stunning 21,400 positions and was offset by a loss of 12,800 part-time positions. The mighty oil and gas extraction category was the largest gainer, adding 10,600 positions in September. Although the gain is impressive, it really just reverses a loss of roughly the same number of jobs the month before, which means the gain is partly related to problems with seasonality in the data.

Nationally the jobs report was similarly positive, with Canadian employment rising by 61,000 positions and blasting through expectations of a gain of 15,000. The upbeat news on the labour market probably couldn’t come at a better time, and serves as a bit of an anchor of hope in this uncertain global economic environment.

Moving forward, it is highly unlikely that Alberta’ labour market is going to be able to keep churning out jobs the way it has in the first three quarters of 2011. Nonetheless, if fears surrounding a European financial crisis and/or US recession are realized, Alberta’s labour market will be entering that period in a strong position.