Alberta economic snapshot for July 7, 2012

July 7, 2012

CALGARY, AB, Jul 7, 2012/ Troy Media/ – Alberta’s job market may be one of the hottest on the continent, but every now and then it too needs to stop and catch its breath.

In June, the province lost 8,600 jobs (seasonally adjusted). That comes after three consecutive months of gains and represents the largest monthly loss in nearly two years. The unemployment rate in the province ticked up one tenth of a percentage point to 4.6 per cent – still the lowest in the country.

Nationally, the Canadian job market was essentially unchanged in June (+7,600 new jobs) with a large gain of 20,200 being offset by losses in most other provinces. The national unemployment rate fell from 7.3 per cent in May to 7.2 per cent in June.

Alberta’s job loss last month was mostly in part-time positions (-5,200) but full-time work also fell a bit (-3,400). Most of the losses were concentrated in accommodation and food services (-9,700), business, building and other support services (-7,900) and manufacturing (-6,300). These were somewhat balanced by month-over-month gains in health care and social assistance jobs (+8,600) and finance, insurance and real estate positions (+7,800).

While June’s job losses are disappointing, one month of data does not alter the overall picture of a healthy job market here. The average level of employment over the last 12 months is still higher by nearly 4.0 per cent compared to the average over the previous 12 months.

And indeed, given the fact that labour shortages are once again rising to the top as one of the most serious challenges faced by companies in Alberta, a little breathing room in the tight job market may not be such a terrible thing.

Construction

Judging by the intentions of Alberta builders and developers the construction sector is gearing up for a busy second half of 2012.

In May, building permits issued by cities and municipalities throughout the province soared to $1.443 billion – an increase of 7.6 per cent over the previous month. Compared to May of 2011, the value of building permits is higher by 26 per cent. Nationally, building permits were also lifted a healthy amount in May and are 6.5 per cent above levels12 months ago.

In Alberta, permits were driven higher by a large month-over-month gain in residential building intentions. This suggests that housing starts in the coming months should be rising even higher, adding to the gains witnessed in the first half of the year.

Non-residential building permits also rose in May but by a much smaller amount. With the exception of April 2011 (which saw an enormous spike in building intentions due to the issuance of a permit for the Calgary airport tunnel project), residential and non-residential building permits are currently at their highest levels in over two years.

U.S. jobs

The American job market posted another disappointing report for June. Payrolls rose 80,000 last month after a 77,000 increase in May, according to the U.S. Labor Department.

Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 per cent. Private employment (which excludes government agencies) increased 84,000 in June – the weakest in 10 months.

Automotive

There was a sigh of relief earlier this week when new car sales data was released in the United States. After a reprieve in May, it’s still possible that car sales come close to their pre-recession levels this year. The story is similar north of the boarder, although it was not hit as hard.

According to data from the Auto Data Corp., light vehicle sales hit a seasonally-adjusted annualized rate of 14.1 million in June. This was 22 per cent higher than where it stood a year ago and 2.2 per cent higher than May’s figure. In Canada, sales of light cars increased 2.7 per cent and light truck sales increased 2.9 per cent relative to last June, according to the automotive consultants Des Rosiers.

A rebounding auto sector will provide a boost to central Canada’s manufacturing sector, especially the American jump. Nearly 80 per cent of light vehicles sold in the United States are domestically manufactured. Cars that are classified as domestically manufactured include Ontario factories and foreign-based car manufacturers who build in North America. It’s unlikely that even if sales return to pre-recession levels that manufacturing employment will return to similar levels (as a lot of production has shifted south) but it will provide a much needed boost.

Agriculture

Alberta’s grain farmers are facing a better season than most. In many important grain producing regions of the world, such as the U.S. mid-west and Europe, poor weather has been reducing yield estimates for this year’s crop. Growing conditions in western Canada, by contrast, have been very good. Provided Mother Nature doesn’t throw a curve ball, farmers should have a very good year.

While it’s expected that farm revenues will be strong this year, costs have also been rising. For instance, according to data compiled by Alberta Agriculture and Rural Development, wheat farmers were paying significantly more for their seed than a year ago and these aren’t the only costs that were on the rise. Fertilizer costs have also jumped, as have fuel costs. That said, it’ll likely be a good year for most farmers.

U.S. service sector

It takes months for official GDP data to be compiled, which is why many analysts pay close attention to surveys done by the Institute for Purchasing Managers. The IPM survey produces momentum indicators, known as Purchasing Manager Indexes (PMI). These indicators effectively gauge whether respondents believe things are getting better or worse. Now maybe things are getting only slightly better or only slightly worse, we don’t know, but the benefit of the survey lies in its timeliness.

Last week the manufacturing-PMI indicated that there had been a substantial drop in manufacturing activity in June and, this week, the non-manufacturing index was released. The manufacturing PMI indicated activity had actually contracted in June, dipping 3.8 per cent.

Thankfully, the news from the non-manufacturing PMI was slightly better; it had dropped only 1.6 per cent from May and indicated that the sector was still modestly expanding.

| ATB Financial

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