Alberta economic snapshot for July 14, 2012

July 14, 2012

CALGARY, AB, Jul 14, 2012/ Troy Media/ – It’s a phrase heard often around the province. Someone asks ‘How are things going?’ The answer, of course, is one word: ‘Busy!’

When it comes to employment, Albertans are not only the highest paid in the country they work some of the longest hours. Workers in the goods-producing services (which includes oil and gas) work on average 38.7 hours a week. Those employed in the service sector work on average 29.4 hours a week. This data is for employees paid hourly for both part-time and full-time workers. It also includes overtime hours paid.

Only in Newfoundland and Labrador do employees work longer hours, taking the No. 1 spot for both categories (see chart). That province’s ascension to title of longest hours worked is a fairly recent event and is due to the boom in offshore oil and related services.

It should come as no surprise to Albertans that they rack up a lot of work hours during the week. The strong economy, the low average age of workers and the fact that there is plenty of overtime for hourly workers boosts the length of the work week in the province.

But is there a dark side to that badge of honour the wear? Is it possible to work too hard, to the point of reduced quality of life, stress and even illness? While it is great to enjoy working long hours and reaping the financial benefits of that, balance is necessary as well. And especially now that Alberta is bathed in beautiful summertime weather, taking some time to relax is important. (EDITOR’S NOTE: Read tomorrow’s column by Todd Hirsch for more comment on the importance of rest and relaxation.)

Housing

Regulatory changes geared at cooling the housing market came into effect this week – but data on how much the market was already cooling in recent months is providing mixed signals.

Last week, sales data showed a precipitous drop in June while, this week, construction data came in relatively strong, with strong housing starts and new home price data.

Year-over-year the new home price index rose 2.4 per cent in May. This was driven mostly by Toronto, where prices rose 5.5 per cent (in Alberta new home prices were flat). Housing starts data for June was also surprisingly strong, coming in at a seasonally adjusted annual rate of 222,700 units – that’s about 5,000 more than May’s number.

Total starts in Alberta were 31,100 in June, steady from starts in May. Starts in the province’s two major cities made significant jumps, with Calgary numbers 65 per cent higher than in 2011 and 46 per cent higher in Edmonton.

Agriculture

It’s looking like western grain farmers are in for a memorable year – even more so than previously expected. While extremely dry conditions have been severely reducing American yields, weather in Canada has been ideal.

This week the United States Department of Agriculture (USDA) cut the yield estimate of soybeans from 43.9 bushels per acre to 40.5 bushels and corn from 166 bushels to 146 bushels. The impact of the USDA downgrade rippled through agricultural markets last week as the reduced supply of key grains causes the price of substitutable crops to also spike.

Canola prices, a close substitute to soybeans and western Canada’s most valuable crop, have spiked considerably on the news this week, hitting $630/ton – levels not seen since 2008. Spring wheat has also surged, although more modestly, moving past $9/bushel.

China

Numbers released earlier this week indicate that inflation is well under control in China, hitting a 24 month low of 2.2 per cent in June. This should provide the Chinese authorities room to increase public spending or reduce credit conditions to help spur growth.

Canada and China had one thing in common during the period of loose monetary policy: both governments became concerned with the housing market and speculative activity and as a result, tightened conditions for home purchases. A key difference however, is that the typical Chinese household saves a high percentage of every paycheque, making household debt far less of a concern.

Energy

Anyone who follows the natural gas market would probably like to forget 2011. For that matter, the first half of 2012 as well. The folks at the Energy Information Administration (EIA) aren’t in the business of forgetting however, publishing a year-end review for natural gas in 2011 last week.

The EIA charts a disastrous year for 2011: average prices dropped to $3.98/MMbtu from 2010’s $4.37/MMbtu, due to record high production and storage levels, which pushed the price even lower through 2012.

Why did production keep rising despite rock bottom prices? The EIA attributes this not only to the cheap abundance of shale gas, but the desire of drillers to drill for crude and other projects that produced natural gas as a by-product.

U.S.

According to the Commerce Department, the U.S. trade deficit narrowed slightly in May, coming in at $48.7 billion compared to a deficit of $50.6 billion in April.

Exports were slightly higher, but it was the 9.3 per cent dip in energy prices that helped narrow the gap. Crude plays a huge role in the expansion of the U.S. trade deficit. Year-to-date the United States has imported $134 billion worth of crude – or about 45 per cent of the merchandise trade deficit. It’s no coincidence that when the price of crude began its ascension early in the past decade that the trade deficit went up in lock step.

Aside from energy, trade in consumer goods accounts for the bulk of the remaining deficit. Take cell phones as an example. Most smart phones are made in Asia and America has imported about $33 billion worth of the product in 2012 so far.

Slight deficits and surpluses are normal but when trade deficits dip below 5 per cent it begins to hit worrying levels, as the only way such consumption levels are made possible is by having creditor countries extend credit. The U.S. has been extended a lot of leeway, it’s unique as the only superpower, but even superpowers are expected to pay their debts.

| ATB Financial

This snapshot is FREE to use on your websites or in your publications. However, Troy Media, with a link to its web site, MUST be credited.

Please follow and like us: