November 6, 2009
Eastern Canada Construction Outlook, 2010–2012
Ontario, along with B.C. and Alberta, has been one of the provinces most affected by the hard times. Toronto has come under fire from several major sectoral crises during the recession. First, the financial community was besieged as major banks in the U.S. and elsewhere were sent into bankruptcy or required government bail-out money. However, Canada’s financial community survived the test very well. The international stature of Canada’s banking sector, in terms of its conservative lending practices and ability to withstand liabilities-to-capital scrutiny, has been raised considerably.
Then there were the auto sector problems. Chrysler and General Motors descending into bankruptcy protection and accompanying resizings have cost jobs in Ontario. Things are looking up again, however, since new ownership is now in place at both companies. Given the size of government involvement and the fact that the public sector has rarely demonstrated much talent for running businesses, this may just be forestalling another round of problems down the road. But that’s for worrying about later, when the economy overall will be in better shape.
Ontario’s homebuilding sector is under stress, but this may alter course with the pick-up in existing home sales. Bargains are to be had both in terms of prices and the exceptionally low mortgage rates that are currently in place. The biggest overhang is in the condominium market in Toronto. Project financing has been an issue, given the credit crunch, and purchasers have been left wondering about their commitments. The inventory of finished but unsold condominiums is too high by double. This needs to be rectified.
Ontario’s economic problems are highlighted by its labour markets. The seven cities with the highest unemployment rates in Canada are all in Ontario, headed by Windsor at 14.8%. Manufacturing activity levels will continue to be challenged by the strength in value of the Canadian dollar versus the greenback. A major disappointment for contractors is the postponement of new nuclear power facilities. The problems at Atomic Energy of Canada Ltd. are partly the reason for the reassessment of spending plans.
La belle province has come through the recession in pretty good shape, all things considered. Its manufacturing focus on aerospace as opposed to autos has softened the blow. Airplane orders have suffered, but not to the same degree as motor vehicle demand. Plus international interest in some new aerospace products has been promising. Sherbrooke, Saguenay, Québec City and Montréal all have had relatively low declines in housing starts to date this year. Québec City (5.1%) has an exceptionally low unemployment rate.
The province has also been on the leading edge when it comes to government stimulus money. Well before most other provinces, Québec's government undertook major spending to upgrade roads and especially bridges in the province. This was after a high profile bridge collapse in Laval that killed several people. Government money has also been flowing into hydro projects. This has the benefit of not only providing stimulus, but of also maintaining the province’s reputation for non-polluting electricity production.
One major industry that is still waiting for a significant turnaround is aluminum production. Demand for aluminum depends on autos, construction, airplanes and consumer goods. All of these will pick up as the world economy returns closer to normal. It has to be remembered, however, that consumer spending may not be as quick to recover as in previous post-recession periods, due to a lingering high level of joblessness combined with less availability of credit and a greater emphasis on saving over spending.
Newfoundland and Labrador Premier Danny Williams has negotiated an agreement with offshore oil companies, on the issues of royalties and ownership, that will bring forward major spending on a mega project or two. His province is also benefiting from investment proceeding on nickel and copper mining and processing at Voisey’s Bay and on the island. The increased prosperity in Newfoundland due to workers returning home from the oil sands during the recession has kept house prices high. St. John's is one of only four cities in the country to record a positive change in housing starts so far this year. Also, the city has the lowest office vacancy rates, downtown (1.6%), suburban (4.4%) and metro-wide (2.9%) in Canada, according to Cushman & Wakefield LePage.
In New Brunswick and Nova Scotia, the two leading urban centres have unemployment rates among the lowest in the country – Saint John, N.B. at 5.2% and Halifax, N.S. at 6.4%. Those two cities hold positions two and three among all census metropolitan areas for employment growth, August 2009 versus August 2008. Jobs in Saint John are +5.2% and in Halifax they are +4.1%. Despite its strong labour market, Halifax has relatively high office vacancy rates, second only to Calgary at the total metro level.
The Canada-wide figure for year-over-year employment change is -1.7%, as of August. By way of comparison, the job change in St. John’s, N.L. of +0.2%, while not outstanding, is a good deal better than in most other cities in Canada. Newfoundland traditionally has the highest unemployment rate in the country, due to the vagaries of the fisheries industry, and it is still true today, at 15.6%. The nation’s second highest jobless rate is in Prince Edward Island, at 13.7% versus last year’s much lower level of 10.4%.
By the way, it generally helps if you work in a provincial capital or in the federal capital. For example, Ottawa-Gatineau’s unemployment rate now stands at only 5.4%. Another consideration is the age of the local population. Individuals aged 15 to 25 have a jobless rate of 16% at this time. Alberta has the youngest population demographic in Canada. The Atlantic region is comprised of a slightly older age grouping, on average. From call centres in the new technology arena and liquefied natural gas projects in the high-tech energy field, the Atlantic region has made significant strides forward into the economy of tomorrow.
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Excerpted from CanaData’s Annual Construction Forecast, 2010–2012 edition. Visit CanaData's website to order.
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