This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Construction Industry Forecasts

Notes from Alex Carrick - Jan 14, 2010

Alex Carrick
Ontario, B.C. and Alberta suffered severe labour market dislocations in 2009

Nearly 60% of the jobs lost in Canada in 2009 were in Ontario. To understand how severe this was, consider that Ontario’s labour force makes up slightly less than 40% of the national total. Out of the national job loss figure of 240,000, Ontario’s portion was 142,000. The year-over-year decline in employment in the province at -2.1% was the most extreme in the country and higher than the national average rate of -1.4%. The manufacturing sector bore most of the pain.

The five worst-performing urban labour markets in the country, in terms of high unemployment rates and weak or negative year-over-year job change, were in Ontario. Four of those cities have an auto connection, either through assembly operations or parts production – Kitchener, Oshawa, St. Catharines-Niagara and Windsor. The fifth, Sudbury, is waiting for an improvement in world base metal prices and demand. This will most likely come by way of China’s rapid expansion.

For confirmation of Ontario’s plight, consider next-door Quebec. The two industrial provinces in central Canada usually demonstrate similar economic patterns in a recession. However, this time Quebec has weathered the storm fairly smoothly. Its decline in jobs (-26,800 and -0.7% year over year) has been modest by comparison. The reasons can be found in massive public spending on hydroelectric projects and an aerospace industry that has suffered to a lesser degree than autos.

Next to Ontario in job losses provincially was British Columbia (-36,300). Resources in that province had a rough ride, particularly the forestry sector. As the U.S. housing market improves in 2010 and as world commodity prices trend upward, B.C.’s economy will come back to life. The high-tech sector in the suburbs of Vancouver is also well-positioned for the future as new technologies are introduced into the marketplace. In the third quarter of 2009, B.C. led all provinces in population growth. The Vancouver-Whistler Winter Games kick off 2010.

Alberta was hard hit by the decline in oil prices. They have revived halfway and that means that some formerly shelved projects are being re-introduced. Natural gas prices remain depressed, however, as new fields are being opened up thanks to better (i.e., horizontal as opposed to vertical) drilling techniques. Natural gas is even more important to Alberta’s economy than oil.

The boom times for heavy oil may be restrained even as prices improve. A closer eye is being kept on the environmental consequences of mining heavy oil, both in terms of landscape damage and carbon dioxide emissions in the extraction process, by international agencies. Then there is the competition that is coming from huge new natural gas supplies that lie in shale deposits.

While seemingly desirable, there is irony in the fact that environmentalists may be in the process of slowing this work as well. There is a push underway in the U.S. House of Representatives to halt experimental and pilot natural gas projects until research has unconditionally established that pushing through and breaking up shale rock does not pollute essential groundwater resources.

Finally, there is general recognition that the oil companies are going to be faced with higher costs tied to carbon taxes. A bill setting out a cap and trade system is working its way through the U.S. Congress. It will be applied on U.S. energy imports, establishing what will be a “de facto” energy tariff. As increasing amounts of Canadian oil are being shipped to the U.S., particularly to refineries located near the Gulf Coast, they will come under this umbrella.

As for the rest of the country, Saskatchewan, Manitoba and the four Atlantic Provinces had 2009 labour markets that were essentially flat. Manitoba depends on a well-diversified economy to smooth things out in good times and bad. Saskatchewan has a wealth of raw materials in oil and gas, agriculture, potash and uranium that can be counted on to pick up the slack when sales of one resource or another falters. The Atlantic region is increasingly tied to offshore oil and gas prospects as well as high-tech ventures such as call centres and research sites in N.B. and N.S.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


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