Entering the second half of this year, it is clear the Québec economy is shifting to a lower gear. This observation is based on the fact that year-to-date total employment is up by only 1,100 jobs, compared to an average increase of 24,400 during the first five months of the past five years.

Indeed, since the beginning of the year, full-time employment has fallen by 11,100 jobs. During the same period in 2007, it increased by 4,300.

From an industry perspective, despite a 5.6% year-to-date increase in retail sales, employment in wholesale and retail trade is down by 12,300. Employment in accommodation and food service has dropped by 6,800 year to date, due in part to the decline in cross-border travel.

Despite this softening in labour demand, the effect of lower mortgage rates and recent tax cuts has contributed to the growth of residential construction. Since the beginning of the year, strong +16.8% growth in multiple units has offset a 11.3% drop in single-family construction. These figures leave total starts up by 5.4% compared to the first five months of 2007.

Looking forward, the ongoing weakness in the U.S. is likely to push Québec's exports, which are off by 4% year to date, further downward. Also, the effects of the retreat in full-time employment, plus a drop in discretionary income brought on by higher energy prices, will probably depress domestic demand during the remainder of the year.

So far this year, residential building permits have fallen by 8.3% year to date and they appear unlikely to strengthen until 2009. In addition, a significant slowdown in the growth of office-based employment in the province has clouded the outlook for commercial building.