Heading into 2010, there are indications that the Quebec economy is starting to recover. However, given the recent weak pattern of employment growth, it is clear that the road to recovery is not without potholes.

In September, employment in the province was down by 1.6% year over year. Although this was smaller than the 2.1% decline for the country as a whole, it was the province’s largest year-over-year decline in jobs since 1992.

Moreover, despite increased government spending on infrastructure, employment in construction fell by 6.5% year over year in September, its steepest year-over-year drop since September 2006.

Having said this, there are signs that the employment picture is starting to improve. The number of full time jobs in the province increased by 8,300 in September, its largest one month increase since April.

Also, a number of the province’s key sectors are starting to strengthen. Employment in education services rose by 4.1% year over year, followed by the utilities sector (+3.1% year over year), wholesale and retail trade (+1.5%), professional services (+1.2%) and financial services (+0.7%).

As in other parts of the country, record low interest rates and strengthening consumer confidence in Quebec have sparked demand for existing homes, which in September were up by 4.9% year over year.

Despite the relatively lacklustre pattern of employment growth over the past several months, existing house prices were up 9.4% year over year.

To date, housing starts in the province are still well below year-ago levels, although residential building intentions appear to be starting to strengthen.

Looking forward, improving U.S. and global demand for commodities, including lumber and aluminum, should give a much needed boost to the province’s resource industry.

And recent gains in full time employment point to a further strengthening in both consumer spending and in residential construction.

Finally, over the next several quarters both institutional and engineering construction should exhibit solid growth due to a combination of federal and provincial fiscal stimulus packages intended to help rejuvenate the province’s aging infrastructure.