B.C. employment, housing starts drop in December

B.C.’s labour market faltered at the end of 2019.

Employment slipped 0.3%, to add to November’s 0.7% decline, marking a drop of 7,700 positions to 2.54 million persons. Metro Vancouver declined 0.8% from November.

While short-term fluctuations are common, B.C. employment trends have eroded since mid-year, cutting net year-over-year growth to a scant 0.3%.

Goods-producing employment rose 1.2% on stronger construction employment, while public administration, trade and finance, real estate and insurance contributed to a 0.6% services sector decline.

Broadly, however, manufacturing and resources have shrunk over the past 12 months, reflecting sectoral woes as services employment has expanded.

Recent employment stumbles signal slower economic momentum, but it should be noted that the labour market remains tight. The average unemployment rate was lowest among provinces at 4.8% in December, slipping from 5% the previous month. While reflecting labour force contraction and a slip in the participation rate, job vacancies in the province remain high while average wage growth in Statistics Canada’s Labour Force Survey continued to trend above 5%, pointing to labour shortages.

Housing starts slipped in December but still ended the year at a new record high.

Monthly urban B.C. starts came in at a seasonally adjusted annualized rate of 41,667 units in December, according to the Canada Mortgage and Housing Corp. That number was down from 46,647 in November, owing entirely to a drop in multi-family starts. Despite the slip, full-year urban-area starts reached 43,215 units – up 12% from 2018, with B.C. posting the strongest gain outside of Atlantic Canada. Including rural areas, housing starts rose 10%.

The trend in housing starts is undoubtedly strong, but we do question whether this can last. Single-detached starts fell 21% in 2019, while multi-family units, predominantly condominium apartments, rose 23%. This suggests that policy measures and a weak resale market curtailed demand for single-family homes. In contrast, a large share of apartments are pre-sold years before construction, which helped propel starts in 2019.

Demand remains supportive of housing starts, with low interest rates, strong labour and a firming resale market. Meanwhile, rental markets are tight and governments are investing in affordable-housing initiatives. That said, the lull in resale markets and weaker pre-sale conditions since 2018 will slow some new project construction this year. We forecast starts to dip 20% in 2020 but remain at a historically elevated pace. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.