BC employment fell sharply in August, but the labour market remained tight with the unemployment rate little changed.
Employment fell by 28,100 persons or 1.0 per cent, to shave the number of employed workers to the lowest level since February. Losses were driven by full-time work, which dropped by 31,900 persons or 1.5 per cent, reversing three months of gains.
More sobering for the latest losses was the breadth of decline with 11 of 16 industries shedding jobs. Notably, wholesale and retail trade fell 15,000 persons (3.5 per cent), alongside business, building and support services (6,500 or 6.3 per cent), and education (5,200 or 2.6 per cent). Growth in private personal services and construction employment were partial offsets.
Despite the hefty loss, B.C.’s unemployment rate managed to hold steady at 4.8 per cent compared with 4.7 per cent in July. Declines were matched by a decrease in the labour force, which could reflect an increase in voluntary quits or a temporary pause from job seeking. The low unemployment rate is still indicative of a tight market observed in job vacancy rates for the province and employment is nearly 3.0 per cent higher than pre-pandemic levels. Average hourly wages for employees remained high at 5.1 per cent year over year but decelerated from July’s 5.6 per cent rate.
The Vancouver Census Metropolitan Area outperformed the rest of the province with employment down a mild 0.1 per cent. The unemployment rate was unchanged at 4.8 per cent.
August’s performance was negative for B.C. but one month does not show a trend, particularly as it relates to volatility in provincial estimates. A partial rebound in September figures would not be surprising. That said, higher interest rates and slowing global growth will continue to temper hiring as the housing market remains weak and businesses feel the pinch of higher costs.
Down, down, down, the Lower Mainland housing market downturn continued through August as higher interest rates and fear of price declines contributed to lower sales and home values.
Multiple Listing Service (MLS) sales in the region spanning Metro Vancouver and Abbotsford-Mission reached 2,854 units in August, down 45 per cent year over year, and consistent with July’s decline. Nevertheless, this marked the fewest August sales since 2012 and the fifth fewest same-month sales since 1995.
Sales weakness owes to rapid erosion of purchasing power due to higher interest rates with prospective buyers adjusting to both higher fixed and variable mortgage rates. In the absence of a much larger down payment, potential buyers have found themselves displaced from the market. Declining prices are also holding back both end-use buyers and investors. More sellers are also opting to step away from the soft market in hopes that conditions improve. New listings flow fell 15 per cent from a year ago, and the trend is declining.
Despite supply holding steady, negotiating power has swung to buyers. The average sales price fell to $1.12 million, marking a 1.2 per cent monthly decline and a 15 per cent decline from peak. As this reflects sold listings, it may be biased lower due to sales composition and motivated sellers (such as investors). The constant-quality MLS housing price index fell 3.0 per cent from July and was led by declines in detached homes and townhomes. The composite index has declined about 9.1 per cent from peak.
Sluggish market conditions are anticipated to continue. The Bank of Canada signalled further rate hikes to cool inflation through the end of the year, and we now expect the policy rate to reach 3.75 per cent by year-end — pushing variable rates higher. Higher rates are expected to keep sales near the current cycle low while prices grind down. That said, prices are not expected to collapse, owing to strength in the labour market and strong rental demand, which will keep sellers from flooding the market with properties.
Bryan Yu is chief economist at Central 1 Credit Union.