June 19, 2013

October 25, 2012

Construction Jobs Up in 19 of Canada’s 33 Cities in September

Alex Carrick

Chief Economist, CanaData

Year-over-year employment in construction in Canada was -0.8% in September, according to Statistics Canada. Only rarely over the past decade has the number of construction jobs in this country been negative year-over-year – most notably during the depths of the recession in 2009.

For most of the past ten years, strong resource sector development has provided increasing levels of work in the construction trades. Almost all resource projects are located in remote locations – or at the least, outside city cores. Examples include oil and gas developments in Alberta and Newfoundland, aluminum smelter expansions in Quebec and B.C. and hydroelectric projects in Quebec and Manitoba. That’s why the story is a little different for construction workers within city boundaries.

The industry is keen to know what’s happening in construction at the city level. The accompanying table shows the number of on-site jobs in the 33 largest urban centres across the nation.

They are ranked according to most recent year-over-year percentage changes. In September, 19 cities recorded increases while 14 showed declines.

In cities, major projects can also have a large impact. A case in point is Montreal where work is currently proceeding on several new larger-than-normal hospitals.

In other cities, it may be rapid transit work or a special project that provides a boost to construction employment. Toronto stands out as it builds facilities to host the PanAm Games in 2015.

In smaller centres, one large industrial plant or a shopping mall can produce a sizable swing in employment from one year to the next.

But often the biggest impact on city construction employment comes from the level of residential work – new and renovation – that is proceeding in the region. Residential investment accounts for about 40% of all new capital expenditures in areas other than machinery and equipment.

It’s tempting to expect a close tie-in between construction employment and housing starts. But a time lag has to be taken into account. A home start translates into peak employment several months or more later. The bigger the project (i.e., condo towers), the longer the time lag.

The five leaders in housing starts so far this year – Regina, Calgary, Hamilton, Winnipeg and Edmonton – should “move up the chart” for construction jobs in the months ahead.

Having said this, it must also be acknowledged that most forecasters are calling for a decline in home starts next year versus this year. CanaData is projecting that the number of new residential footings will fall to 185,000 units in 2013 from 212,500 in 2012.

This will mean a decline in ground-breakings in most cities and an accompanying drop in construction employment that may or may not be made up in other types of structures.

One key indicator that analysts watch to determine the strength in housing markets is new home prices. Statistics Canada has just published its new housing price index report (NHPI) for August. Versus July, the price of new homes rose 0.2%, a still-healthy pace of increase.

August’s year-over-year new home price change nationally was +2.4%, comprised of a “structure only” increase of 2.6% and a “land only” gain of 1.7%.

Five cities recorded much faster than average new home price increases. They were: Toronto and Oshawa (+4.7%); Winnipeg (+4.4%); Regina (+3.5%); Quebec City (+3.3%); and Kitchener-Cambridge-Waterloo (+3.0%).

Moving in the opposite direction, there were four urban regions in which year-over-year prices declined. In three of those four locations, the price drop was less than 1.0%: Vancouver (-0.4%); Charlottetown (-0.7%); and a grouping of Saint John, Fredericton and Moncton, all in New Brunswick (-0.9%).

Vancouver’s new home price moderation is not a surprise. The city has been notorious for having home prices way higher than everywhere else in the country. Eventually, the distortion was going to be sorted out.

That leaves one other city with a price decline. Earlier in the cycle, Victoria’s housing market was overwhelmed by what was happening in nearby Vancouver, accounting for an “echo” run-up in prices.

In the latest month, Victoria recorded the worst performance among the nation’s 33 cities with a 3.0% year-over-year price pullback.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

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