Canadian Economy Slowing
01-31-2014, 07:49 PM
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Canadian Economy Slowing
From http://www.greaterfool.ca/,
Sears dropped another 700 of so jobs on Wednesday, bringing the body count close to 3,000. A few hours later Best Buy punted 950 more. Obviously when major retailers throw people off the roof, it says a lot about the strength of consumer spending. Meanwhile Canada Post was announcing plans for the phasing-out of mail delivery to six million addresses, which tells you something about eight thousand more workers with good jobs and decent pensions.
Meanwhile we just heard the feds got the counting wrong on the November jobs report. Instead of creating 21,000 new positions that month, the country actually shed 27,600. Whoops. I guess the margin of error is now 200%. And as you know, we lost another 46,000 jobs in December, punching the unemployment rate higher than that of the United States. There’s no pretty way to put this – the elimination of 73,000 jobs in the last sixty days of 2013 is an unmitigated disaster.
And did I mention 1,700 jobs at Bombardier a few days ago? Kellogg’s? Heinz? Encana? The media chains?
In the last year job growth equalled 0.8%, which is less than the increase in the population. That pace of growth was two-thirds less than in 2011. All this underscores why the dollar has collapsed in 2014, losing more than four cents against the American currency, and now solidly under the 90-cent mark. As I told you a day or two ago, many believe it’s on the way to 85. Some say less than 80.
The impact of that will be most keenly felt in rising consumer prices, since almost all imports from places like China are paid in US dollars. The Canadian economy is 67% comprised of consumer spending, which is why this is a big, hairy deal. When the price of socks and sweatshirts rise, not to mention most of what you eat, it’s hard to avoid feeling it. These days debt is at the highest level in history, and folks have never, ever carried such mortgage loads, so it makes ya wonder. Are the guys running Sears and BestBuy just getting ready to survive what they know is coming?
That was a rhetorical question. Of course they are. And thus you can see the nature of the negative feedback loop developing. A slowing economy with job losses begets a lower currency which brings higher input costs, rising prices, declining consumption and fewer jobs. This is not an easy sucker to reverse, especially when interest rates are already in the ditch, meaning the central bank has a limited set of tools to work with.
Isn’t this all depressing?
It gets worse. Canada has one of the highest home ownership ratios among developed countries, and a far greater debt-to-income ratio than the nation most like us, America. Owning a house is not like having an ETF. Once your income is stretched by rising prices, or your wife loses her job at the department store, you can’t just phone some guy and sell your home to raise cash and cut costs. Unless you’re in one of those very localized hot hipster zones in Toronto or Vancouver, where heavily-publicized bidding wars are taking place, selling can a long time. Closing takes even longer. So the process can easily stretch out six months or more.
This means most of the net worth in Canada (real estate has at least 75% of it) is to some degree illiquid. So, when families feel an economic pinch, they first have to rein in spending, before they bail on the house. More negative feedback.
Okay, so where’s all this heading?
It’s reasonable to expect the Canadian economy will stagger for much of 2014. No real reason for the dollar to go up. More job cuts likely. Bad time to be in retail. Variable mortgage rates won’t move. Fixed rates may come off ten or twenty basis points. Realtors, bankers and brokers will make a huge deal of that, and you can already tell how much hype is being thrown at the Spring market. The high-profile bidding wars and large-dollar sales will mask underlying traits that should be worrisome. Like a steady decline in detached home sales in Toronto, or 74% of all homes in Vancouver sitting over the $1 million line. There are so many indicators that this market is fragile and fickle, held together with the gossamer threads of desire and the duct tape of blunt force marketing.
So, try to resist buying. Regardless of your spouse. If you’ve thought about selling, ask yourself if you really think it’ll be better in the fall when the jobs situation is more dire, or a year later when mortgage rates start to click higher.
And, as always, if the bulk of your net worth is in a house, you’d best change that. Seriously.
Sears dropped another 700 of so jobs on Wednesday, bringing the body count close to 3,000. A few hours later Best Buy punted 950 more. Obviously when major retailers throw people off the roof, it says a lot about the strength of consumer spending. Meanwhile Canada Post was announcing plans for the phasing-out of mail delivery to six million addresses, which tells you something about eight thousand more workers with good jobs and decent pensions.
Meanwhile we just heard the feds got the counting wrong on the November jobs report. Instead of creating 21,000 new positions that month, the country actually shed 27,600. Whoops. I guess the margin of error is now 200%. And as you know, we lost another 46,000 jobs in December, punching the unemployment rate higher than that of the United States. There’s no pretty way to put this – the elimination of 73,000 jobs in the last sixty days of 2013 is an unmitigated disaster.
And did I mention 1,700 jobs at Bombardier a few days ago? Kellogg’s? Heinz? Encana? The media chains?
In the last year job growth equalled 0.8%, which is less than the increase in the population. That pace of growth was two-thirds less than in 2011. All this underscores why the dollar has collapsed in 2014, losing more than four cents against the American currency, and now solidly under the 90-cent mark. As I told you a day or two ago, many believe it’s on the way to 85. Some say less than 80.
The impact of that will be most keenly felt in rising consumer prices, since almost all imports from places like China are paid in US dollars. The Canadian economy is 67% comprised of consumer spending, which is why this is a big, hairy deal. When the price of socks and sweatshirts rise, not to mention most of what you eat, it’s hard to avoid feeling it. These days debt is at the highest level in history, and folks have never, ever carried such mortgage loads, so it makes ya wonder. Are the guys running Sears and BestBuy just getting ready to survive what they know is coming?
That was a rhetorical question. Of course they are. And thus you can see the nature of the negative feedback loop developing. A slowing economy with job losses begets a lower currency which brings higher input costs, rising prices, declining consumption and fewer jobs. This is not an easy sucker to reverse, especially when interest rates are already in the ditch, meaning the central bank has a limited set of tools to work with.
Isn’t this all depressing?
It gets worse. Canada has one of the highest home ownership ratios among developed countries, and a far greater debt-to-income ratio than the nation most like us, America. Owning a house is not like having an ETF. Once your income is stretched by rising prices, or your wife loses her job at the department store, you can’t just phone some guy and sell your home to raise cash and cut costs. Unless you’re in one of those very localized hot hipster zones in Toronto or Vancouver, where heavily-publicized bidding wars are taking place, selling can a long time. Closing takes even longer. So the process can easily stretch out six months or more.
This means most of the net worth in Canada (real estate has at least 75% of it) is to some degree illiquid. So, when families feel an economic pinch, they first have to rein in spending, before they bail on the house. More negative feedback.
Okay, so where’s all this heading?
It’s reasonable to expect the Canadian economy will stagger for much of 2014. No real reason for the dollar to go up. More job cuts likely. Bad time to be in retail. Variable mortgage rates won’t move. Fixed rates may come off ten or twenty basis points. Realtors, bankers and brokers will make a huge deal of that, and you can already tell how much hype is being thrown at the Spring market. The high-profile bidding wars and large-dollar sales will mask underlying traits that should be worrisome. Like a steady decline in detached home sales in Toronto, or 74% of all homes in Vancouver sitting over the $1 million line. There are so many indicators that this market is fragile and fickle, held together with the gossamer threads of desire and the duct tape of blunt force marketing.
So, try to resist buying. Regardless of your spouse. If you’ve thought about selling, ask yourself if you really think it’ll be better in the fall when the jobs situation is more dire, or a year later when mortgage rates start to click higher.
And, as always, if the bulk of your net worth is in a house, you’d best change that. Seriously.
01-31-2014, 08:04 PM
#3
Nordschleife Master
I am not to worried about it. I think our dollar is falling because USA is recovering. Which will mean they will buy more from us because our dollar is lower. Sears laying off people is because the minimum wage was increased.
01-31-2014, 08:22 PM
#4
Burning Brakes
Unfortunately the price of real estate in Vancouver has not been dependent on Canadian workers for a long long time.
A bungalow will cost you at least $1.5M on the West Side. Anything that has been reno'd will go for over $3M.
Waterfront is over $50M.
Level of debt on those properties = $NIL.
Don't think the average Canadian family are buying those homes.
I expect some impact on the outlying areas of Vancouver but in the desirable West Side and West Vancouver there will be no decline.
A bungalow will cost you at least $1.5M on the West Side. Anything that has been reno'd will go for over $3M.
Waterfront is over $50M.
Level of debt on those properties = $NIL.
Don't think the average Canadian family are buying those homes.
I expect some impact on the outlying areas of Vancouver but in the desirable West Side and West Vancouver there will be no decline.
01-31-2014, 09:11 PM
#5
Race Car
On a positive note, the American economy has been on fire for the last 2 quarters and that should help Canada's growth. The problem with the Canadian currency is that there really isn't much reason to own it so we have to pay for a lofty dollar with higher interest rates. That just isn't happening now but will as inflation picks up. We really need some pipeline approvals to get us going. That is proving difficult with the strength of radical eviro terrorists. Many of the retail layoffs are the result of on-line buying and the higher minimum wage will result in more. A 10% increase in the minimum wage results in a loss of about 5% of minimum wage jobs.
01-31-2014, 10:45 PM
#6
Race Car
Sears is just clueing in that the department store model of of old is passe.
Best Buy / Future Shop are eliminating competeing stores at the same location and expanding their on line optiopns to compete with Amazon.
Raising minimum wag will just move more jobs overseas.
What I find more worried about is the public sector employees and the leacy costs associated with them.
Do your US shopping now.
Best Buy / Future Shop are eliminating competeing stores at the same location and expanding their on line optiopns to compete with Amazon.
Raising minimum wag will just move more jobs overseas.
What I find more worried about is the public sector employees and the leacy costs associated with them.
Do your US shopping now.
01-31-2014, 11:34 PM
#7
Captain Obvious
Super User
Super User
You can thank the Vancouver housing prices to the rich Asian infux. If someone is willing to pay 1.5 mill for a 50 year old 1000sq ft bungallow, then you know momey is not that much of an object for the buyer.
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01-31-2014, 11:38 PM
#8
Rennlist Member
+1 Canadian Real Estate is seen by many offshore as a safe place to park money.
02-01-2014, 02:53 AM
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Unfortunately the price of real estate in Vancouver has not been dependent on Canadian workers for a long long time.
A bungalow will cost you at least $1.5M on the West Side. Anything that has been reno'd will go for over $3M.
Waterfront is over $50M.
Level of debt on those properties = $NIL.
Don't think the average Canadian family are buying those homes.
I expect some impact on the outlying areas of Vancouver but in the desirable West Side and West Vancouver there will be no decline.
A bungalow will cost you at least $1.5M on the West Side. Anything that has been reno'd will go for over $3M.
Waterfront is over $50M.
Level of debt on those properties = $NIL.
Don't think the average Canadian family are buying those homes.
I expect some impact on the outlying areas of Vancouver but in the desirable West Side and West Vancouver there will be no decline.
"On a positive note, the American economy has been on fire for the last 2 quarters"
Then why is the U.S market down so much in Jan? Walmart/Amazon/Apple are all down and the average U.S consumer still has not received the Obama Care bill yet.
I think the bubble is bursting like 2008.
02-01-2014, 10:54 AM
#11
Burning Brakes
I have not seen a property listed for over $50Mil in Vancouver EVER. This is the most expensive waterfront house for sale in the greater Vancouver area on the MLS at $17.8m http://beta.realtor.ca/propertyDetai...rtyId=13509332
"On a positive note, the American economy has been on fire for the last 2 quarters"
Then why is the U.S market down so much in Jan? Walmart/Amazon/Apple are all down and the average U.S consumer still has not received the Obama Care bill yet.
I think the bubble is bursting like 2008.
"On a positive note, the American economy has been on fire for the last 2 quarters"
Then why is the U.S market down so much in Jan? Walmart/Amazon/Apple are all down and the average U.S consumer still has not received the Obama Care bill yet.
I think the bubble is bursting like 2008.
Have a read -
http://www.cbc.ca/news/canada/britis...home-1.2482084
There are really two economies at play in Vancouver.
The factors that affect the price of premium houses are driven by world events. If China were to have issues with their economy or if China were to successfully crack down on the outflow of capital then you may see a drop in the price of housing in the desirable West Side or West Vancouver.
http://www.cnbc.com/id/101225781
It may come as a surprise to some but in bad times the really wealthy families actually do better. In the years after 2008 the majority of my client who have owned their family business for a long time had their best years even better than in the boom times before 2008.
Some of this is due to their ability to operate without outside financing and the increase in gross margins for their products as their competitors go out of business.
I do agree with you that we should expect to see a drop in the price of real estate in areas outside of Vancouver West Side and West Vancouver. Real estate is those areas are driven by the financial abilities of local Canadian workers. Here interest rates will have a major influence. The high price of these homes is only due to the low interest rates.
I think Vancouver real estate will always be strong in the long run because Vancouver is a desirable place to live and due to the confines of our geographical location there is a limit to the amount of development space. As long as there is net immigration into the area the will be demand for housing.
For an example of why Vancouver is such a desirable place to live - refer to my reply to the tread "OT: At what point do I shovel".
02-01-2014, 11:41 AM
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Not sure a lot of foreign investors are fighting to buy Canadian properties. While the local media keep reporting that our real estate will be fine, it seems international media are piling on with terms such as "most over-valued in the world", etc.
The Economist has been a big reporter of our over-valued real estate, and I've read it in other papers such as the NY times and the WSJ. Having said that, the house is mostly paid for, and not worth the effort and foolishness of trying to market time. Besides, I'm not about to move the toys out of the garage with all the work I've done to build a proper toy box.
The Economist has been a big reporter of our over-valued real estate, and I've read it in other papers such as the NY times and the WSJ. Having said that, the house is mostly paid for, and not worth the effort and foolishness of trying to market time. Besides, I'm not about to move the toys out of the garage with all the work I've done to build a proper toy box.
02-01-2014, 11:42 AM
#13
Rennlist Member
Meanwhile in Alberta, we're hiring over 200 people in 2014 for newly created food services positions. We're projecting that we'll have to go overseas for 150 or more of those positions as there are so few unskilled workers available in Alberta. These are entry level jobs at ~1.5 X min wage but you have to start somewhere...
02-01-2014, 12:04 PM
#14
Race Car
Meanwhile in Toronto, our organization is hiring like mad...9 positions out of 14 are management level.
Its not as bleak as one report tends to elude to.
Its not as bleak as one report tends to elude to.
02-01-2014, 12:12 PM
#15
Rennlist Member
From http://www.greaterfool.ca/,
Sears dropped another 700 of so jobs on Wednesday, bringing the body count close to 3,000. A few hours later Best Buy punted 950 more. Obviously when major retailers throw people off the roof, it says a lot about the strength of consumer spending. Meanwhile Canada Post was announcing plans for the phasing-out of mail delivery to six million addresses, which tells you something about eight thousand more workers with good jobs and decent pensions.
Meanwhile we just heard the feds got the counting wrong on the November jobs report. Instead of creating 21,000 new positions that month, the country actually shed 27,600. Whoops. I guess the margin of error is now 200%. And as you know, we lost another 46,000 jobs in December, punching the unemployment rate higher than that of the United States. There’s no pretty way to put this – the elimination of 73,000 jobs in the last sixty days of 2013 is an unmitigated disaster.
And did I mention 1,700 jobs at Bombardier a few days ago? Kellogg’s? Heinz? Encana? The media chains?
In the last year job growth equalled 0.8%, which is less than the increase in the population. That pace of growth was two-thirds less than in 2011. All this underscores why the dollar has collapsed in 2014, losing more than four cents against the American currency, and now solidly under the 90-cent mark. As I told you a day or two ago, many believe it’s on the way to 85. Some say less than 80.
The impact of that will be most keenly felt in rising consumer prices, since almost all imports from places like China are paid in US dollars. The Canadian economy is 67% comprised of consumer spending, which is why this is a big, hairy deal. When the price of socks and sweatshirts rise, not to mention most of what you eat, it’s hard to avoid feeling it. These days debt is at the highest level in history, and folks have never, ever carried such mortgage loads, so it makes ya wonder. Are the guys running Sears and BestBuy just getting ready to survive what they know is coming?
That was a rhetorical question. Of course they are. And thus you can see the nature of the negative feedback loop developing. A slowing economy with job losses begets a lower currency which brings higher input costs, rising prices, declining consumption and fewer jobs. This is not an easy sucker to reverse, especially when interest rates are already in the ditch, meaning the central bank has a limited set of tools to work with.
Isn’t this all depressing?
It gets worse. Canada has one of the highest home ownership ratios among developed countries, and a far greater debt-to-income ratio than the nation most like us, America. Owning a house is not like having an ETF. Once your income is stretched by rising prices, or your wife loses her job at the department store, you can’t just phone some guy and sell your home to raise cash and cut costs. Unless you’re in one of those very localized hot hipster zones in Toronto or Vancouver, where heavily-publicized bidding wars are taking place, selling can a long time. Closing takes even longer. So the process can easily stretch out six months or more.
This means most of the net worth in Canada (real estate has at least 75% of it) is to some degree illiquid. So, when families feel an economic pinch, they first have to rein in spending, before they bail on the house. More negative feedback.
Okay, so where’s all this heading?
It’s reasonable to expect the Canadian economy will stagger for much of 2014. No real reason for the dollar to go up. More job cuts likely. Bad time to be in retail. Variable mortgage rates won’t move. Fixed rates may come off ten or twenty basis points. Realtors, bankers and brokers will make a huge deal of that, and you can already tell how much hype is being thrown at the Spring market. The high-profile bidding wars and large-dollar sales will mask underlying traits that should be worrisome. Like a steady decline in detached home sales in Toronto, or 74% of all homes in Vancouver sitting over the $1 million line. There are so many indicators that this market is fragile and fickle, held together with the gossamer threads of desire and the duct tape of blunt force marketing.
So, try to resist buying. Regardless of your spouse. If you’ve thought about selling, ask yourself if you really think it’ll be better in the fall when the jobs situation is more dire, or a year later when mortgage rates start to click higher.
And, as always, if the bulk of your net worth is in a house, you’d best change that. Seriously.
Sears dropped another 700 of so jobs on Wednesday, bringing the body count close to 3,000. A few hours later Best Buy punted 950 more. Obviously when major retailers throw people off the roof, it says a lot about the strength of consumer spending. Meanwhile Canada Post was announcing plans for the phasing-out of mail delivery to six million addresses, which tells you something about eight thousand more workers with good jobs and decent pensions.
Meanwhile we just heard the feds got the counting wrong on the November jobs report. Instead of creating 21,000 new positions that month, the country actually shed 27,600. Whoops. I guess the margin of error is now 200%. And as you know, we lost another 46,000 jobs in December, punching the unemployment rate higher than that of the United States. There’s no pretty way to put this – the elimination of 73,000 jobs in the last sixty days of 2013 is an unmitigated disaster.
And did I mention 1,700 jobs at Bombardier a few days ago? Kellogg’s? Heinz? Encana? The media chains?
In the last year job growth equalled 0.8%, which is less than the increase in the population. That pace of growth was two-thirds less than in 2011. All this underscores why the dollar has collapsed in 2014, losing more than four cents against the American currency, and now solidly under the 90-cent mark. As I told you a day or two ago, many believe it’s on the way to 85. Some say less than 80.
The impact of that will be most keenly felt in rising consumer prices, since almost all imports from places like China are paid in US dollars. The Canadian economy is 67% comprised of consumer spending, which is why this is a big, hairy deal. When the price of socks and sweatshirts rise, not to mention most of what you eat, it’s hard to avoid feeling it. These days debt is at the highest level in history, and folks have never, ever carried such mortgage loads, so it makes ya wonder. Are the guys running Sears and BestBuy just getting ready to survive what they know is coming?
That was a rhetorical question. Of course they are. And thus you can see the nature of the negative feedback loop developing. A slowing economy with job losses begets a lower currency which brings higher input costs, rising prices, declining consumption and fewer jobs. This is not an easy sucker to reverse, especially when interest rates are already in the ditch, meaning the central bank has a limited set of tools to work with.
Isn’t this all depressing?
It gets worse. Canada has one of the highest home ownership ratios among developed countries, and a far greater debt-to-income ratio than the nation most like us, America. Owning a house is not like having an ETF. Once your income is stretched by rising prices, or your wife loses her job at the department store, you can’t just phone some guy and sell your home to raise cash and cut costs. Unless you’re in one of those very localized hot hipster zones in Toronto or Vancouver, where heavily-publicized bidding wars are taking place, selling can a long time. Closing takes even longer. So the process can easily stretch out six months or more.
This means most of the net worth in Canada (real estate has at least 75% of it) is to some degree illiquid. So, when families feel an economic pinch, they first have to rein in spending, before they bail on the house. More negative feedback.
Okay, so where’s all this heading?
It’s reasonable to expect the Canadian economy will stagger for much of 2014. No real reason for the dollar to go up. More job cuts likely. Bad time to be in retail. Variable mortgage rates won’t move. Fixed rates may come off ten or twenty basis points. Realtors, bankers and brokers will make a huge deal of that, and you can already tell how much hype is being thrown at the Spring market. The high-profile bidding wars and large-dollar sales will mask underlying traits that should be worrisome. Like a steady decline in detached home sales in Toronto, or 74% of all homes in Vancouver sitting over the $1 million line. There are so many indicators that this market is fragile and fickle, held together with the gossamer threads of desire and the duct tape of blunt force marketing.
So, try to resist buying. Regardless of your spouse. If you’ve thought about selling, ask yourself if you really think it’ll be better in the fall when the jobs situation is more dire, or a year later when mortgage rates start to click higher.
And, as always, if the bulk of your net worth is in a house, you’d best change that. Seriously.
History has hundreds of examples of economies and societies morphing and changing - local - national - international as technology, immigration and yes, PEOPLE, take their inevitable toll on where society heads. Can't speak to Sears and what I at least perceive as a dated brand, Best Buy to the tech nature of their target market who would just as soon buy online...but will suggest that the jobs shed by Sears and Best Buy find a home in Norstram, or Target or within Hudson's Bay as they do a nice job at re-branding...or even the countless independents who can't find capable people if that is the career path these folks take....but closer to my heart, speak to any of your small electrical, mechanical or masonry contractors who continually look for the lack of qualified electricians, plumbers and masons. Many of us seem to want are kids to go to university for an arts degree where we have a serious shortage of young people entering the trades for what is inevitably an $ 80K/+ year job. This is frightening.
All as this tells me is we have to have our wits about us. Someone far wiser than me said, "I've Heard There's Going To Be a Recession I've Decided Not To Participate".
Sorry - not subscribing to the 'this is going to s**t' part of the program.