OTTAWA – POLITICS – With job creation stalled, consumer credit and spending maxed out and housing prices set for an adjustment or outright crash Canada’s economy is sputtering mightily under the negligent watch of the Harper government.
It may sound odd, but it’s true that Canada’s economy has been on ‘full-sputter’ over the last 12 months. Job creation is down. Consumer debt is at a record high. Housing prices are on fire, but set for a very significant correction. All of this makes for a very wobbly base for Canada’s fragile economy and it spells trouble over the next several years for us unless things change dramatically for the better.
Canada’s reputation as a job creation powerhouse is now shot. We found out this week that Canada lost 9,400 jobs in June with an astonishing 34,000 jobs lost in Ontario alone. Taking one month of numbers and trying to make an argument for something is a fool’s game, so it’s better to look at the longer term trend. In the last twelve months, Canada has created just 74,000 jobs, with just 25,000 coming in Ontario compared to 65,000 in Alberta. If you want to work in an oil patch there is probably a job for you, but if you want to live and work in Ontario or anywhere else in the country good luck. There just aren’t any jobs for you.
Consumer spending has played an important role in Canada’s relatively positive economic performance over the last decade and since the recession. While manufacturing, services, mining, agriculture and just about every other export group outside of oil have taken a beating it has been the Canadian consumer who has picked up the slack. Consumers have kept buying goods and services far beyond their means, and today the average consumer debt load is now 163% of a person’s yearly income, or about the same level as Americans held prior to the last recession. Without consumers being able to spend and keep money changing hands in our towns and cities the responsibility for economic growth and job creation must now fall to Canada’s exporters, but as you can see from the numbers above this important transition just isn’t happening as many believed and hoped it would.
Finally, Canada’s housing market is poised to become the big spoiler to Canada’s continuing economic growth. Homebuilding, renovations, furnishings, maintenance, and utilities all contribute positively to Canada’s economic growth and have created jobs, economic activity, and wealth for owners, builders, and workers alike. In fact, the housing market here has been so hot that prices in some cities across Canada have doubled over the last decade without seemingly any justification or reason outside of ultra-low interest rates allowing many to afford the home of their dreams without the burden of high monthly payments. That is all set to change though as interest rates are set to rise and consumers have basically stretched their budgets to the max.
The International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), Capital Economics and perhaps most importantly the Bank of Canada have called the overbuilding and overvaluation of the Canadian housing market the single greatest domestic threat to Canada’s economic stability. Just this week the huge international investment firm Morningstar based out of Chicago said it expects home prices to drop by 30% over the next five years in Canada which would be devastating to the economy as the net worth of home owners would be slashed by roughly the same amount, and jobs would dry up in everything from construction to utilities and furniture sales. A 30% drop in Canada’s $1.2 trillion (trillion!) housing market should send chills up the spine of economists in Ottawa and elsewhere.
If you live anywhere in Canada where you can’t find oil or natural gas under your feet then Stephen Harper’s Conservative government has done little for you, your family, your friends, and your community. Instead, it has been your consumer spending and investment in housing that has really been the engine that kept our economy afloat and kept people working. Far from being a steady hand Stephen Harper has fallen asleep at the wheel and as a result the Canadian economy is now, sadly, headed for a deep ditch.
John Rafferty MP
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