ECONOMIC OUTLOOK 2008

Economic growth in the province is expected to slow this year. The higher Canada/US exchange rate and overall weakness in the US economy, especially in residential construction, will curtail BC exports again this year. The dollar value of softwood lumber exports to the US fell 22 per cent last year. Recovery in US housing starts is not expected this year. In addition, less consumer spending by Americans, combined with a high Canadian dollar, will also curb the number of US tourists to BC. Total US traveler entries to BC declined 6 per cent last year, and a marked improvement is unlikely this year.

Despite some weakness in BC exports, the economy is forecast to grow by 2.5 per cent this year and 2.7 per cent in 2009. Construction is underway on $57 billion worth of capital projects and a further $75 billion in capital projects are proposed. Retail sales are expected to remain brisk, growing a further 6.5 per cent this year and 6.7 per cent in 2009.

Besides the bright lights of capital projects and retail sales, labour market conditions are favorable to BC households and housing demand. The unemployment rate in BC fell from 4.8 per cent in 2006 to 4.2 per cent last year. In the last five years, the unemployment rate has decreased by more than 50 per cent. Strong labour demand is expected to continue this year, with employment increasing by 2.5 per cent in 2008 and 2.6 per cent in 2009. Robust employment growth and low unemployment puts upward pressure on wages and salaries, a positive side effect for BC households. Both personal disposable income and workers wages are expected to be higher again this year.

Employment in wood manufacturing fell by 8,400 jobs during the first quarter, with total manufacturing employment down by 18,200 jobs. However, a gain of 25,400 construction jobs during the same period more than offsets the job losses in manufacturing, and illustrates that the goods sector in the province remains on a solid footing. In the service sector, finance and related employment is showing little growth, no doubt due to tightening credit conditions. Nevertheless, strong employment growth in transportation and warehousing, commercial and personal services, and public administration is expected to propel service sector employment upward by more than 38,000 jobs this year.

BC’s robust economy contributed to a 31 per cent increase in net inter-provincial migration last year. The population was bolstered by an additional 13,385 individuals who migrated from other provinces in 2007. While economic growth is expected to slow in 2008, BC will remain one of the strongest economies and continue to attract Canadians searching for employment and lifestyle opportunities. Net inter-provincial migration is forecast to rise a further 5 per cent to 14,100 this year before dipping 2 per cent to 13,800 in 2009.

International migration is continuing on an upward trend. Total net international migration is forecast to reach 41,000 individuals this year, an increase of 3 per cent. International migration is not as susceptible to the ebbs and flows of the business cycle and appears limited only by federal government policy. Efforts to address the sizable backlog of international applicants is expected to increase the number of immigrants to the province over the next five years. Skilled workers are the largest segment of BC immigrants.

“Copyright British Columbia Real Estate Association. Reprinted with permission.”