Local economic outlook is promising: economist
Saturday, Jan 18, 2014 06:00 am
The local housing market should remain strong in 2014 as long as Alberta continues to experience strong net migration and job growth, a prominent economist told the local chamber of commerce Wednesday.
Last year Alberta attracted about 100,000 workers and created about 70,000 new jobs, said Ian Glassford, chief financial officer with Servus Credit Union. That created pressure in the local housing market, with the cost of housing going up 22 per cent relative to people’s salaries, he said.
If the cost of real estate continues to rise it may create a problem, but for now the region can support its housing market because of strong job and wage growth, low interest rates, and the influx of workers to the province, he said.
“There is not a strong indication right now that the employment pressure is ending,” he said. “There are certain skills that are very difficult to identify and it won’t get any better in 2014.”
As part of the chamber’s annual economic outlook luncheon, Glassford also spoke on a number of international issues and their impact on the Canadian and global economy.
He said the United States’ economy did some recovering in 2013.
Corporate profits are still low as businesses have managed their costs aggressively since the recession. But people are spending more confidently again, he said, with the level of consumer debt returning to better levels, though they are still far from ideal.
As the American economy recovers, the country’s deficit is now expected to be $680 billion, he said.
“That sounds bad but remember in 2009 it was $1.4 trillion,” he said. “There are more American states running surpluses than people realize. The amount of negative push by the government is diminishing.”
A healthier economy in the U.S. will also aid other parts of Canada, such as Ontario’s manufacturing sector, which were heavily affected by the American recession, he said.
He stressed, however, that Alberta will soon have to find ways to export its oil to tidewaters to keep the province’s growth stabilized as the U.S. is ramping up its own oil production.
Imports to the United States were down by almost 14 per cent for the first 11 months of last year, he said. Oilfields in the U.S. now produce almost one million barrels per day, and will continue to affect Canadian exports negatively.
Also affected by the United States economy are the emerging markets, he said.
Glassford said many of the emerging markets – such as Turkey – are becoming worried about their dependence on changes in the American economy and whether it could destabilize theirs.
“People went to these emerging markets because the yields were better,” he said. “As soon as there is an opportunity to get better returns in stable environments they flood right back out again and these economies can’t really sustain that.”
In Europe, Glassford expects to see few changes to the economic instability that affects many of its countries yet no big problems should hit the European Union in 2014.
Much more concerning this year is the Chinese housing market, he said.
Since 1993, housing prices in Beijing have gone up 2000 per cent, while people’s wages are up 700 per cent. While the Chinese government expects to grow its economy by seven per cent, Glassford said there is reason to be cautious of risks in the country’s real estate market in coming years.
“If it ever falls down there’s a lot of consumer wealth that evaporates,” he said. “And it’s hard to keep an economy going when everything I have saved in my life has disappeared because my condo in Beijing is gone.”