Canadian construction job market should remain somewhat tight into 2009

by John Clinkard

While the total value of building permits fell by 5.3% month over month in June 2008, they were actually up by 13.1% quarter over quarter for the second quarter of 2008 as a whole. This figure marks the second largest increase in more than 10 years, and follows an 8.2% drop in the first quarter.

Surprisingly, all four major construction sectors contributed to the quarterly increase in total building permits.

The commercial construction sector saw an increase of 31.2% in the value of commercial building permits, following a 4.3% drop in the first quarter.

The total value of residential building permits increased by 5.8% in the second quarter, its strongest quarterly increase since second-quarter 2007. This increase comes despite declines in sales of existing homes and rising numbers of completed and unabsorbed single and semi-detached dwelling units.

The value of institutional building permits increased by a very solid 19.9% in the second quarter, following an 11% drop in the first.

Finally, despite the strong dollar and eroding manufacturing profits, the value of industrial building permits was up by 10.8% in the second-quarter, due to healthy increases in Ontario, Quebec, all four Atlantic provinces, Saskatchewan and Manitoba.

In view of this broad-based increase in the total value of residential and non-residential building permits, it is not really surprising that the construction sector added 10,000 jobs in July, while the rest of the economy lost 65,500. Although the majority of July’s new construction jobs were in British Columbia, year-to-date construction employment is up in every province except Nova Scotia.

Looking forward, the healthy increase in both residential and non-residential building intentions in the second quarter will probably ensure that the construction job market in general remains fairly tight into 2009.

Having said this, the recent pull-back in housing starts and the slowdown in the growth of new house prices indicate that single-family residential construction will steadily weaken over the next several quarters.

However, this pull-back should be offset in part by moderate growth of multi-unit residential, commercial, institutional and industrial building, growth that should extend into 2009.