From Ben at the economic analyst
Saskatchewan:
Eventually the boom in construction and real estate will end. Where do all these excess construction workers go to work? Mining and energy jobs account for 5% of Saskatchewan's working population. So that sector is too small to absorb those jobs. But for the fun of it, lets say that resource jobs double in the next three years ( highly unlikely), where are most mining and energy jobs found?
2007 numbers :
Mining employed 2250 people in Saskatoon. Percentage of the working population 1.6%.
Construction employed 8800 people in Saskatoon. Percentage of the working population 6.5%.
2011 numbers:
I don't have mining numbers but I would expect the percentage to be under 2%, while construction numbers are just under 9% of Saskatoon's working population.
So will resources save the excess construction jobs when the building boom is done? NO. You can guess what that will do to the housing market in the major centers.
Some things to note:
ReplyDeleteA vast majority of employees and contractors at Agrium, Mosaic Colonsay, PCS Allan, Patience Lake, and Cory all commute from Saskatoon. Most of the employment at the northern mines (Cameco, Claude, Golden Band) are people being flown in by plane via Saskatoon. Most new expansions in the north will continue to be that way.
There are lots of Ft. Mack workers that fly or drive from Saskatoon as well. This will continue to be the norm on many new projects in the north.
Projects like Janzen, Burr and Star/Orion will be higher users of local, small town employees, but these smaller centers still draw economically on Saskatoon to a degree.
I'm not disagreeing with you but it's important to recognize that Saskatoon isn't an island just because the projects are outside of the 50Km radius.
Just wondering if you realize that the period of time from 1990-2005 was the worst period of economic growth for Saskatoon and Saskatchewan since the 30's? So is it fair or reasonable to make comparisons of the current growth to the worst economic period we have seen in modern times for our province?
ReplyDeleteI understand that this doesn't justify the large increase we've seen in house prices over the last 5 years, but your comment "Where do all these excess construction workers go to work?"... simple answer, they will have the enormous task of playing catch-up on the infrastructure that we are lacking in this province to keep up with growth....
One sure-fire way to pop the "housing bubble" in Saskatchewan and stop growth in its tracks is to fall back into the mindset that growing our economy shouldn't require investment.... Tightening up those nasty royalty regimes to discourage further investment and reducing investment in infrastructure. Now that's an excellent way to deflate the economy!
Saskaboom,
ReplyDeleteThe early 80's was worse than 1990-2005. Commodities crashed and the housing bubble popped. Inflation was crazy in the 80's.
Saskatoon in the early 90's experienced high unemployment but Saskatoon's economy was fine from 1996-2005. This time period saw low to moderate economic growth. Population grew every year. Consumers were not bloated with debt. First time buyers could afford a house and were not at the mercy of interest rates. And 50% of all rental household did not put over 50% of their income towards monthly housing costs like they do in Saskatoon today.
I highly doubt investment would be discouraged with higher royalty rates ( collapsing commodities would do that trick) For example PCS generated 1.6 Billion in profits for 2010 but paid 77 Million in royalties. Royalties definitely could be increased. I am sure there is a formula that would work for both sides.
I have to say there is not much I agree with the NDP's stance on...well... pretty much everything but there should be a royalty rate review.
If the NDP gets in, ( they won't, I hope) ooh boy!
I would disagree with you on the 80s being worse than the 90s. The early 90s was the first "double dip" recession we've ever experienced. The early 80s was a bigger shock, but it didn't have the lasting impact that we saw in the 90s (mind you that was likely due to the hangover of the debts we incurred in the 80s).
ReplyDeleteSomething else people don't realize is that the commodity crash of the late 90s early '00s was the worst (relatively speaking) in the last century. So right now it does seem like prices are way out of line, but our frame of reference (being the last 20-30 yrs) is skewed....
And the only reason Saskatoon's economy was "fine" was because of the mass exodus from rural Saskatchewan to the cities. Saskatchewan as a province was flat for economic growth. And I'd hardly call an average annual growth of 0.5% in Saskatoon from 1990-2000 "fine".
I understand that economic principles need to be held in check (i.e. house price to income ratios, etc.). But remember the first three laws of real estate.... Location, location.... and... I keep forgetting the third.... oh yeah... location. House prices will be depressed in areas where people don't want to be.... as long as people want to be here and relocate here, the housing market shouldn't crash.
I've been through enough commodity cycles to know that the prices go up and down and that it's not reasonable to assume that the elevated levels we're seeing now will stay this way for the long term. However, Saskatchewan has been investing for the long term. It's obviously risky because no one has a crystal ball to know when the prices will come down or by how much, but we are in a much better position now than we were 10-15 years ago. An important thing to remember is that when commodity prices go down the low margin operations go down first. We are lucky in Saskatchewan that most of our commodities are considered low cost operations on a global scale. The world will need potash, uranium, oil and our agriculture products for a long time to come.... whatever the price.
It's true that the royalties that PCS paid in relation to their income for 2010 seem small, but the combined tax and royalties were over $600M for 2010 (something like $300M of that went to the province).
Saskaboom,
ReplyDeleteIt depends on one's perspective. If you talk to many farmers or home owners from the early 80's that was worse than the 90's. The NEP did not help either. As for Governments, Devine in the 80's almost drove this province into the ground. The 90s were definitely the hangover from the 80's. As for now, history does not repeat but it can rhyme.
I said "Saskatoon's economy was fine from 1996-2005" I did not say 1990-2000. Starting from about 1996, Saskatoon had low to moderate economic growth.
There was not a "mass exodus" from rural Saskatchewan to the cities. Yes, people left very small towns to the big cities but check this out
http://www40.statcan.gc.ca/l01/cst01/demo62i-eng.htm
"as long as people want to be here and relocate here, the housing market shouldn't crash."
as long as mortgage debt keeps growing, the housing market shouldn't crash. That is what has launched house prices. People do not buy houses, people with mortgages buy houses.
Mortgage debt taken out in Saskatchewan 2005
$2,749,000,000
Mortgage debt taken out in Saskatchewan 2010
$6,665,500,000 in 2010
http://saskatoonhousingbubble.blogspot.com/2011/09/holy-grail-of-why-house-prices-doubled.html
As for commodities, I would not put too much hope in them in saving our high house prices. Commodities are boom/bust always have been always will be. Australia a commodity producing country and it that looks like resources are not saving their housing market. Reason = too much debt. And if commodities were to crash, Australia's housing market would be in a full blown bust.
Canada is really the last western country standing in regards to housing markets. ( Actually, there are many pockets in Canada were the housing bubble has busted) Canada as a whole is not immune from a downturn, either is Saskatchewan.